EQT Partners AB updates
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Swedish regulators have opened a market abuse investigation into private equity group EQT after a controversial $2.7bn share sale by top executives.
Shares in EQT fell 6 per cent on Friday morning after the Swedish Financial Supervisory Authority said it was looking into whether one of Europe’s largest private equity groups had violated market abuse regulations by failing to disclose insider information promptly.
Several EQT shareholders have expressed anger over the decision by partners at the private equity company to sell $2.7bn of shares a year earlier than stated in a lock-up agreement.
EQT announced this month that existing and former partners, including chair and founder Conni Jonsson and chief executive Christian Sinding, would sell 63m shares in the group representing about 6 per cent of the total capital and 11 per cent of the top executives’ holdings.
Under the lock-up agreement from EQT’s 2019 IPO those shares were not supposed to be sold until September 2022. But the Stockholm-based company said on September 7 that the shares would be sold, boosting liquidity in the stock.
“We think it’s critical that the market can trust in commitments made, for example, when a company is doing an IPO,” Sverre Linton, chief lawyer of the Swedish Shareholders’ Association, told the Financial Times. “There should be no doubt for the potential investor if a commitment regarding a lock-up is solid or not, and you should not have to be a trained lawyer or a financial expert to be able to find out on your own.”
EQT also said on September 7 that another 8 per cent of its share capital would be released from lock-up in 2023 with the remaining partners’ shares unlocked between 2024 and 2028. Partners had to commit to reinvest half of the proceeds of any share sales into EQT funds, the firm added.
The private equity group, which has about €71bn in assets under management and whose main shareholder is the investment vehicle of the Wallenberg family, Investor, informed Swedish regulators on September 7 about the “postponed publication of insider information”. The Swedish FSA asked a week later for more information and based on that has now launched a probe.
Jonsson justified the share sale at the time as helping strengthen EQT’s shareholder base and improve liquidity. He added: “It is also about future-proofing EQT further. The firm will benefit from a more solid governance, a stronger alignment of interests, and a broadened ownership base.”
Norway’s $1.4tn oil fund, one of the largest outside investors in EQT, voted against Jonsson’s re-election at this year’s annual meeting, arguing he was not independent and that “board decisions that are particularly vulnerable to conflicts of interest should have additional safeguards”.
EQT said on Friday it remained in dialogue with the Swedish Financial Supervisory Authority, and that it still believed it had “handled the timing of announcing the insider information correctly . . . Now it is important to let the process take its course.”