Making sense of Klarna’s tanked valuation

The BNPL giant is in talks to fundraise at a $15B valuation. It had previously been valued at $46B.

Why should we care?
Klarna’s declined valuation isn’t just about Klarna, but also about BNPL and the tech sector writ large. Low interest rates allowed unprofitable tech companies to stay afloat with cheap cash; investors now have more rational priorities, seeing profit as a more accurate reflection of a company’s health than its rate of growth. And growing volatility, in addition to general skepticism about the largely unregulated lending practice, have made BNPL a less favorable sector to investors. Klarna in particular has seen its net loss quadruple to $250M in Q1 2022, and it’s laid off 10% of its employees in response. Apple’s foray into BNPL doesn’t help either, given the company’s deep pockets, which could let it outlast other competitors and emphasize growth over profit where cash-strapped providers can’t. Klarna may be forced to take a hit to its image through such a steep decline in its valuation—but, at the least, it will help them survive a downturn.