Klarna to raise $ 1 billion at $ 31 billion valuation

LONDON – Klarna is on the cusp of finalizing a billion dollar funding round that would give the Swedish fintech company a $ 31 billion valuation, two people familiar with the matter told CNBC.

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

The company is pulling a tour de force ahead of a possible successful stock market listing that would be a boon for some of its early venture capitalists, like Atomico and Sequoia. Klarna is also backed by large investors such as Snoop Dogg and Ant Group.

The deal could be done within days, the sources said, preferring to remain anonymous as details have yet to be released. The new capital injection was oversubscribed and lifted in just a week, one of the sources said.

Klarna declined to comment when contacted by CNBC.

Klarna is now Europe’s number one tech unicorn, surpassing payment software company Checkout.com, which reached a valuation of $ 15 billion last month.

Klarna continues to grow rapidly over a decade after its inception and has made significant progress expanding into the U.S. It received a big boost last year thanks to increased demand for BNPL plans, fueled by partly by coronavirus lockdowns that have accelerated the shift to online shopping.

This growth in BNPL products has worried regulators in the UK, and the UK government recently announced that companies in the sector would be subject to more stringent regulation. BNPL plans are often touted as an alternative to credit cards, but consumer groups like Which warn they often trick people – especially young people – to spend more than they can afford. For her part, Klarna says she is in favor of the new rules.

“We’re on the safe side of this,” Klarna CEO and co-founder Sebastian Siemiatkowski told CNBC in an interview on Wednesday.

“We are, with this product, challenging a massive industry that has overcharged consumers with overdraft fees, with interest-bearing terms of use,” he added. “There are a lot of misconceptions in the UK, but when we have the chance to sit down with UK politicians … they get convinced and then they switch sides.”

Klarna reached $ 1 billion in annual revenue for the first time last year, posting a record operating profit of $ 1.2 billion. However, the losses also accelerated by 50% due to increased costs associated with international expansion, with Klarna’s net loss amounting to around $ 109.2 million.

Klarna earns income by taking fees from merchants every time a customer makes a transaction. The company is a regulated bank and is increasingly entering retail banking in its home country as well as in Germany.

Founded in 2005, Klarna is one of many potential candidates for a technology IPO in Europe. Several companies are rumored to go public this year, including Deliveroo, TransferWise, and Darktrace. Siemiatkowski said a stock market listing could take place as early as this year, but the company is waiting until its new chief financial officer, former HSBC executive Niclas Neglen, has settled before making official plans.

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

Klarna’s boss added that the company finds direct listings – an alternative route to a traditional IPO where companies list without issuing new shares – “attractive.” Siemiatkowski pointed to the example of Spotify, which went public via direct listing in 2018. But he ruled on the possibility of merging with a Special Purpose Acquisition Company, or SPAC, a listing method that recently won. land on Wall Street.