News arrived Tuesday that Swedish payment-service Klarna have three new major owners. Venture capital giants Northzone and Wellington, in cooperation with British trust Wellcome, bought shares for 680 million SEK ($80 million) in a transaction which valued entire Klarna to 19.2 SEK ($2.25 billion).
The reports were first uncovered by Wall Street Journal, and they were shortly after confirmed by our own sources. Neither Wall Street Journal nor we at Breakit could at that point tell who had sold the shares, and why.
But we can give a complete overview now with - amongst other - the aid of documents from Bolagsverket. The backdrop to the sale of shares is the options programme which Klarna founders Sebastian Siemiatkowski, Niklas Adalberth and Victor Jacobsson were allowed to take part in when the American venture capital firm Sequoia came in as owners, five years ago.
The options programme was built on a number of various parameters. Simplified, it came down to this: The founders would receive dividend if the valuation of the company increased by 500 percent over a five year period. The options programme expired on 1 August this year and already ahead of the date, it could be noted that Klarna’s increase in value had far exceeded the expected goal.
According to Breakit’s calculations valuation of the Klarna-founder’s options were approximately 2 billion SEK ($240 million) on the date of redeemable contingency. But the founders were not interested in exchanging their options for cash. Instead, they decided to reinvest the money in their own company.
“Klarna are just about to enter the American market where the potential is enormous and indications thus far have been incredibly positive. At that point, none of the three founders wanted to decrease their exposure”, says one of Breakit’s sources.
This strategic decision, in turn opened up possibilities for new owner to enter the company. Here is how it happened step-by-step.
# The Klarna-founders sold a part of the shares to Northzone, Wellington and Wellcome for approximately 680 million kronor. A number of other investors were interested in buying shares but these three participants drew the longest straw.
# Then, the founders converted their options into shares. Since the growth value has been strong within the company, the options entitled the founders to buy shares at a substantially lower rate than the market value. According to Breakit’s calculations, the founders only paid about a quarter of the price per share, compared to what the new owners could buy for.
# Since the Klarna-founders could buy shares at a substantially lower rate, they also received significantly more number of shares. In total, this meant that the founders increased their share in the company with roughly 5 percentage points. Thereby, they strengthen their control over the company. According to Breakit’s sources, the three founders now own right below 50 percent of the shares in Klarna.
The options deal at approximately 2 billion kronor is a real steal which definitely qualifies as one of the best business ventures made by a Swedish tech entrepreneur. The three founders now own almost half of the shares in a company worth somewhere around 19 billion kronor.