Klarna, the buy now, pay later company, has established a holding company in the United Kingdom, positioning itself at the apex of its corporate structure. This strategic move signifies the groundwork for a potential future public listing.
A spokesperson from Klarna confirmed to CNBC that the Stockholm-based company, renowned for enabling customers to defer payments through installment plans, has initiated a legal restructuring to create the holding company. This development has been agreed upon in collaboration with some of Klarna’s major shareholders, including Sequoia and Heartland.
It is important to note that while this restructuring serves as a prelude to a formal listing, it is still in its nascent stages, and Klarna presently has no immediate plans for going public. The spokesperson also clarified that the choice of the stock exchange for listing has not been determined, and establishing the new legal entity in the U.K. does not necessarily indicate that the company will go public there. Nonetheless, it affords Klarna the flexibility to make that decision in the future.
The restructuring primarily constitutes an administrative alteration that has been in progress for over a year and does not impact anyone’s roles or Klarna’s operations in Sweden. Klarna Holding will continue to operate as a regulated financial holding company under the direct supervision of the SFSA (Swedish Financial Services Authority) and maintain its Swedish banking license.
Klarna holds a significant position in the European payments sector, with a valuation of $6.7 billion. Like PayPal and Stripe, it provides online merchants with the capability to integrate checkout functionality into their digital stores. What sets Klarna apart from its competitors are its adaptable payment plans, known as “buy now, pay later.”
During the peak of the e-commerce surge driven by the COVID-19 pandemic, Klarna reached a staggering valuation of $46 billion, with SoftBank becoming an investor. However, its valuation subsequently plummeted by 85% to $6.7 billion as the tech market’s inflated valuations receded.
Klarna, featured in CNBC and Statista’s list of the top 200 fintech companies, has amassed over $4 billion in funding from investors such as Sequoia, Silver Lake, and China’s Ant Group.
The U.K. initially intended to implement stringent regulations on the buy now, pay later industry, including the requirement for affordability checks and clearer advertising communication. However, these plans may be reconsidered after prominent industry players expressed concerns in discussions with the government, suggesting that overly burdensome regulations could force them to exit the U.K.
Executives at Klarna and Block, the parent company of the buy now, pay later service Clearpay, criticized various aspects of the proposed U.K. regulations, including an exemption for e-commerce giant Amazon from compliance.
Klarna has been vigorously working towards profitability and reported its first profitable month earlier this year, marking its first since 2020. The company has been heavily investing in artificial intelligence products, with the recent launch of an AI image recognition tool capable of identifying specific products, such as jackets or headphones.
Additionally, over the weekend, Klarna reached an agreement with its workers in Sweden to avert a planned strike.