More pain for Chrysalis shares as Klarna valuation slashed to £5.6bn

Co-manager Watts says new price tag does not reflect ‘buy now pay later’ firm’s progress since initial investment

Klarna Buy Now Pay Later

Chrysalis’ share price has taken a further hit following news Klarna is to take a brutal 86% haircut to its valuation.

The ‘buy now pay later’ firm revealed on Monday it had raised $800m in its latest funding round, led by Sequoia Capital and backed by new investors, including the Canadian Pension Plan Investment Board and Mubadala, the United Arab Emirates’ sovereign wealth fund.

This was higher than the $500m it was reportedly looking to raise a month ago, but still shy of the $1bn funding round floated in May.

Despite this, the transaction values the Swedish business at just $6.7bn (£5.6bn), a staggering discount to the $45.6bn price tag it was on last summer.

Chrysalis said the revised valuation of its holding in Klarna, together with the movement of listed assets and FX markets, would shave 32p off the trust’s net asset value, slicing it to 179.5p from 211.8p at the end of March.

Its shares were down over 7% to 96.2p as markets closed on Monday.

Chrysalis duo remain ‘extremely positive’ on Klarna

Richard Watts said he and co-manager Nick Williamson remain “extremely positive on the outlook” for Klarna.

The pair first invested in the business in August 2019 when it was valued at $5.5bn. Since then, it has grown into a “global dominant payments business with a dominant market position in several territories”. Revenues have ballooned from $753m in 2019 to $1.6bn in 2021 and its number of global active users has shot up 150% to 150 million and it now serves 400,000 merchants.

Despite its rapid growth, the company has yet to turn a profit, with net losses quadrupling to SEK 2.6bn (£210m) in Q1, prompting the company to lay off 10% of its workforce.

While Klarna has a strong position in the Nordics and Germany, Watts admitted it has “not yet fully proven its ability” to penetrate the largest e-commerce markets, including the US, UK and Asia.

”The current funding round does not reflect Klarna’s progress since our initial investment, it reflects the very attractive terms that providers of capital are demanding against the current macroeconomic backdrop,” Watts said.

“We remain extremely positive on the outlook and potential of this business and believe that Klarna now has sufficient capital to reach profitability, whilst continuing to grow strongly.”

In the trust’s interim update, Watts and Williamson revealed 60% of holdings in the portfolio are currently unprofitable.

With £55m of cash on the balance sheet, they said they could extend cash runways, 14 months on average, by up to a year. But share buybacks and new investments are firmly off the table for now.

Portfolio Company  % of portfolio 
Starling 25.1%
Wefox 13.3%
Smart Pension 10.6%
The Brandtech Group 10.5%
Graphcore 6.1%
Klarna 5.5%
Featurespace 3.8%
Tactus 3.7%
InfoSum 3.3%
Deep Instinct 3.2%
Sorted 2.7%
Wise 2.3%
Revolution Beauty 1.9%
THG 1.7%
Secret Escapes 1.5%
Growth Street 0.0%
Rowanmoor 0.0%
Cash 4.8%
Source: Chrysalis

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