FinTech: Klarna, Last Valued At $46B, Cuts Workforce By 10%
The fintech, famous for “buy-now-pay-later,” said it was the “hardest” decision it ever made.
On Monday, Sebastian Siemiatkowski, Klarna’s CEO and co-founder, told all his employees to work from home this week. The reason: to soften the blow, and “in consideration of the privacy of the people affected” by the fintech’s decision to lay off 10% of the workforce.
“Colleagues and friends who are impacted will receive an invite to a conversation within the next few days,” said the announcement from Klarna. “The invite will be titled ‘Meeting regarding your role at Klarna’. In this meeting, you will be provided with further information about the next steps.” (Klarna)
Klarna employees working in Europe will be offered an associated compensation for leaving the company. Outside of Europe, the process for laid-off employees will depend on where they work.
Siemiatkowski 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.
“While crucial to stay calm in stormy weather, it’s also crucial not to turn a blind eye to reality,” he wrote. “What we are seeing now in the world is not temporary or short-lived, and hence we need to act.”
“We serve 400,000 merchants and 150m consumers, which means that we have a profound impact on the world. At the same time, we are highly influenced by it.”
The perfect storm
Rising interest rates, gas prices and overall inflation have squeezed consumers’ wallets. At the same time, unfavorable publicity has surrounded fintechs offering “buy-now-pay-later” schemes – the critics claim the easy borrowing procedures had lured consumers into debt traps.
Siemiatkowski’s comment on stock market volatility is relevant particularly to Affirm (NASDAQ: AFRM), a rival in the BNPL space that has lost three-quarters of its value year-to-date.
Klarna, a private entity, is also not immune to the decimation of market value in the sector. While it was valued at a humongous $46 billion in its last funding round, media reports claim its forthcoming financing will be a down round that will trim a third of that valuation.
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