Klarna invests in Zip, page-4

AFR – street talk

Zip Co in cross hairs of a strategic investor

There’s a strategic investor hiding out on Zip Co’s share register, with fingers pointing to Swedish fintech Klarna as the most likely candidate.

Street Talk understands the strategic investor has nabbed about a 4 per cent stake, in a move designed to give it options should the buy now, pay later sector consolidate down to two or three main players globally.

Klarna, which is part owned by Australia’s Commonwealth Bank, is the most logical investor. It has the size and scale to make the $160 million-odd investment, and the strategic imperative to jostle hard to emerge as a true buy now, pay later winner.

As it stands, Klarna is locked in a battle with US-listed Affirm and Australia’s Afterpay and Zip Co in the global race to be the No.1 buy now, pay later group, while there are a host of dozens of smaller players chasing the leaders in various markets around the world.

In the US, which is the biggest market for BNPL and financial services more generally, Afterpay, Affirm and Klarna are the three biggest players, while Zip Co’s QuadPay is gaining ground.

In the UK, Klarna has first mover advantage which puts it ahead of Afterpay’s Clearpay, while Afterpay leads Zip in Australia.

The stealth Zip stake in understood to have been built up in recent months, and sees the investor sitting below the 5 per cent substantial shareholder level that would prompt disclosure.

A 4 per cent stake would be worth about $160 million, based on Zip’s recent trading.

The move is not dissimilar to Chinese e-commence and investment giant Tencent acquiring a strategic 5 per cent stake in Afterpay in the first half of last year.

Klarna is an unlisted company based in Sweden and recently raised $US639 million from investors including Softbank, in a deal valuing it at $US45.6 billion ($60.5 billion), or nearly double what Afterpay is worth. It recorded $US1.2 billion revenue in 2020 and lost $US109.2 million.

The company’s shareholders include Australia’s Commonwealth Bank of Australia, which is sitting on about a 5 per cent stake. CBA is also involved in helping Klarna roll out its instalment payments products in Australia and New Zealand.

Other shareholders include private equity groups Silver Lake and Permira, as well as Singapore’s GIC and US investor Sequoia Capital.