Source: Crypto Matters net
This week the valuation of Klarna Bank AB’s had been slashed to about $6.7 billion in its last funding round. Clearly, this came across as a dramatic reversal for one of the most high-profile startups of Europe. In a statement from Monday, July 11, it said how it had raised about $800 million from its existing and new investors.
Its new valuation dropped from its valuation of $45.6 billion which it received last year in June. This is with the buy-now-pay-later giant reducing ambition many times while talking with the investors. In fact, Klarna was seen to discuss the high valuation of $60 billion in February this year. However, this was prior to the Russian invasion of Ukraine, along with the increasing rates resulting in an impending recession.
Clearly, tech-based businesses have gone through a range od routs in 2022 as investors refused to look at what they viewed as potentially overprices and risky assets. Many tech-specialists like SoftBank Group Corp had been left on huge losses on billions. SoftBank backed Klarna in 2021, but was not named as its supporter this year.
Sebastian Siemiatkowski, the CEO of Klarna, expressed his thoughts in a series of tweets. He stated while the startup is not immune to the downturn of stock, and now is the time to look at return to profitability. Owing to this, he finds this valuation rather ‘odd’ taking into accounts its achievements.
“What does not kill you, makes you stronger,” he said.
Additionally, the startup is exposed to downturns in the sector of consumer finances. Its offers include interest-free loans for spreading payments for purchases over several instalments. This enables it to make money by charging retailers a small payment on each transaction and from interest on the longer terms loans.
Despite the increase in its customer number, Klarna sees its own losses and debt costs now piling up. Alongside, its business burning through million of dollars per quarter. In the first quarter, it posted an operating loss of 2.54 billion kronor or $245 million, and 6.58 billion kronor in 2021. Moreover, even the lender, that the Swedish Financial Supervisory Authority regulates, cut staff recently to cut costs.
Its existing investors who backed this funding round include Commonwealth Bank of Australia, Sequoia and Silver Lake. Moreover, its new investors include Canada Pension Plan Investment Board, along with Mubadala Investment Co. The startup’s decline is clearly mirrored by that of Affirm Holdings Inc, its US- listed rival. Affirm’s market value had dropped to $6.1 billion from its peak of $46.8 billion in November last year.
