The $600 million deal, which is being finalized, will involve investors including Sequoia Capital and Abu Dhabi’s Mubadala putting money into the Swedish company, two of the people added. The dramatic decline in the value of one of Europe’s most valuable private companies underscores the extreme reversal of sentiment for growth-chasing startups. It also shows how investors have put pressure on buy-now-pay-later companies like Klarna, which provide a form of short-term credit. Just a year ago, Klarna was able to double its valuation to $46 billion after a $639 million funding round amid an e-commerce boom during the coronavirus pandemic. That funding round was led by Japan’s SoftBank, the investment group behind a disastrous bet on office-sharing group WeWork. Klarna? the Goldman Sachs adviser; and Sequoia, whose partner Michael Moritz is also Klarna’s chairman, declined to comment. Mumbandala did not immediately respond to a request for comment. The Wall Street Journal first reported the new financing terms. Founded in 2005, the company is a pioneer in the buy now, pay later business, which allows customers to delay or split payments. However, 40 percent of her transactions are now paid in full through the Pay Now option. The new valuation would be the lowest for Klarna since August 2019, when it was valued at $5.5 billion, and follows a series of attempts to raise cash this year, according to people briefed on the matter. In May the company tapped investors, including institutional investment firms and family offices, for fresh cash at a $25 billion valuation. However, according to these people, it failed to gain any significant traction. Klarna has also cut 10 percent of its workforce of more than 7,000 employees, with chief executive Sebastian Siemiatkowski describing 2022 as a “tumultuous year”. A month later, some investors were approached with the opportunity to invest at a valuation below $20 billion, according to the same people. The reduced valuation reflects a broader run in the fintech market. Rising inflation has led investors to take a more cautious approach, stemming the flow of easy money that has helped boost the industry to stunning heights.

Buy now pay later providers have been hit particularly hard as falling discretionary spending, the risk of rising defaults and higher interest rates squeeze already tight margins. In its first-quarter results, Klarna reported a net loss of SKr 2.5 billion ($254 million), quadrupling the amount in the same period last year, while cash flow fell from a positive SKr 7.6 billion to a negative 7 .3 billion SKr in one year. They also face pressure from rivals such as Apple, which is launching its own Apple Pay Later product in the US, and increasing regulatory scrutiny over whether there are enough checks to ensure customers can afford their loans. In June the UK government outlined plans to strengthen rules in the sector, including requiring lenders to carry out affordability checks and allowing consumers to lodge complaints with the Financial Ombudsman Service. Buy now pay later providers have already taken some steps to assuage regulatory concerns. Since June, Klarna has started reporting information to credit bureaus, allowing other lenders to see customer payment data.