Buy Now Pay Later giant Klarna strides towards $15bn float
Klarna, the buy now, pay later (BNPL) finance giant, is setting up a new British holding company as it clears the path to a stock market flotation that could value it at more than $15bn (£12.1bn).
Sky News has learnt that the Stockholm-based consumer credit provider has informed investors it has kicked off preparatory work ahead of a listing expected to be launched as soon as the first half of next year.
City sources said this weekend that Klarna, which employs about 5,000 people and boasts 150 million customers globally, would be ready to float within months if market conditions were accommodating.
Its founder and chief executive Sebastian Siemiatkowski said in August that three key conditions – becoming established in the US, having a sustainable business model and significant growth potential – for an initial public offering (IPO) had been met.
Third-quarter results to be released on Monday are expected to show continued progress towards annual profitability, according to insiders.
The administrative decision has been taken to reflect the UK’s standing from a legal, regulatory and capital markets perspective, they added.
The incorporation of the new holding company does not, however, mean that Klarna will necessarily decide to float in London.
Many bankers and investors expect it to choose New York to list instead, in what would be perceived as another blow to the City’s prestige following the US listing of ARM Holdings, the chip designer.
In a statement issued to Sky News this weekend, a Klarna spokesman said: “We have initiated a process for a legal entity restructuring to set up a UK holding company as an important early step on a journey towards an eventual IPO.
“This is an administrative change that has been in the works for over 12 months and does not affect anyone’s roles, nor Klarna’s Swedish operations.
“Klarna Holding will continue to be the regulated financial holding company under the direct supervision of the SFSA [Swedish financial regulator] and we will continue to hold a Swedish banking licence.
“This entity would be registered in the UK.”
Klarna boasts 150 million customers globally
Klarna was forced to slash its valuation to $6.7bn (£5.4bn) in a funding round last year, having once been valued at $46bn (£37.2bn) and drawn backing from investors such as SoftBank’s Vision Fund, Sequoia Capital and Mubadala, the Abu Dhabi sovereign wealth fund.
Bankers believe that based on a comparison with New York-listed peer Affirm Holdings, Klarna should attract an IPO valuation of between $15bn and $20bn (£16.1bn).
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The establishment of the British holding company, which requires shareholder approval, is expected to take place shortly.
Klarna’s corporate reorganisation comes as the UK government veers away from a crackdown on the BNPL sector.
Sky News revealed in July that ministers were planning to shelve new legislation to regulate providers such as Klarna, with future rules instead incorporated into a reformed Consumer Credit Act.
Consumer group fury
Consumer campaign groups responded with fury to the decision, which has yet to be announced by the government.
One industry source said they understood that ministers were preparing to hold talks with BNPL providers about agreeing a series of voluntary measures prior to any legislative changes being introduced.
This week, the Financial Conduct Authority said it had secured contract changes for BNPL customers after an explosion in the use of such products.
Research published by the City watchdog showed that 27% of adults – roughly 14m people – had used BNPL at least once in the second half of 2023.
‘Proportionate’ regulation
Klarna has previously declared itself in favour of “proportionate” regulation of the sector.
Earlier this year, it said it was “concerned with the suggestion to copy and paste Consumer Credit Act rules on credit agreements, which are outdated and don’t protect or inform consumers”.
“Quite the opposite, they leave consumers confused and, ironically, push them towards expensive and higher-risk forms of credit.
“With BNPL regulation the government has a golden opportunity to be bold and create new rules to give consumers the right information at the right time so they can make informed decisions.”
In May, Klarna launched what it described as Britain’s first “credit opt-out” product to give consumers greater control of their finances.
It said the idea had been suggested by Andrew Griffith, the City minister, during a meeting with Mr Siemiatkowski.
Four people have been arrested by police investigating cyber attacks targeting M&S, Co-op and Harrods.
A 20-year-old woman and two males, both aged 19, and a male aged 17, were detained in London and the West Midlands this morning as part of a National Crime Agency (NCA) operation.
They were arrested at their homes on suspicion of Computer Misuse Act offences, blackmail, money laundering and participating in the activities of an organised crime group.
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Electronic devices were seized from the suspects and are currently being analysed by forensic experts.
M&S halted online orders, and shelves were empty in shops after the cyber attack on the retailer earlier this year.
The initial hack into the retailer’s systems took place in April through “sophisticated impersonation” involving a third party.
Disruption is expected to continue at the retailer until the end of this month.
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Mickey Carroll in May answered why M&S cyber attack was so bad.
The Co-op and Harrods were also subsequently targeted by hackers.
Paul Foster, head of the NCA’s National cybercrime unit described the arrests as a “significant step” in their investigation, which remains “one of the Agency’s highest priorities”.
He added: “…our work continues, alongside partners in the UK and overseas, to ensure those responsible are identified and brought to justice.”
The National Crime Agency is keen to “signal” to “future victims” the “importance of seeking support and engaging with law enforcement”, stating that “the NCA and policing are here to help”.
The NCA has also thanked M&S, Co-op and Harrods for their support in their investigations.
The arrests, which took place early on Thursday morning, were supported by officers from the West Midlands Regional Organised Crime Unit and the East Midlands Special Operations Unit.
Earlier this week, the chairman of M&S told MPs that the hack had been “traumatic” and like an “out-of-body experience”.
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Archie Norman, however, refused to be drawn on whether the retailer had paid any ransom.
“We are not discussing any of the details of our interaction with the threat actor, including this subject, but that subject is fully shared with the NCA,” he said.
It is estimated that the cyber attack will cost M&S up to £300m this year.
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Days after M&S was attacked, the Co-op was targeted and forced to shut down some internal systems.
Harrods was then hacked, and also had to shut some systems despite its website and shops continuing to operate.
Of those arrested, a 17-year-old British male and a 19-year-old Latvian male were from the West Midlands.
A 19-year-old man was from London and a 20-year-old woman from Staffordshire.
Royal Mail is to be allowed to scrap Saturday second-class stamp deliveries, under a series of reforms proposed by the communications regulator.
From 28 July, Royal Mail will also be allowed to deliver second-class letters on alternate weekdays, Ofcom said.
The post will still be delivered within three working days of collection from Monday to Friday.
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The proposals had already been raised by Ofcom after a consultation was announced in 2024, and the scale back was proposed early this year.
Royal Mail had repeatedly failed to meet the so-called universal service obligation to deliver post within set periods of time.
Those delivery targets are now being revised downwards.
Rather than having to have 93% of first-class mail delivered the next day, 90% will be legally allowed.
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The target for second-class mail deliveries will be lowered from 98.5% to arrive within three working days to 95%.
A review of stamp prices has also been announced by Ofcom amid concerns over affordability, with a consultation set to be launched next year.
It’s good news for Royal Mail and its new owner, the Czech billionaire Daniel Kretinsky. Ofcom estimates the changes will bring savings of between £250m and £425m.
A welcome change?
Unsurprisingly, the company welcomed the announcement.
“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable universal service,” said Martin Seidenberg, the group chief executive of Royal Mail’s parent company, International Distribution Services.
“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”
Citizens Advice, however, doubted whether services would improve as a result of the changes.
“Today, Ofcom missed a major opportunity to bring about meaningful change,” said Tom MacInnes, the director of policy at Citizens Advice.
“Pushing ahead with plans to slash services and relax delivery targets in the name of savings won’t automatically make letter deliveries more reliable or improve standards.”
Acknowledging long delays “where letters have taken weeks to arrive”, Ofcom said it set Royal Mail new enforceable targets so 99% of mail has to be delivered no more than two days late.
Changing habits
Less than a third of letters are sent now than 20 years ago, and it is forecast to fall to about a fifth of the letters previously sent.
According to Ofcom research, people want reliability and affordability more than speedy delivery.
Royal Mail has been loss-making in recent years as revenues fell.
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In response to Ofcom’s changes, a government spokesperson said: “The public expects a well-run postal service, with letters arriving on time across the country without it costing the earth. With the way people use postal services having changed, it’s right the regulator has looked at this.
“We now need Royal Mail to work with unions and posties to deliver a service that people expect, and this includes maintaining the principle of one price to send a letter anywhere in the UK”.
Ofcom said it has told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear their experiences implementing the changes.
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