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

LONDON – Klarna is close to completing a $ 1 billion round of funding that would give the Swedish fintech firm a valuation of $ 31 billion, 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 throwing a bumper round ahead of a potential blockbuster listing that would be a boon to some of its early venture capital investors, such as Atomico and Sequoia. Klarna is also backed by major investors such as Snoop Dogg and Ant Group.

The deal could be closed within days, the sources said, who preferred to remain anonymous because the details have not yet been made public. The new capital injection was oversubscribed and collected within a week, one source said.

Klarna declined to comment when he reached out to CNBC.

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

Klarna continues to grow rapidly more than a decade after it was founded, and has made significant strides in expanding into the US. It got a big boost last year from increased demand for BNPL plans, fueled in part by the coronavirus accelerating a shift to online shopping.

That growth in BNPL products is worrying regulators in the UK, and the country’s government recently announced that companies in the sector would be subject to tighter regulation. BNPL plans are often touted as an alternative to credit cards, but consumer advocacy groups like this one warn that they often entice people – especially young people – to spend more than they can afford. Klarna says she welcomes new rules.

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

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

Klarna had annual sales of $ 1 billion for the first time last year, with record operating income of $ 1.2 billion. However, losses also accelerated by 50% due to higher costs related to international expansion, with Klarna’s net loss amounting to approximately $ 109.2 million.

Klarna earns income from collecting a fee from sellers every time a customer makes a transaction. The company is a regulated bank and is increasingly using retail banking both in its home country and in Germany.

Founded in 2005, Klarna is one of many potential tech IPO candidates in Europe. According to rumors, several companies will go public this year, including Deliveroo, TransferWise and Darktrace. Siemiatkowski said a listing could take place as early as this year, but the company is waiting for its new chief financial officer, former HSBC director Niclas Neglen, to make a decision before making any official plans.

“Maybe it could happen this year, maybe it will be next year, but of course it will happen pretty soon,” said Siemiatkowski. “It is certainly in the works, but we have not officially started the process yet.”

Klarna’s boss added that the company finds direct listing – an alternative route to a traditional IPO where companies go public without issuing new shares – “interesting.” Siemiatkowski highlighted the example of Spotify, which was made public in 2018 via a direct listing. But he judged the possibility of merging with a specialty acquisition company, or SPAC, a listing method that has been getting a lot of attention on Wall Street lately.