Klarna Raises $800m as Investors’ 'Opposite' Votes Sink Valuation by 85%

Klarna, a Swedish fintech company, confirmed on Monday that it has closed an $800 million financing round that brings its post-money valuation to $6.7 billion.

The company, popular for its buy now, pay later services, disclosed this in a statement titled ‘Klarna closes major financing round during worst stock downturn in 50 years’.

This puts to rest reports about the company’s efforts to raise funds to top up its valuation.

However, with the new raise, Klarna’s post-money valuation has sunk -85% from the $45.6 billion valuation peak it hit in June 2021 after raising $639 million.

Michael Mortiz, a Partner at Sequoia, an American venture capital firm, explained that: “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.”

However, Moritz believes that investors will emerge eventually 'from their bunkers' and the shares of Klarna and other top firms will improve.

According to Klarna, whose net operating income jumped 38% to $1.6 billion in 2021, the $800 million financing round is for the payments and retail banking company to expand its position in the United States.

Recently, Klarna launched Klarna Kosma, a new business unit and sub-brand, to accelerate the growth of its open banking platform.

Existing investors who committed to the new raise, include Sequoia Capital, Bestseller, Silver Lake and the Commonwealth of Bank of Australia.

The newcomers are the Mubadala Investment Company, a United Arab Emirates sovereign investor, and Canada Pension Plan Investment Board, a professional investment management organization.

Contributory Factors

Klarna said the investment comes “during possibly the worst set of circumstances to afflict stock markets since World War II.”

The Sweden-based fintech company listed these adverse conditions to include high inflation, rising interest rates, mounting fears of a recession and the ripple effects of the COVID-19 pandemic.

It added that the strain on commerce caused by supply chain disruptions, rising gas prices and the impact of the Russia-Ukraine war on Europe, are also not favourable.

Klarna explained: “The investment is of $800m in common equity and at a valuation 3x times higher than back in 2018, outperforming Klarna’s public peers for the same time period.

“Klarna has not been immune to the significant downdrafts of fintech stock in public markets.

“The company’s peers are down 80-90% vs peak valuations and consequently, the adjustment in Klarna’s valuation is on par with its public peers from its $45.6bn valuation in June 2021.”

Sebastian Siemiatkowski, the Chief Executive Officer of Klarna, believes that the new financing “is a testament to the strength of Karna's business” in the face of the steepest drop in global stock markets in over 50 years.

Moritz pointed out 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.”