The $6 billion valuation mark is dramatically lower than the $15 billion the BNPL firm was eyeing as of last month. That being said, the company’s valuation is still in flux, and it might end up being closer to $10 billion as it tries to find its footing in today’s turbulent market.
According to people familiar with the matter, employees may be issued new equity options as the existing ones have no value.
While Klarna declined to offer any specific details on its fundraising efforts, reports indicate that private equity firm Sequoia may lead a $650 million investment in the company, giving it a valuation of $6.5 billion.
The significant decline in the Swedish firm’s valuation has come along with a rise in operating losses. In Q1, the company reported an operating loss of $245 million and a stunning loss of nearly $628 million last year.
Nevertheless, Klarna still maintains an active user base of 147 million consumers globally and has some 400,000 retail partnerships, including those with key brands such as Nike, Sephora, IKEA, and Expedia, Bloomberg reported.
The mounting losses have come as a result of rising inflation, higher interest rates, and fears of a looming recession — factors that have also impacted the business of other BNPL firms.
Affirm, for example, has seen its valuation tumble by 75% in just the last 12 months as investors have taken a negative view of the BNPL business model.
To top that off, these firms are continuing to see an increase in competition. Earlier last month, tech giant Apple announced plans to launch its own BNPL offering, for example. Apple’s entry, in particular, could upend the dominance of players such as Klarna, Affirm, and PayPal.
“I think it’s a final, massive embracement of what to me is a much healthier form of credit,” said Klarna CEO Sebastian Siemiatkowski on Apple’s entry into the market.
Siemiatkowski also called Klarna’s business “extremely recession-proof” when compared to traditional credit card companies. It is worth noting, however, that the state of Klarna’s business today is a far cry from its pre-pandemic heydays.
In May of this year, the company announced plans to lay off 10% of its workforce due to weakening consumer confidence, rising inflation, a volatile stock market, and Russia’s ongoing war against Ukraine.
“When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today,” Siemiatkowski said in May. “While crucial to stay calm in stormy weather, it’s also crucial not to turn a blind eye to reality. What we are seeing now in the world is not temporary or short-lived, and hence we need to act.”