Klarna to raise $ 1 billion at $ 31 billion valuation

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

The firm in Stockholm is one of the world’s largest providers of ‘buy now, pay later’ (BNPL) services, enabling retailers to spread the cost of their purchases over a period of interest-free installments.

The company is making an exorbitant round ahead of a possible stock market listing that could be a boon for some of its earliest venture capitalists, such as Atomico and Sequoia. Klarna is also supported by large investors such as Snoop Dogg and Ant Group.

The sources can conclude the agreement within a few days, and prefer to remain anonymous, as the details have not yet been released. One of the sources said that the new capital injection was oversubscribed and raised within just a week.

Klarna declined to comment when contacted by CNBC.

Klarna is now the top-tech unicorn in Europe surpassing payment software Checkout.com, which last month reached a $ 15 billion valuation.

Klarna continues to grow rapidly more than a decade after its inception, and has made significant progress in expanding to the US. It received a major boost last year due to increased demand for BNPL plans, fueled in part by coronavirus closures that accelerated the move to online shopping. .

The growth in BNPL products has worried regulators in the UK, and the country’s government recently announced that businesses in the sector will come under stricter regulation. BNPL plans are often put forward as an alternative to credit cards, but consumer advocacy groups like Warn them that they often entice people – especially young people – to spend more than they can afford. In turn, Klarna says he welcomes new rules.

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

“With this product, we are challenging a massive industry that has paid consumers too much with overdraft fees, with interest-bearing terms of use,” he added. “There are a lot of misconceptions in the UK, but if we get the chance to sit down with British politicians … they will be convinced and then they will be sidelined.”

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

Klarna earns revenue from taking a fee from merchants every time a customer makes a transaction. The company is a regulated bank and has increasingly relied on retail banking in its own country as well as Germany.

Founded in 2005, Klarna is one of the many potential IPO candidates in Europe. There are rumors that several companies will be public this year, including Deliveroo, TransferWise and Darktrace. Siemiatkowski said a listing on the stock market could take place as early as this year, but the company is waiting until its new chief financial officer, former HSBC chief executive Niclas Neglen, is finalized before estimating official plans.

“Maybe it can happen this year, maybe it will be next year, but of course it’s going to happen pretty soon,” Siemiatkowski said. “It’s definitely going on, but we have not officially started the process yet.”

Klarna’s boss added that the firm finds direct listings – an alternative route to a traditional stock exchange where companies list without issuing new shares – ‘interesting’. Siemiatkowski highlighted the example of Spotify, published in 2018 through direct listing. But he expressed the possibility of merging with a specialty acquisition company, or SPAC, a listing method that has recently gained significant traction on Wall Street.