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Buy now, pay later pioneer says it expects to be profitable again by end of year

Klarna halved its losses in the first quarter as the Swedish buy now, pay later pioneer said it was on course to return to profit by the end of the year.

Once Europe’s most valuable private tech company, Klarna said on Friday that its net loss narrowed to SKr1.3bn ($120mn) in the quarter as the group’s credit losses shrank by more than a third. Its revenues climbed 13 per cent to SKr4.9bn.

Klarna became a symbol of the boom and bust in the fintech sector as its valuation was slashed from $46bn to $6.7bn last year, prompting the group to retrench and cut jobs.

Founded in 2005, the company pioneered “buy now, pay later”, which allows customers to delay payments or divide them into instalments. The popular form of credit was boosted by the ecommerce boom during the coronavirus pandemic.

Chief executive Sebastian Siemiatkowski said late last year that he expected Klarna to be profitable again by August or September.

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Elon Musk suggested Thursday during a Twitter Spaces with Ford CEO Jim Farley that Tesla might open up some of its automotive operating system code to other automakers.

“In the same way that maybe Android is helpful to the phone industry as sort of a general standard, like we could potentially open source more code,” said Musk. If Tesla takes that leap it will compete with Google, which has developed an automotive operating system based on Android, as well as Apple.

Musk was responding to Farley’s note that making a “fully software updatable vehicle” is “super hard.” The billionaire executive said Tesla would be happy to “be helpful on the software front.”

Musk made the comment during a Twitter Spaces that was used to announce a milestone agreement between Tesla and Ford. Under the deal announced Thursday, Ford’s EV customers will get access to the Tesla Supercharging network in the U.S. and Canada. More importantly, Ford agreed to incorporate Tesla’s charging port into its second-generation of EVs, which includes a truck and three-row SUV, starting in 2025.

Musk often spitballs ideas for Tesla at live events, some of which come to fruition and some of which don’t. If Tesla were to try to commercialize its over-the-air updatable software to other vehicles, it would put the automaker in direct competition with Google and Apple.

Google offers automakers Android Automotive OS, which is modeled after its open source mobile operating system that runs on Linux and is modified for use in cars. Apple also jumped into the OS game last June when it announced that its next-gen CarPlay aims to power a vehicle’s entire instrument cluster. Both tech companies also offer a middleware product called Apple CarPlay and Android Auto that connects a user’s phone to a car’s infotainment system.

Supply chain partnerships

Musk and Farley also hinted Thursday at other potential partnerships in the future, including in the supply chain.

The Ford CEO questioned Musk about Tesla’s new Corpus Christi lithium refining plant. Ford recently struck a series of deals, including with Albemarle and SQM, to ensure the automaker’s access to lithium.

Musk repeated previous woes that there are not enough entrepreneurs in the U.S. digging into raw materials mining and processing, and that he wishes Tesla didn’t have to pick up the slack. He said the company has a nickel-based cathode refinery in Austin, and might also have to get involved in anode manufacturing, but “hopefully not.”

Musk noted that there’s going to be a huge market for synthetic graphite (graphite is the main material in most lithium-ion anodes).

The two CEOs have remained friendly at times despite competing against each other. Musk has praised the automaker in the past, noting on several occasions that only Tesla and Ford have avoided bankruptcy.

Ford, like other legacy automakers, is still aiming to unseat Tesla as the No. 1 seller of EVs in the United States. Ford has a ways to go.

In 2022, Ford sold 61,575 electric vehicles in the U.S. Tesla sold 1.3 million EVs globally. The company doesn’t break out sales by country. Over the past two years, Ford said it lost about $3 billion on its EV and digital services business, a unit now known as Model e. The company doesn’t expect Model e to be profitable until late 2026 with an 8% operating profit margin. Ford’s traditional gas-powered engine units were profitable enough to offset those losses, though.

In terms of production, Ford aims to reach 600,000 EV units by the end of 2023 and 2 million by the end of 2026.

Tesla said it wants to hit a 50% compound annual growth rate in 2023 that should see the automaker produce 1.8 million cars

Nikola, the beleaguered electric truck developer, is at risk of being delisted from Nasdaq, the company disclosed Thursday in a regulatory filing.

Nikola said that on May 24 it received a delisting notice from the public exchange because its share price has been below $1 for the past 30 days. The company has until November 20 to comply with Nasdaq’s minimum price rule, which requires the share price to be above $1 for 10 consecutive business days.

Nikola shares were as high as $65.90 in 2020 when the buzzy SPAC was being led by Trevor Milton, the company’s co-founder and former CEO, who has been indicted on federal securities fraud. Shares have since fallen 20% to $0.62.

Nikola is among a growing number of companies that went public via a merger with a special purpose acquisition company to see its market cap go into a free fall, and in some cases, land in delisting limbo. Lordstown Motors said this month it also received a delisting notice. The notice, and its failing deal with Foxconn, prompted Lordstown to issue a reverse stock split. Many of these mobility companies were attracted to the capital that public markets can access. And the use of the SPAC as a financial instrument seemed to work at first with many becoming buzzy meme stocks in 2021.

Now the fundamentals are catching up to companies like Nikola as well as other SPACs like Arrival, Bird and Canoo.

Nikola has been working to raise more money by issuing more shares. It is urging shareholders to vote for a proposal that would allow it to increase the number of shares of its company’s common stock. The passage of this proposal requires more than 50% of its outstanding shares to vote favorably.