The Commonwealth Bank is facing a $2bn investment hit on a major buy now, pay later app.
The Commonwealth Bank is facing a giant $2bn hit to its investment in Klarna, with the buy now, pay later platform’s value expected to plummet.
Stockholm-based Klarna’s valuation has crashed to just $US6.5bn ($A9.6bn) from $US45.6bn ($A66.2bn) last year due to market volatility and troubled expansion plans.
It is now reportedly attempting to raise $US650m ($A957m) from investors, including Mubadala and Sequoia Capital.
Just one year ago, the platform was Europe’s most valuable start up.
CBA first attempted to take a piece of the pie in 2019, buying a 2 per cent stake for $100m when the company was valued at $5bn.
Another $200m was invested in Klarna by the bank in early 2020.
The total stake was valued at $2.7bn on June 30 of last year.
However, Morgan Stanley’s Richard Wiles said the valuation of the funding’s latest round would confirm just how much CBA was set to lose.
“An 85 per cent year-on-year reduction in the value of Klarna suggested by the media report would imply a writedown of around $2bn in the value of CBA’s stake to around $400m,” he said in a research note.
Klarna was founded in 2005 and is widely seen as the blueprint for other major BNPL services including Australia’s Afterpay.
Much of the sector has been hit by similar woes and declining shares this year due to surging inflation and rising interest rates.
Global instability following Russia’s invasion of Ukraine and a drop in investor interest for tech companies have also been blamed for the plummet.
Klarna, however, remains privately owned after speculation it would go public following the 2021 surge.
Ten per cent of Klarna’s staff were laid off in response to the fall in value.
CBA did not respond to NCA NewsWire’s request for comment.
Originally published as Commonwealth Bank facing $2bn investment hit amid Klarna’s woes
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