Klarna seeks to raise less than half of its high of $ 46 billion, a dramatic decline that underscores the “buy now, pay later” crisis business model this helped make it the largest private company in Europe, according to people familiar with the matter.
The Swedish fintech group has been forced to downgrade many times in recent months as it tries to persuade investors to provide it with new liquidity, the people said.
A month ago, the SoftBank-backed company was attracting investors, including institutional investment firms and family offices, for $ 25 billion in new money, but failed to gain significant strength, the people said.
More recently, some investors have again turned to the opportunity to invest less than $ 20 billion, according to these people. The Wall Street Journal reported that Clarna was discussing raising money worth about $ 15 billion.
Klarna’s rating rose during the coronavirus pandemic as customers embraced online shopping instead of buying goods at retail stores. Since August 2019, its value has grown from $ 5.5 billion to a peak of $ 46 billion in June 2021.
The sharp decline in the value of Klarna comes as the market capitalization of publicly listed technology companies has fallen by about 25% since the beginning of the year. Technology investors are also intimidated by the actions taken by central banks to curb inflation and the war in Ukraine.
In May, the Stockholm-based company cut 10% of its workforce to more than 7,000, blaming the Russian invasion, as well as rising inflation, market instability and changing consumer behavior.
Buy now, pay later for services that allow consumers to delay or distribute payments on installations, face the tribe of threats of reduced discretionary costs, the likelihood of higher customer defaults and rising interest rates with deteriorating economic conditions .
Shares in Affirm, now bought by the United States, a later payment provider that partnered with Amazon and Walmart, fell 80 percent this year.
According to surveys commissioned by the debt advice charity StepChange, half of those who buy now pay off loans in the UK later, saying they find it difficult to handle household bills and repay loans.
The sector is facing increasing scrutiny from regulators and investors, who are cautious about whether there are enough checks to make sure consumers can afford to use these products.
Clarna last year overhaul its services in the UK, including offering a pay now option, as it has been criticized for encouraging young or vulnerable people to overspend. He also removed all late fees.
In May, he said he would start data sharing on buy now, pay later transactions with credit bureaus in the UK Experian and TransUnion, offering greater clarity to other lenders on whether customers can afford credit.
On Thursday, the UK government pledged to amendment of the Consumer Credit Actwhich covers credit cards and personal loans, including buy now, pay later. Separately, the results of a consultation with the UK Treasury Department in the sector are expected soon, after which the Financial Conduct Authority said it plans to launch its own regulatory dialogue.
Apple’s decision to enter the purchase now, pay later this month, accumulated additional pressure on Klarna. The move has the potential to disrupt the sector, with more than 1 billion people using its iPhone.