Klarna seeks to raise less than half of its high of $ 46 billion, a dramatic decline that highlights the crisis in the buy-now-pay-later business model that helped make it the biggest private company in Europe, according to people informed about the issue.
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 reports that Clarna is considering raising 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 installment payments, face the impact 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.
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Last year, Klarna reviewed its services in the UK, including offering a pay now option, as it was criticized for encouraging young or vulnerable people to overspend. He also removed all late fees.
In May, she said she would start sharing data on buying now, paying for later transactions with UK credit bureaus Experian and TransUnion, offering greater clarity to other lenders on whether customers can afford credit.
On Thursday, the UK government committed to revising the Consumer Credit Act, which covers credit cards and personal loans, including buy now, pay later. Separately, the outcome of the UK Treasury’s consultation in the sector is expected soon, after which the Financial Conduct Authority said it plans to launch its own regulatory dialogue.
Apple’s decision to make the purchase now, to pay later this month, has put additional pressure on Klarna. The move has the potential to disrupt the sector, with more than 1 billion people using its iPhone.
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