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Klarna establishes UK holding company in step towards IPO

Klarna UK
Image credit: Klarna

Swedish fintech Klarna has established a new UK holding company in an “important” step towards an “eventual IPO” as regulatory debates around buy now pay later (BNPL) continue.

Based in Stockholm, Klarna is one of the world’s largest providers of BNPL services, which allow consumers to split the cost of purchases into regular payments.

The new holding company, first reported by Sky News, is part of a pre-IPO plan that aims to attract international investors accustomed to the UK’s financial and regulatory regime.

A spokesperson for Klarna said the move was an “important early step on a journey towards an eventual IPO” and that the “administrative change” had been “in the works for over 12 months”.

The spokesperson confirmed that the new entity would not impact any existing roles or operations in Sweden or elsewhere.

“Klarna Holding will continue to be the regulated financial holding company under the direct supervision of the [Swedish regulators] and we will continue to hold a Swedish banking licence. This entity would be registered in the UK.”

The new UK entity can provide the company with access to additional international investors. However, the choice of location does not necessarily mean the company plans to IPO in London.

Klarna has not set a specific timeline for its public float and while a UK entity suggests some confidence in the British investment scene, the company could still opt for New York, which often promises higher valuations and larger capital pools.

Last year, Klarna was Europe’s most valuable private tech firm, worth $45.6bn. However, in July, the company’s latest fundraise – an $800m round featuring Sequoia Capital and the United Arab Emirates-owned Mubadala Capital – left it with a massively slashed valuation of $6.7bn.

The BNPL industry has become the subject of fierce regulatory debate in the UK, with critics arguing it currently exists as an unregulated loan product with the potential to put consumers into debt.

The UK’s Financial Conduct Authority (FCA) last week enforced a requirement for firms in the BNPL sector to present customers with clear, easy-to-understand contracts that inform people of the financial risks that accompany the use of the loan product.

The FCA has advocated repeatedly for BNPL regulation to be made law, however, the government has stalled its implementation.

Labour’s shadow city minister Tulip Siddiq on Monday unveiled Labour’s intention to regulate BNPL similarly to other short-term loans.