Buy Now, Pay Later (BNPL) company Klarna could see its value drop by almost $40 billion after a capital raise at a valuation of $6.5 billion, according to a report by the Wall Street Journal.

The business has increased its value from $5.5 billion to $46 billion over the past two years.

People familiar with the matter told the publication that the Swedish firm plans to raise around $650 million, largely from existing investors.

Last month the US newspaper said that the company was looking for fresh funding to keep up with regulatory capital requirements.

In May, Klarna announced it was cutting its workforce by 10 per cent in response to a “volatile economic environment”.

The move came despite the company introducing a worldwide hybrid working policy earlier in the month, after it said the past two years had “proven” that significant growth and success can be achieved with flexible working.

In its latest financial results, Klarna said that although it had experienced strong growth across the business it needed to “consolidate and capitalise” amid the backdrop of the current economic and geopolitical climate.

The business, which now serves 100 million active customers around the world, said that improved underwriting on mature market volume growth added $100 million to losses, while an increase in volume of new customers in growth markets added $300 million of losses.

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