BNPL provider Klarna secures 800 million dollar financing

Swedish payment provider Klarna has announced it has closed a new 800 million dollar funding round which it said will be used primarily to support the expansion of its US market position.

The ‘buy now, pay later’ (BNPL) operator said it had received backing from existing investors, including Bestseller and its founders Sequoia, as well as a number of new investors, such as Canada Pension Plan Investment Board and Mubadala Investment Company.

“It’s a testament to the strength of Klarna’s business that, during the steepest drop in global stock markets in over 50 years, investors recognised our strong position and continued progress in revolutionising the retail banking industry,” said Klarna CEO, Sebastian Siemiatkowski. “Now more than ever businesses need a strong consumer base, a superior product and a sustainable business model.”

Following the significant round, which comes at a 6.7 billion dollar post-money valuation, Klarna is now looking to potentially allow its 1,000 plus smaller shareholders to participate on a pro-rata basis in a process that is set to continue for the coming weeks.

Inflation and rising concerns around BNPL

The investment comes during a period of high inflation for global markets, which has had a major impact on the stock market, however the service provider noted that, despite its shares also being hit, it has created a “strong solid foundation” in order to take on the approaching challenges.

Sticking to a positive outlook, Michael Moritz, a partner at Sequoia, stated: “The irony is that Klarna’s business, its position in various markets and its popularity with consumers and merchants are all stronger than at any time since Sequoia first invested in 2010. Eventually, after investors emerge from their bunkers, the stocks of Klarna and other first-rate companies will receive the attention they deserve.”

Despite investors’ upbeat view, the financing also follows a rise in resistance towards the BNPL model, with banking firms and international governments looking to implement stricter rules and regulations surrounding the payment option.

In the UK, concern comes amid the increasingly worrisome ‘cost of living’ crisis in the region, with many firms suggesting that BNPL could put financially unstable consumers at risk of significant debt.

The UK government is expected to lay secondary legislation regarding BNPL, following an initial draft, by mid-2023, which could require lenders to carry out affordability checks and approve BNPL products through the Financial Conduct Authority.

However, Siemiatkowski affirmed Klarna’s position as a profitable business, noting that its previous investments have helped it to transform into a “global player”.

The CEO continued: “With the recent shift in investor sentiment we also now shift our focus and look forward to returning to a modus operandi of growth and profitability. The foundation for a global leader has been set.”