Swedish-based fintech giant Klarna has initiated a strategic move to pave the way for a potential future listing by creating a U.K. holding company at the top of its corporate structure. A representative from Klarna confirmed to CNBC that the company has embarked on a formal entity restructuring, emphasizing that it is a preliminary step toward a potential public offering. The spokesperson clarified that while it's still in the early stages and no immediate plans for an IPO are in place, the company has taken this step to facilitate its corporate framework for future possibilities.
Klarna's major shareholders, Sequoia and Heartland, are reported to have endorsed the new company's preparations. The spokesperson highlighted that the restructuring is primarily an administrative change, with no impact on the roles of individuals within the organization or the day-to-day operations of Klarna in Sweden. Klarna Holding will continue to be a regulated financial holding company under the supervision of the Swedish Financial Supervisory Authority (SFSA) and maintain its Swedish banking license.
The spokesperson emphasized that the choice of the U.K. for the new legal entity does not necessarily indicate that Klarna will go public there, as the company retains the flexibility to choose its listing venue. Klarna, a European payments giant valued at $6.7 billion, distinguishes itself from competitors like PayPal and Stripe by offering "buy now, pay later" options, catering to the evolving demands of online shoppers.
During the height of the COVID-driven e-commerce surge, Klarna's valuation soared to $46 billion, securing partnerships with SoftBank. However, following the subsequent contraction in the tech market, the company's valuation experienced an 85% decline to $6.7 billion. Notably, Klarna has attracted significant investment from notable entities such as Sequoia, Silver Lake, and Ant Group, raising over $4 billion.
In response, major players, including Klarna and Block (owners of Clearpay), expressed concerns about the potential impact of stringent regulations and criticized exemptions, such as the one for Amazon. The U.K. government is reportedly considering revising these plans after receiving feedback from industry players who warned of potential departures if regulations were deemed too restrictive.
Despite the challenges, Klarna has actively pursued profitability, achieving its first profitable month since 2020 earlier this year. Additionally, the company has invested significantly in artificial intelligence technologies, showcasing innovations like an AI picture recognition technology capable of identifying various products.
In a recent development, Klarna also reached a strike-avoidance agreement with Swedish workers over the weekend, adding another positive note to the company's current trajectory. As Klarna positions itself for potential future growth and a public listing, its strategic moves will undoubtedly be closely monitored in the dynamic landscape of fintech.