Shares in Chrysalis (CHRY ), Jupiter’s beleaguered growth capital fund, have continued to slide after the company confirmed a massive write-down in Klarna, the buy-now-pay-later credit provider now valued at $6.65bn (£5.6bn), 78% less than at the end of March.

Fund manager Richard Watts insisted the $800m fundraising round that slashed Klarna’s valuation did not reflect the digital lender’s progress since Chrysalis first invested in August 2019 at a valuation of $5.5bn.

Watts said Chrysalis had taken up its entitlement to invest $8.7m in the capital raising led by Sequoia Capital to avoid having its stake diluted in a company whose growth rate has accelerated as it penetrated new markets.

Revenues had grown by 112% from $753m three years ago to $1.6bn last year, yet Klarna was now valued at just three times sales, compared to 6.7 when he and co-manager Nick Williamson first backed the company.

He said this represented a discount of more than 30% to US-listed Affirm (AFRM.O), its closest peer.

‘’The current funding round does not reflect Klarna’s progress since our initial investment, it reflects the very attractive terms that providers of capital are demanding against the current macroeconomic backdrop.

‘We remain extremely positive on the outlook and potential of this business and believe that Klarna now has sufficient capital to reach profitability, whilst continuing to grow strongly,’ Watts said.

The drop in the ‘post new money’ valuation of Klarna sees it tumble from second to sixth place in the 17-strong portfolio, accounting for just 5.5% of assets compared to 19% previously.

Taken with currency movements and falls in Chrysalis’ listed investments, the write-down in Klarna knocks 15% from the investment company’s net asset value, reducing NAV per share at 31 March by 32p to 179.5p.

Chrysalis shares slid 7% to 96.2p yesterday when the news broke, and after Peel Hunt analysts downgraded the fund to ‘neutral’ from ‘outperform’, leaving it on a 47% discount below the new NAV.

Today the shares dropped another 3.9% to 92.5p, leaving them 63% down year to date, as the company revealed Wefox, the Berlin-based insurance technology platform, had raised $400m at an increased valuation of $4.5bn, up from $3bn a year ago. However, it said the new valuation was already reflected in its NAV, dashing hopes the good news could offset some of the hit from Klarna.

Wefox replaces Klarna as Chrysalis’ second biggest investment at 13.3% of assets, behind Starling bank which accounts for 25.1%. Its funding round was led by Mubadala Investment Company, the UAE’s sovereign wealth fund, with LGT, Horizons Ventures and Canadian pension fund Omers Ventures participating.

Mubadala and the Canadian Pension Plan Investment Board were also new investors in Klarna, alongside existing investors Silver Lake and Commonwealth Bank of Australia, which like Chrysalis, also topped up their stakes.

Chrysalis’ broker Numis Securities said it was encouraging to see blue-chip institutions backing both companies in a difficult market.

‘The continued deterioration in pricing is an indication as to the difficulties in pricing unprofitable businesses, particularly when sentiment turns against them. That said, it does not mean all growth companies valuations are being written down, which is vindicated by a c.50% valuation uplift to Wefox compared to June 2021 albeit this is already included in the NAV,’ said analyst Ewan Lovett-Turner.

Stifel analyst Will Crighton reminded investors: ‘We downgraded he trust to “hold” last month citing the lack of visibility currently and a scenario of a further double-digit fall in the quarter to 30 June seeming a reasonable assumption.’

Liberum’s Conor Finn agreed: ‘We expect further valuation reductions across other portfolio companies given the weakness in growth markets, although the company does have protection mechanisms which should offset some valuation declines. Forty-five percent of the portfolio is currently profitable and 51% of the portfolio is now either profitable or has sufficient cash to reach profitability. The remaining 44% of the portfolio, excluding cash, has approximately 15 months of runway without raising further capital.’