According to ARK Invest, Klarna’s valuation down round could be par for the coming course.
In its next funding round the valuation of Swedish buy now, pay later (BNPL) startup Klarna could drop 85% to $6.5 billion, according to a recent WSJ report, well below rumors of around $30 billion and $15 billion in May 2022 and June 2022, respectively, and the SoftBank-led funding round that valued the company at $45 billion in June 2021, ARK Invest wrote in a recent newsletter.
At a $6.5 billion valuation, Klarna and public competitor Affirm would be equivalent on a price-to-sales basis. At a $30 billion valuation, its price-to-sales ratio would have matched that of Affirm nearly a year ago in June 2021, before the public and private valuations collapsed, according to ARK.
“Such a steep valuation cut would not surprise us,” ARK wrote. “According to our research, standalone BNPL providers like Klarna and Affirm are facing increasingly stiff competition from digital wallets like Cash App, Shop Pay, and Apple’s Pay Later that will expose their limited value proposition.”
Square — Block’s seller business — announced last month that it will integrate with Apple’s new Tap-to-Pay feature, allowing merchants to accept contactless payments using its point-of-sale iPhone app and providing “new commerce experiences” such as serving customers on the spot and accepting contactless payments on the go.
“We believe digital wallets will integrate BNPL as a ‘feature,’ not a product, and will evolve into full service ‘bank branches in pockets’ serving user bases much larger than any US money center bank,” ARK wrote.
The ARK Fintech Innovation ETF (ARKF) offers exposure to fintech innovations including mobile payments, digital wallets, peer-to-peer lending, blockchain technology, and financial risk transformation. These innovations should revolutionize the financial industry, impacting every sector of the global economy.
This fund aims to pick the winners in financial technology such as blockchain, transaction innovation, and customer platforms. The fund typically holds between 35-55 securities, according to ARK’s website.
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