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🍋 Klarna Valuation Destroyed

🍋 Klarna Valuation Destroyed

Short Squeez
July 12, 2022

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"Volatility is the friend of the unleveraged long-term investor. We much prefer the bumpy road to higher rates of return than a smoother rise to more modest profits." — Bill Ackman

Good Morning! Timing is everything, and GameStop may have gotten it wrong, launching its marketplace for NFTs yesterday right after sales of NFTs plummet thanks to industry volatility. Spiking though, are summer box office sales, as moviegoers get off the couch and back into theaters. They will be on the couch to watch the Champions League though. That's why the bids for the 6 year US TV rights are expected to top $2 billion.

If you are looking to reconcile all your investments in one place, check out the Delta Investment Tracker, which lets you manage and track your portfolio so you don't need 10 different spreadsheets anymore.

1. Story of the Day: Klarna Valuation Destroyed

Klarna, one of the world's most high profile startups, just shed some light into the obscure world that is private market valuations. The buy-now-pay-later leader recently raised $800 million from new and existing investors, bringing the current valuation down to $6.7 billion from $45.6 billion in June 2021.

Earlier this year, Klarna's valuation was being hypothesized as high as $60 billion. Then, the Russian invasion of Ukraine, rising rates, and plenty of other market factors came in and rained on the tech parade. Investors, including SoftBank who invested in Klarna's last round but sat on the sidelines in this more recent fundraise, have grown wary of the higher risk sector and sky high valuations.

Klarna CEO, Sebastian Siemiatkowski, tweeted, "We are not immune to public peers being down 75-90% and hence our valuation is down on par." He goes on to say the lower valuation is "odd considering all the things achieved, how much larger and better and stronger we are now."

As mentioned, Klarna is not immune to the volatility in public markets. Simultaneously, they're not immune to changes in consumer behaviors. The company's model makes money by collecting fees from retailers on transactions, and from interest on longer term loans. With this model, they're able to offer interest free loans to retail shoppers that pay for items in installments; however, Klarna's own debt costs are piling up. It posted an operating loss of $245 million in the first quarter.

Short Squeez Takeaway: Klarna's US listed competitor, Affirm, has seen its market value fall from a $46.8 peak valuation, to roughly $6.1 billion. This nearly identical decline shows that private markets, albeit more difficult to see, are likely struggling as well these days.

2. Markets Rundown

Markets were the week off lower as the tone seems cautious ahead of key data releases later this week for inflation and corporate earnings.

Movers & Shakers

(–) Twitter ($TWTR) -11% because Elon Musk is walking away from his deal to buy the company.
(–) Wynn Resorts ($WYNN) -7% thanks to a week long shutdown in Macao thanks to a COVID outbreak.
(–) Nio ($NIO) -9% as China seems to have placed more health restrictions in cities responding to another wave of COVID.

Private Dealmaking

Partners Group invests $500 million in Budderfly, an energy-as-a-service company
Planetarium Labs, a decentralized blockchain games platform, raised $32 million in funding
LiveOak Fiber, a broadband services provider, raised $150 million in funding
Clearhaven Partners invests over $100 million in video-platform SundaySky
Deuna, a one-click checkout commerce, raised $30 million to expand into Latin America
Lucinity, a banking compliance startup, raised $17 million

3. Top Reads

Goldman: US job market probably not as good as it seems (BB)
U.S. bank profits to sharply tumble (Reuters)
BlackRock warns against dip buying (BB)
Why Musk may be stuck (NYTimes)
Uber whistleblower reveals company’s dark tricks (BBC)
Start-ups strive to scale amidst headwinds (WSJ)
Family offices have become $6 trillion powerhouse in investing and dealmaking (CNBC)
Billionaires can’t get enough of private equity (BB)
8 ways the Elon Musk-Twitter saga could end (CNBC)

A Message from Delta: One App to Track it All

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4. Book of the Day: Everyone is an "Influencer"

In Everyone is an Influencer, Kelly Keenan, Founder of Brand Story Experts, unlocks the code to recognizing and utilizing true Influencers to soar your organization to new heights. In an accessible voice laden with wit, Keenan teaches a proven and practiced method to develop your brand’s story: one that’s been working to create an army of influencers for over a decade.

You’ll discover proven secrets of how to create and strengthen lifelong relationships with your team and with customers. Not just short-term gains. Go beyond sales gimmicks and short-sighted tactics. Help your business of any size grow and sustain.

This book is for business leaders looking to super-charge their company. It’s for sales and marketing leaders seeking to gain greater results with enthusiasm. Finally, this book is for any team member ready to step up and become a change-maker for their organization.

It’s all possible, because as you’ll see, Everyone Is An Influencer.

“You can talk about results all you want, but they remain nothing more than ideas until you decide exactly how you’re going to measure them."

5. Short Squeez Picks

19 of the best workout songs of 2022 (so far)
Here’s how much it takes to be ‘financially comfortable’ in 12 U.S. cities
Why your office feels so cold
Why we fight on vacation - and how to stop
14 common daytime habits that sabotage sleep

6. Daily Visual: Percentage of Jobs Lost at the Start of the Pandemic Now Recovered (by sector)

Source: Axios

7. Daily Acumen: Are You Day Trading?

“The volatility of bitcoin turns the people who own it into addicts. At any given moment, it’s up $100 or down a thousand.

When it’s up, you think you’re brilliant, that you somehow had something to do with it.

And when it’s down, the world is about to implode.

Most people don’t day trade bitcoin, but all of us day trade something. We’re hooked into something volatile, easily measured and emotional. We overdo our response to news, good or bad, and let it distract us from the long-term job of living a useful life.

Your SEO results, your Facebook likes, the look on your boss’s face when she gets back from a meeting–all of these things are rife with opportunities for day trading.

It’ll be volatile with or without your help. Better to set it aside and get back to the real work of making a difference instead.”