Klarna loses some of its gloss for investors as regulation looms

Klarna loses some of its gloss for investors as regulation looms

THE WHAT? Klarna’s valuation has plummeted from US$46 billion to US$6.7 billion as a result of a funding round that saw the buy now, pay later platform struggle to persuade investors of its worth, according to a report published by the Financial Times.

THE DETAILS The US$800 million round took place during ‘the worst set of circumstances to afflict stock markets since World War II: high inflation, rising interest rates, mounting fears fo a recession, the after effects of the first global pandemic since 1918, strains on commerce caused by supply chain disruptions, rising gas prices, and, especially in Europe, the dislocations caused by the war in Ukraine’, Klarna said in a statement.

Existing and new investors participated in the round, including Sequoia, the founders, Bestseller, Silver Lake, Canada Pension Plan Investment Board and Mubadala Investment Company.

“It’s a testament to the strength of Klarna’s business that, during the steepest drop in global stock markets in over fifty years, investors recognized our strong position and continued progress in revolutionizing the retail banking industry,” said Sebastian Siemiatkowski, CEO of Klarna. “Now more than ever businesses need a strong consumer base, a superior product, and a sustainable business model.” 

THE WHY? Michael Moritz, Partner at Sequoia, explains, “The shift in Klarna’s valuation is entirely due to investors suddenly voting in the opposite manner to the way they voted for the past few years. The irony is that Klarna’s business, its position in various markets and its popularity with consumers and merchants are all stronger than at any time since Sequoia first invested in 2010. Eventually, after investors emerge from their bunkers, the stocks of Klarna and other first-rate companies will receive the attention they deserve”.