Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Sequoia Capital is seeking to oust its former leader Michael Moritz as chair of the fintech Klarna, an extraordinary move that reflects the venture capital group’s mounting discontent over the governance of what was once Europe’s most valuable start-up.
The boardroom dispute adds to pressure on Klarna chief executive and co-founder Sebastian Siemiatkowski as the Swedish “buy now, pay later” pioneer prepares for a public listing, people with knowledge of the situation told the Financial Times.
Moritz, who led Sequoia’s investments into Google, PayPal, YouTube and Klarna over a near-40 year career, is a crucial boardroom ally of Siemiatkowski, according to three people with knowledge of their relationship. One person with knowledge of the move said removing Moritz could be viewed as “step one to removing Sebastian”.
When Moritz left Sequoia last year, the firm’s managing partner Roelof Botha told investors that he would “smoothly transition” off boards at Sequoia companies “over time”.
But Moritz retained an independent role on Klarna’s board even as a new Sequoia partner, Matthew Miller, was appointed. The formal procedure to oust Moritz was initiated by Miller, who sent a letter to other investors seeking an extraordinary shareholder meeting to remove his former colleague from the Klarna board.
Miller was representing Sequoia and had the full backing of Botha and the firm’s partnership, according to people familiar with the matter. They added that other shareholders were sympathetic to Sequoia’s effort.
Asked to comment on the effort to remove Moritz, Sequoia said: “As we engaged with the company with a new board member, we realised there were a series of governance changes that needed to be made to set the company up for its future.”
“We’re excited to back Sebastian and Klarna’s journey ahead. This request is about board composition to set the company up for its next chapter,” a spokesperson added.
Sequoia is Klarna’s largest shareholder, with funds advised by the firm holding a 22 per cent stake, according to a corporate governance report published last year.
The Information first reported Sequoia’s attempt to remove Moritz as chair.
Moritz declined to comment. He remains a senior adviser to Sequoia Heritage, a wealth management fund independent from Sequoia Capital. Klarna also declined to comment.
Klarna has long been viewed as a prime candidate for a public offering, and has backing from big investors including SoftBank, Silver Lake, Permira, Canada Pension Plan Investment Board and Mubadala Investment Company, the $276bn sovereign fund of the UAE.
Behind the scenes, Klarna had been preparing for an IPO for the past year, according to a person with knowledge of the matter. The company had not yet appointed advisers but last year set up a new legal entity in the UK to simplify a potential listing, this person said. Siemiatkowski has also recently spoken about his intent to take the company public.
A long anticipated IPO has been stalled by higher interest rates, which have hit the valuations of private start-ups over the past two years and deterred all but a handful of large companies from going public. Klarna soared to a valuation of almost $46bn in 2021, but a year later its valuation was slashed to about $7bn when it raised $800mn from investors.
The IPO drought has increased the pressure on venture capital firms, which rely on mergers, acquisitions and listings to cash out stakes in private companies and return capital to their own backers, to edge the best candidates in their portfolios towards the public markets.
Online grocery delivery company Instacart, another prominent Sequoia portfolio company, listed last year — following a corporate governance reshuffle in 2021 that saw founder Apoorva Mehta step back from his role as chief executive to become executive chair.
One investor said they did not hold out any hopes of an IPO under Siemiatkowski, despite the chief executive’s public statements that he was ready to float the company whenever market conditions improved. But another person with knowledge of the board dispute said Siemiatkowski “has no objection to the company being floated”.
Source link
