Klarna blames worst market in 50 years for 85% drop in valuation

Swedish buy now, pay later giant Klarna has suffered a colossal downround, with its valuation dropping by 85% to $6.7bn.

The new valuation comes after the close of an $800m funding round from a mixture of existing and first-time backers. With the funds, the company hopes to expand in the US.

This new valuation comes a year after it was valued at $46bn and follows months of speculation around a potential downround, and a 10% cut to its global workforce.

Klarna blamed the major downround on the worst stock downturn in 50 years.

In its statement, it said, “The fresh investment in Klarna occurred during possibly the worst set of circumstances to afflict stock markets since World War II: high inflation, rising interest rates, mounting fears of a recession, the aftereffects of the first global pandemic since 1918, strains on commerce caused by supply chain disruptions, rising gas prices, and, especially in Europe, the dislocations caused by the war in Ukraine.”

The company highlighted that its new valuation is three-times higher than it was in 2018 and claims to be “outperforming Klarna’s public peers for the same time period.”

It added, “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.”

Backers in the new round included existing investors Sequoia, the founders, Bestseller, Silver Lake, and Commonwealth Bank of Australia. Also joining the round were Mubadala Investment Company and Canada Pension Plan Investment Board, which made their first investment into Klarna.

Following the close of the round, Klarna is letting over 1,000 of its smaller shareholders participate on a pro-rata basis.

Speaking on the investment, Klarna CEO Sebastian Siemiatkowski said, “It’s a testament to the strength of Klarna’s business that, during the steepest drop in global stock markets in over fifty years, investors recognised our strong position and continued progress in revolutionising the retail banking industry. Now more than ever businesses need a strong consumer base, a superior product, and a sustainable business model.”

Klarna added that it has grown significantly since 2018. It has launched in 11 new markets, including France, Canada and Australia, gained 30 million users in the US, increased volume in the UK by eight-times and more. It also claimed to be larger than Amex, with 150m users worldwide.

UK-based buy now, pay later platform Zilch recently collected an additional $50m for its Series C round, bringing the round’s total to $160m. The company raised the funds at a $2bn valuation.

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