Klarna to raise $ 1 billion in $ 31 billion valuation

LONDON – Klarna is close to finalizing a $ 1 billion financing round that would give Swedish company Fintech 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 customers to spread the cost of their purchases over a period of interest-free installments.

The company is lifting a huge round before a potentially successful stock market listing that would be a boon to some of its early venture capitalists, like Atomico and Sequoia. Klarna is also supported by renowned investors like Snoop Dogg and Ant Group.

The deal may close in a few days, the sources said, preferring to remain anonymous, as details have not yet been released. The new capital injection was overloaded and lifted in just a week, said one of the sources.

Klarna declined to comment when contacted by CNBC.

Klarna is now Europe’s largest technology unicorn, overtaking payments software company Checkout.com, which reached a $ 15 billion valuation last month.

Klarna continues to grow rapidly more than a decade after it was founded, and has made significant strides in expanding to the United States. It had a major boost last year with the increased demand for BNPL plans, fueled in part by coronavirus blocks that accelerated a shift towards online shopping.

The growth of BNPL products has worried regulators in the UK, and the government of the country recently announced that companies in the sector would undergo stricter regulation. BNPL’s plans are often presented as an alternative to credit cards, but consumer advocacy groups such as Which warn that they tend to attract people – especially young people – to spend more than they can afford. For his part, Klarna says he accepts new rules.

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

“We are, with this product, challenging a massive industry that has burdened consumers with overdraft fees, with interest-bearing terms,” ​​he added. “There are many misunderstandings in the UK, but when we have a chance to talk to UK politicians … they are convinced and then they switch sides.”

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

Klarna earns revenue by charging merchants’ fees each time a customer makes a transaction. The company is a regulated bank and is increasingly turning to the retail bank in its home country, as well as in Germany.

Founded in 2005, Klarna is among the many potential technology IPO candidates in Europe. There are rumors that several companies will go public this year, including Deliveroo, TransferWise and Darktrace. Siemiatkowski said a listing on the stock market could happen later this year, but the company is waiting until its new chief financial officer, former HSBC executive Niclas Neglen, makes a deal before making any official plans.

“Maybe it can happen this year, maybe it will be next year, but it will obviously happen soon,” said Siemiatkowski. “It’s definitely underway, but we haven’t officially started the process yet.”

Klarna’s boss added that the company considers direct listings – an alternative route to a traditional IPO, where companies list without issuing new shares – “interesting”. Siemiatkowski highlighted the example of Spotify, which went public through direct listing in 2018. But he ruled out the possibility of merging with a special purpose acquisition company, or SPAC, a listing method that has gained significant momentum on Wall Street recently .