When people talk about promising tech startups, they first think of projects in Silicon Valley. But there are exceptions, one of which is Swedish fintech service Klarna. This “buy now, pay later” service has been dubbed one of the most expensive and promising ventures in Europe. Its cost is estimated at around $46 billion, but the company remains private for now. This means that its shares are not publicly traded. However, you can invest in them using pre-IPO futures traded on UTEX.
How was the “buy now, pay later” principle introduced in pre-IPO?
The founders of Klarna – Sebastian Semyatkovski, Niklas Adalbert and Viktor Jakobsson – started from three main messages:
- Users who buy something online do not want to enter a lot of data.
- People are more willing to buy in installments.
- All commissions can be assigned to the seller, but it will still be profitable for him to work with you, because users are more willing to buy in installments and will immediately receive the money for the purchase.
With this idea, the prospective founders of the venture came to the competition at the Stockholm School of Economics in 2005 and won nothing, taking one of the last places. However, this did not stop them and in the same year they set up their company in Stockholm. Thus, a business was launched that positions itself as a “healthier, simpler and smarter alternative to credit cards”.
Its first investors were the famous Swedish business-angel Jane Valierud, who has also invested in many other local ventures. Valierud gave the founders €60,000 for 10% in the future company and helped search for a team of programmers interested in improving the technical side of the service. These five programmers received an additional 37% of this service.
The working principle is simple. When purchasing, the user must enter a minimum of data: name, e-mail address, telephone number and regular address for the delivery of goods. No credit card details or other information. Klarna believes that a long registration process will demoralize the user and they may eventually refuse to purchase.
As soon as you buy something using the customer service, the seller immediately receives the corresponding amount from Klarna. At the same time, the buyer chooses one of several payment options: he can pay this amount within 30 days or pay it in three installments with an interval of two weeks. In these cases, the buyer pays nothing but the purchase amount itself. There is also the option to purchase on credit.
For sellers, they pay a fixed amount plus a commission on each purchase. As they say in Klarna itself, this is beneficial for sellers, because purchasing with installment and simple online payment increases the probability of purchase and the average amount, and reviews show that users like this payment scheme.
One of the most expensive fintech-services in the world
At first, the service only worked in Sweden, after a few years it expanded to other countries in this region – Norway, Denmark and Finland. Now the company has more than 90 million users in almost two dozen countries and employs about 4,000, according to its own data. More than 250,000 vendors collaborate with Klarna, including giants such as IKEA, Samsung, AliExpress, H&M and others.
In September 2020, Klarna launched another funding round – raising $650 million from a group of investors led by the Silver Lake mutual fund. The overall valuation nearly doubled from $5.5 billion recently to $10.6 billion. At that time, European and American media ran articles calling Klarna “Europe’s largest fintech unicorn” and “the world’s fourth largest private fintech company”.
Plus – more: the company’s valuation has increased 330% in less than a year – now worth $45.6 billion. The fintech firm raised $639 million in June from Vision Fund 2, which is owned by Japanese conglomerate SoftBank, and included a number of other investors, including Adit Ventures and Honeycomb Asset Management.
Overall, investors include individuals and organizations ranging from American rappers Snoop Dogg and ASAP Rocky to Alibaba-owned Chinese fintech giant Ant Group.
Klarna’s revenue last year was $1.2 billion – a record for a service. True, the loss also increased, 50% more than in 2019, reaching $109.2 million. This is primarily due to the active expansion of the service to new countries – it has big plans. Also, in recent years the company has more and more competitors.
Moreover, unlike many startups that are prepared to remain unprofitable for years in order to grow and develop more actively, Klarna has been profitable for most of its existence. Only in the last two years has it decided to sacrifice these indicators for further growth and investment in technology. As the company’s founder and CEO, Sebastian Semyatkovski, noted, “it’s very strange for us to take losses,” promising to return to profits in the near future.
Since the beginning of 2021, the service has entered six new markets, including France and New Zealand. Klarna wants to advance in the American market because it is very promising. Worldpay estimates that the share of “buy now, pay later” in North America will triple by 2023, accounting for 3% of the total e-commerce payments market. Klarna is also actively acquiring other technology companies.
Investments in Klarna pre-IPO via futures
Klarna has existed for 16 years and is still privately owned. The media periodically writes about the prospects for the IPO of such a promising service. Yes, and its founder, Sebastian Semyatkovski, said in an interview with American television station CNBC earlier this year that the company plans to go public.
Although now a well-established company with tens of millions of users, it is still privately owned. That is, it is not possible to invest in the public market by purchasing shares directly. But there is an alternative way – futures of Klarna shares on the UTEX exchange.
This platform was launched last year, initially specialized only in cryptocurrency trading. And this year, a new trading instrument has surfaced – futures of shares of various companies at the pre-IPO (pre-IPO) stage. These are companies that remain private for now, but are likely to go public soon.
However, almost no financial service offers pre-IPO investments to ordinary users yet. Moreover, there are no offers that will allow not only to invest but also to buy and sell stocks. These are the features that Klarna pre-IPO futures combine. With UTT token, you can pay 50% less commission for futures transactions.
This is a more flexible instrument than “ordinary” pre-IPO investments, because their price is not dependent on the price of the shares, but only on the demand for these futures from exchange users. A Marketmeyker (market maker) – a private entity that holds shares of the desired company – sets the starting price for futures and then only maintains liquidity.
Futures can be traded at any time without penalty or additional payment. Of course, this makes them a more suitable, riskier tool for more experienced traders. However, users who can draw conclusions about the fair price of futures and choose the most suitable moment to buy and sell them, have a chance to make money.
Pre-IPO futures have an expiration date. When it arrives, all futures at users’ disposal are automatically sold. The specific expiration date depends on the occurrence of a specific event related to the IPO. Most often this is an IPO, but a direct placement, merger with a SPAC company, etc. may be. At the same time, sales with futures continue for some time after the event.
Once again, after buying a futures, there is no need to wait for expiration or Klarna to enter the public market: if the price of the futures rises, the owner can sell it for a profit at any time.
What are the advantages of futures trading on the UTEX exchange?
This platform has several useful features and capabilities that set it apart from its peers. Judging by the feedback, it shows that these features are popular with users. For example, there is a basic interface for beginners that is simple, straightforward and requires no prior preparation. And if you are an experienced trader, there is a PRO interface with more detailed functionality (including limit orders).
Another advantage is the so-called price protection. This means that by submitting an order, the user can be sure that it will be fulfilled only at the price indicated by him. On other trading floors, if the volume of the bid at the declared price is insufficient, the order can be executed at a more favorable price.
Another useful feature is the alerts that there is a very high difference between the buy and sell prices. If this value exceeds 3% (which reflects low liquidity), a corresponding prompt will appear on the interface. This will not prevent you from buying or selling such futures, but it will help you consider all risks.
Pay discounted rates with UTT tokens
The standard futures commission is 3%. However, the commission can be cut in half – up to 1.5% if you pay with platform tokens. It is very easy to activate the commission payment function in UTT in the trading interface. True, for it to work, there must be a sufficient number of tokens in the account.
UTT can also be a good investment in cryptocurrencies. Its popularity is already growing. The more people willing to buy an exchange token and pay commission in it, the higher its price.
In general, you can top up your UTEX account with dollars or any cryptocurrency offered on the exchange. After depositing money in your account, you can buy futures from the pre-IPO IPO of Klarna and other interesting private companies. In total, about 20 futures are already available on the platform. Check the website and you’ll see names you might be familiar with: Impossible Foods, Robinhood, DigitalOcean, SpaceX, and more. Hurry as pre-IPO investments are the new trend!