Klarna will raise $ 1 billion to $ 31 billion

LONDON – Klarna is about to complete a $ 1 billion round of funding that would give the Swedish fintech company a $ 31 billion valuation, two people familiar with the matter told CNBC.

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

The company is advancing a quick round ahead of a potential stock price that would be an advantage for some of its early venture capital investors, such as Atomico and Sequoia. Klarna is also supported by large investors such as Snoop Dogg and Ant Group.

The deal could be closed in a matter of days, according to sources, who prefer to remain anonymous as details have not yet been made public. One source said the new capital injection was oversubscribed and increased in just one week.

Klarna declined to comment when contacted by CNBC.

Klarna is now the highest-tech unicorn in Europe, surpassing payment software company Checkout.com, which reached a $ 15 billion valuation last month.

Klarna continues to grow rapidly more than a decade after its founding and has made significant progress in the United States. Last year saw a major boost from increased demand for BNPL plans, fueled in part by coronavirus blockages that accelerated the shift to online shopping. .

This growth in BNPL products has worried UK regulators and the country’s government has recently announced that companies in the sector would become more strictly regulated. BNPL plans are often promoted as an alternative to credit cards, but consumer advocacy groups like Which warn that they often entice people (especially young people) to spend more than they can afford. For her part, Klarna says she welcomes the new rules.

“We’re on the right side,” Sebastian Siemiatkowski, CEO and co-founder of Klarna, told CNBC on Wednesday.

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

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

Klarna earns revenue by charging a fee to merchants every time a customer makes a transaction. The company is a regulated bank and has been growing more and more towards retail banking in its home country and in Germany.

Founded in 2005, Klarna is among many potential candidates for the IPO in Europe. It is rumored that several companies will go public this year, including Deliveroo, TransferWise and Darktrace. Siemiatkowski said a stock price could occur as early as this year, but the firm expects its new chief financial officer, former HSBC executive Niclas Neglen, to be established before making any official plans.

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

The head of Klarna added that the company finds “quotes” direct quotes, an alternative route to a traditional IPO where companies list without issuing any new shares. Siemiatkowski highlighted the example of Spotify, which was made public by direct contribution in 2018. But ruled on the possibility of merging with a special purpose acquisition company, or SPAC, a contribution method that has gained strength on Wall Street recently.