Klarna to raise $ 1 billion with a valuation of $ 31 billion


The logo of the Swedish payment provider Klarna is displayed on a smartphone screen on April 22, 2020 in Berlin, Germany.

Thomas Trutschel | Photothek | fake images

LONDON – Klarna is close to finalizing a $ 1 billion funding round that would give the Swedish fintech company a $ 31 billion valuation, two people familiar with the matter told CNBC.

The Stockholm-based firm is one of the world’s largest providers of “buy now, pay later” (BNPL) services, which allow buyers to spread the cost of their purchases over an interest-free installment period.

The company is raising a big round ahead of a possible highly successful IPO that would be a boon to some of its early venture capital investors, such as Atomico and Sequoia. Klarna is also backed by big name investors like Snoop Dogg and Ant Group.

The deal could be closed in a few days, said the sources, who preferred to remain anonymous as details have not yet been made public. The new capital injection was oversubscribed and raised in just one week, one of the sources said.

Klarna declined to comment when contacted by CNBC.

Klarna is now Europe’s top tech unicorn, surpassing payments software company Checkout.com, which reached a valuation of $ 15 billion last month.

Regulatory concerns

Klarna continues to grow rapidly more than a decade after its founding and has made significant progress in its expansion to the U.S. Last year it received a big boost from increased demand for BNPL plans, driven in part by coronavirus lockdowns. that accelerated a shift toward online shopping.

That growth in BNPL’s products has UK regulators concerned, with the UK government recently announcing that companies in the sector would be subject to stricter regulation. BNPL’s plans are often touted as an alternative to credit cards, but consumer advocacy groups like Which warn that they often attract people, especially young people, to spend more than they can afford. For her part, Klarna says she welcomes new rules.

“We are on the right side of this,” Sebastian Siemiatkowski, CEO and co-founder of Klarna, told CNBC in an interview Wednesday.

“With this product, we are challenging a massive industry that has overcharged consumers with overdraft fees, with interest-bearing terms of use,” he added. “There are a lot of misconceptions in the UK, but when we get a chance to sit down with UK politicians … they get convinced and then switch sides.”

IPO plans

Klarna reached $ 1 billion in annual revenue for the first time last year, posting a record operating income of $ 1.2 billion. However, losses were also accelerated by 50% due to increased costs associated with international expansion, and Klarna’s net loss was approximately $ 109.2 million.

Klarna earns revenue by charging merchants a fee each time a customer makes a transaction. The company is a regulated bank and is increasingly targeting retail banking in its home country as well as in Germany.

Founded in 2005, Klarna is among the many potential technology IPO candidates in Europe. Several companies are rumored to go public this year, including Deliveroo, TransferWise, and Darktrace. Siemiatkowski said a listing on the stock market could happen as early as this year, but the firm is waiting until its new chief financial officer, former HSBC executive Niclas Neglen, has settled in before making official plans.

“Maybe it could happen this year, maybe it will be next, but obviously it will happen quite soon,” Siemiatkowski said. “It is definitely in process, but we have not officially started the process.”

The Klarna boss added that the firm finds direct listings – an alternative route to a traditional IPO where firms trade without issuing new shares – “interesting.” Siemiatkowski highlighted the example of Spotify, which went public through direct listing in 2018. But he ruled out the possibility of merging with a special purpose acquisition company, or SPAC, a listing method that has gained significant traction on Wall Street. Recently.

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