Klarna Bank AB is in talks to raise new equity at a valuation as low as $6 billion. That valuation would be a fraction of the $45.6 billion Klarna commanded last summer as it became Europe’s most valuable startup, according to people with knowledge of the matter.

The buy-now, pay-later giant is in talks with investors about the new funding round, according to people, asking Bloomberg to not identify them because the talks are a private matter. The $6 billion figure is drastically lower than the $15 billion mark reported last month.

Employees might receive granted new equity options at the lower valuation. Most existing options bear no value. Klarna’s valuation discussions remain in flux. It’s possible the level could land closer to $10 billion, some of the people said.

A Klarna representative declined to comment, saying the company doesn’t discuss fundraising or valuation speculation. On Friday, the Wall Street Journal reported that venture capital firm and backer Sequoia may lead a roughly $650 million round. That round could value Klarna at as low as $6.5 billion.

400,000 retail partners

The Swedish lender offers buy-now, pay-later credit to more than 147 million global active users. Klarna posted an operating loss of 2.54 billion krona ($245 million) in the first quarter. Last year, its operating loss was 6.58 billion krona. It claims 400,000 retail partners on its website, including 102 of the 2022 Digital Commerce 360 Top 1000 like Nike Inc. (No. 10), Macy’s Inc. (No. 16), Joann Inc. (No. 266) and Forever 21 (No. 120).

Klarna is the third most-popular buy now, pay later service among the Top 1000. Affirm tops the list with 145 Top 1000 retailers offering the service as a payment option, and PayPal Credit is available at 114 Top 1000 retailers. Among retailers in the Next 1000, Afterpay also tops Klarna, pushing it to the No. 4 spot among smaller online retailers. However, Klarna also counts non-retail services among its clients, with travel services and digital goods also available for pay-later purchases.

Klarna faces stiff competition this fall, when Apple Inc. (No. 3) is expected to launch its own pay-later service for any retailer using its Apple Pay service. With the payment option already available at 372 Top 1000 retailers, Apple Pay Later would increase pay-later service penetration from 45.8% to 59.2% of all Top 1000 retailers.

Led by CEO Sebastian Siemiatkowski, Klarna’s backers include Dragoneer, Permira, SoftBank Group Corp.’s Vision Fund 2 and Silver Lake. The lender, which is regulated by the Swedish Financial Supervisory Authority, recently cut staff to curb costs.

A new valuation for Klarna would align with a correction in public markets. That’s because inflation, higher rates and a possible recession pressure its business model. Also, shares of rival Affirm tumbled 75% in the past year as investor sentiment on the buy-now, pay-later model has turned negative.