FinTech: Klarna’s Valuation Plunges To $6.5B In Talks To Raise $650M (WSJ)

July 1, 2022 | FinTech, Latest News, News

That’s down from a massive $45.6 billion valuation in the previous funding in 2021.

Klarna, the Swedish fintech known for its buy-now-pay-later (BNPL) financial product, is negotiating to raise $650 million at a valuation of $6.5 billion, which is a very sharp comedown from the $45.6 billion tag in a June 2021 funding round led by SoftBank Group. (Wall Street Journal)

There is no guarantee that the deal will fructify, the WSJ said, and there remained the possibility of last minute hiccups.

Klarna’s seemingly desperate efforts to raise cash at a valuation of a seventh of its previous fundraising are a pointer to the extremely tight financial conditions globally that have forced investors to focus only on profitable companies. Fintechs have also suffered alongside tech stocks which received a hammering at the hands of investors rushing for the exits after interest rate hikes took hold across the globe.

According to the WSJ, another reason could be Swedish capital norms applying to Klarna given that it is a licensed bank in that country.

Klarna has a down round

Most industry onlookers expected a “down round,” but the sheer scale of the markdown at Klarna gives new meaning to that term.

The WSJ revealed that the current discussions commenced at a $50 billion valuation but then was truncated to $30 billion, then $15 billion before it was negotiated at the current figure.

During the first quarter, Klarna reported credit losses equivalent to 1.9% of customer lending (up from 1.8% a year earlier), amounting to a third of quarterly revenue and pushing Klarna to a net loss of SKr2.6bn ($265 million).

In a nod to the risk from slowing growth, and to preserve its cash runway, Klarna was forced to lay off 10% of its workforce last month.

Sebastian Siemiatkowski, Klarna’s CEO and co-founder, said the Ukraine war, inflation, a shift in comsumer sentiment, a volatile stock market and a potential recession had all combined to roil the business plans Klarna set for 2022 last year in autumn.

Related Story: Klarna, Last Valued At $46B, Cuts Workforce By 10%

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