Klarna Weighs Secondary Share Sale Ahead of IPO
The Takeaway
• Goldman Sachs is advising Klarna on the potential share sale
• A sale would set a new valuation ahead of an expected IPO
• Rippling, Figma and Canva have also held secondary sales
Klarna, the Swedish “buy now, pay later” firm, has been preparing what would be one of next year’s first big tech initial public offerings. First it wants to see if investors think it’s worth more than the roughly $7 billion valuation awarded during its last fundraising.
The Sequoia Capital–backed startup has been in preliminary discussions with investment firms about their interest in buying shares held by existing shareholders, said a person approached by the company’s representatives and a person who has talked to the company’s leaders. Goldman Sachs is advising the 15-year-old company on the potential share sale, said a third person. Such a deal would likely value the company at $10 billion or higher, based on recent trades in the secondary market for private stock, as well as on where mutual funds have priced their shares.
A Klarna spokesperson didn’t respond to a request for comment.
A sale arranged by Klarna would add to a growing trend among mature startups. With the IPO market still largely dormant, startups including Figma, Rippling and Canva have arranged secondary sales that allow investors and employees to sell some of their stakes. A secondary sale arranged by Stripe early this year valued the fintech leader 30% higher than its prior fundraising.
The specific terms of the potential Klarna secondary sale haven’t been set, and the deal may not go forward, one of the people said.
If it does, the sale would allow Klarna to set a new price ahead of an expected IPO. Klarna neared a $46 billion valuation in 2021, during the peak of investors’ excitement over digital bank alternatives. After interest rates spiked, pummeling its business, the company slashed its valuation 85% in a new funding round the next year. Klarna’s board chair, former Sequoia leader Michael Moritz, argued that the valuation was at odds with the strength of the company’s business.
Klarna, which offers short-term credit to shoppers for relatively small online orders, mostly makes money charging fees to merchants such as H&M and Adidas. It has said revenue rose 29% in the first quarter to 6.4 billion krona, or about $600 million, as the company expanded from Europe further into the U.S.. It has saved money on marketing and customer service by using new artificial intelligence tools and has cut staff, bringing it closer to profitability.
The improved financial performance has emboldened some investors. Asset management giant BlackRock, which owns shares in Klarna, has marked up the value of its shares 59% since March last year, according to public filings. It valued its shares at a price that implies a valuation of $9.5 billion, according to Caplight. Javier Avalos, CEO of Caplight, said investors bought shares in Klarna at that valuation earlier this year, too.
The share sale would also potentially relieve some pressure from existing shareholders to sell soon after the typical six-month IPO lock-up period. Klarna CEO Sebastian Siemiatkowski has said the company is ready for an IPO.
Several other tech firms eyeing IPOs next year have already given shareholders a chance to cash out some of their holdings. They include British fintech Revolut, which told staff last week it would sell $500 million worth of shares at a $45 billion valuation, working with Morgan Stanley, the Financial Times reported. That would be an increase from the $33 billion valuation at Revolut’s last fundraising. Goldman Sachs has arranged similar sales for software firms Figma and Canva this year.
A higher valuation would burnish Klarna’s image after a drama-filled start to the year.
Matt Miller, a partner at Sequoia Capital, moved to oust longtime board member Moritz from the Klarna board of directors earlier this year after the two disagreed over efforts to change the company’s shareholder agreements in Sweden as it began preparations to go public. The move backfired, leading to Miller stepping down in favor of Sequoia partner and Moritz ally Andrew Reed.
Sequoia is Klarna’s largest outside shareholder and owns 20% of the company, according to the company’s annual report. Sequoia first invested in 2010.