WSJ News Exclusive | SoftBank-Backed Fintech Giant Klarna Looks for New Funds at Lower Valuation
Klarna Bank AB is seeking to raise new funds that could value the fintech giant at almost a third less than the roughly $46 billion valuation it achieved just under a year ago, according to people familiar with the matter, an example of the struggles facing the tech investing world.
Klarna specializes in buy-now-pay-later services, a popular type of cash advance that competes with credit cards and lets customers pay for goods and services in installments without paying interest. Klarna makes money by charging merchants who offer Klarna’s services a fee.
Klarna became Europe’s most valuable financial-technology startup in June when SoftBank Group Corp.’s Vision Fund 2 led an investment in the company that valued it at $45.6 billion.
The Sweden-based payments company is aiming to raise up to $1 billion from new and existing investors in a deal that could value it in the low $30-billion-range after the money is injected, the people said. That would represent a roughly 30% drop from the previous round.
Earlier this year, Klarna spoke with investors about a valuation of more than $50 billion, but some balked amid the market jitters, one of the people said.
Goldman Sachs Group Inc.
is pitching investors on the round, said the people familiar with the potential deal. The deal’s timing and roster of investors couldn’t be learned. There is also always a risk that a deal doesn’t happen.
In 2019, Klarna, whose investors include Sequoia Capital, Silver Lake and Dragoneer Investment Group LLC, was valued at close to $3.5 billion, according to data from PitchBook.
Its valuation jumped massively through several fundraising rounds during the pandemic as consumers and businesses moved transactions online, a trend accelerated by pandemic-induced lockdowns. Klarna raised money in March 2021 and was then valued at $31 billion. The June fundraising made Klarna more valuable than most large European banks.
Public- and private-market investors are now second-guessing the inroads Klarna and other buy-now-pay-later firms made with consumers.
The share price of Nasdaq-listed
Affirm Holdings Inc.,
a Klarna competitor, is down 75% this year, giving it a market value of $7.2 billion. That decline comes even as the payment network earlier this month boosted its 2022 revenue guidance to $1.33 billion to $1.34 billion, from earlier guidance of $1.29 billion to $1.31 billion.
Klarna, Affirm and other buy-now-pay-later providers face increasing competition. Traditional lenders such as
PLC, as well as financial giant PayPay Holdings Inc., have launched their own offerings. Meantime, the industry faces more scrutiny. Last year, the U.K. government said it would start regulating BNPL products to protect consumers.
Some fast-growing tech companies are forging ahead with their fundraising plans despite difficult market conditions, under pressure to expand geographically and introduce new products to feed their continued growth and start generating profits. Tech companies and investors are uncertain how long the current rout will last, and some reason that now is the best time to raise money, before things get worse.
Earlier this month, SoftBank posted its worst annual loss, more than $13 billion, due to the collapse in values of many of its tech investments.
Last year, Klarna’s net loss widened to 7.1 billion Swedish krona, equivalent to $705.7 million, while credit losses jumped as the company grew its consumer base and expanded geographically.
Chief Executive Sebastian Siemiatkowski founded the company with two friends in 2005. Klarna processed $80 billion worth of transactions in 2021, up 42% from the previous year. It has made a string of acquisitions in recent years, picking up PriceRunner, a price-comparison service, as well as e-commerce technology firm Hero Towers Ltd., which links online shoppers and retail workers via text messages, videos and online chat rooms.
Other fintechs are also having to accept discounted valuations to get deals done.
SumUp, a U.K. fintech that makes card readers like
Square, is in talks to raise 400 million euros, equivalent to $419 million, in a fundraising round at a €6.5 billion valuation, according to a person familiar with the matter. SumUp had initially targeted a valuation of up to €15 billion from the fundraising round, the person said.
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