Currently, most “buy now, pay later” services do not affect a person’s credit score. This will now change in the UK
Jakub Pozhitsky | NurPhoto | Getty Images
Klarna’s valuation is down 85% in a new funding round announced on Monday, reflecting gloomy investor sentiment on fast-growing tech stocks and buy-now-pay-later lenders.
A Swedish fintech company said it has raised $800 million in new funding from investors at a $6.7 billion valuation, sharply below the $45.6 billion it received from a 2021 cash injection led by Japan . SoftBank.
This follows weeks of speculation that Klarna is looking for a so-called round down, in which a private company raises capital at a lower valuation than when it last sold new shares to investors.
Klarna CEO Sebastian Siemiatkowski tried to play down the company’s depreciation on Monday, insisting the deal was “evidence of the strength of Klarna’s business.”
“At a time of the sharpest decline in global equity markets in more than fifty years, investors recognized our strong position and continued progress in revolutionizing retail banking,” Siemiatkowski said in a statement Monday.
In addition to securing support from existing Sequoia and Silver Lake investors, Klarna has also raised additional investment from Canadian Pension Plan Abu Dhabi-owned investment firm Mubadala.
Klarna said it will use the funding to continue expanding in the United States. The company said it currently has 30 million users in the US.
Goldman Sachs The company added that it acted as an advisor to Klarna on the funds raised.
The fall of Klarna is a sign of how the turmoil in tech stocks is unnerving investors in the private markets.
The valuations of many venture capital-backed technology companies have fallen due to recession fears. They have also taken a number of layoffs and other cost-cutting measures to appease fearful investors.
Klarna itself cut about 10% of its global workforce earlier this year.
The development also points to problems in the buy-now-pay-later or BNPL market.
Services such as Klarna and Confirmthat allow customers to spread the cost of their purchases into equal monthly payments have faced questions about the sustainability of their business models in the face of rising inflation and higher interest rates.
Affirm, which debuted in early 2021, is down more than 77% since the start of the year.
PayPal and parent company Square Block, which recently acquired Australian-based BNPL Afterpay, fell 64% and 61%, respectively, over the same time period.
In a series of tweets on Monday, Siemiatkowski said Klarna is “not immune” to the pressures its peers are facing and that the company plans to “return to profitability” after suffering massive losses from its aggressive international expansion.
The fact that Klarna is valued at only slightly higher than the $5.5 billion it was worth in mid-2019 was “strange, considering all the gains” the company has made since then, Semyatkowski said.
“What doesn’t kill you makes you stronger,” he added.