Klarna aims to raise $ 1 billion at a valuation of $ 31 billion


The logo of the Swedish payment provider Klarna will be shown on the display of a smartphone on April 22, 2020 in Berlin.

Thomas Trutschel | Photo library | Getty Images

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

The Stockholm-based company is one of the world’s largest providers of BNPL (“buy now, pay later”) services that allow buyers to spread the cost of their purchases over a period of interest-free installments.

The company is lifting a bumper on a potential blockbuster listing that would be a boon to some of its earliest venture capital investors like Atomico and Sequoia. Klarna is also supported by well-known investors such as Snoop Dogg and China’s Ant Group.

The deal could be closed in a matter of days, the sources said, preferring to remain anonymous as the details have not yet been released. The fresh capital injection was oversubscribed and increased in just a week, one of the sources said.

Klarna declined to comment when contacted by CNBC.

Klarna is now Europe’s top tech unicorn, surpassing payment software company Checkout.com, which was valued at $ 15 billion last month.

Regulatory concerns

Klarna continues to grow rapidly more than a decade after its inception and has made significant strides in expanding into the United States. The increased demand for BNPL plans has gotten a big boost in the past year, partly due to coronavirus lockdowns that accelerated a shift towards online shopping.

This growth in BNPL products has hit regulators in the UK, and the country’s government recently announced that companies in the sector would be subject to stricter regulation. BNPL plans are often touted as an alternative to credit cards, but consumer advocacy groups like Which? warn that they often mislead people – especially young people – into spending more than they can afford. Klarna, for its part, welcomes new rules.

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

“With this product, we are challenging a massive industry that has overwhelmed consumers with overdraft fees and interest-bearing terms of service,” he added. “There is a lot of misunderstanding in Britain, but when we get the chance to sit down with British politicians, they get convinced and then switch sides.”

IPO plans

Klarna achieved annual sales of 1 billion US dollars for the first time last year and achieved a record operating profit of 1.2 billion US dollars. However, losses also accelerated 50% due to increased costs associated with international expansion. Klarna’s net loss was approximately $ 109.2 million.

Klarna generates revenue from charging merchants for every transaction made by a customer. The company is a regulated bank and is increasingly pushing private customer business in its home country and in Germany.

Klarna was founded in 2005 and is one of many potential tech IPO candidates in Europe. It is rumored that several companies are going public this year, including Deliveroo, TransferWise, and Darktrace. Siemiatkowski said it could go public this year, but the company is waiting for its new CFO, former HSBC executive Niclas Neglen, to settle into the role before making official plans.

“Maybe it could happen this year, maybe it would happen next year, but it’s obviously going to happen pretty soon,” said Siemiatkowski. “It’s definitely a work in progress, but we haven’t officially started the process.”

Klarna’s boss added that the company is “interesting” in direct listing – an alternative route to a traditional IPO where companies list without issuing new shares. Siemiatkowski highlighted the example of Spotify, which went public in 2018 via a direct listing. However, he ruled out the possibility of a merger with a special purpose vehicle (SPAC), a listing method that has grown significantly in prominence on Wall Street recently.