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Ericsson – Right issue 2002

Ericsson – Right issue 2002. April 19, 2002 Q1 results published SKr 30bn righ issue announced. Stock price : 35.90 April 22, 2002 Stock price: 27.30 (-24%) July 02, 2002 Stock price: 14.90 Michael Teschow, Ericsson chairman :

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Ericsson – Right issue 2002

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  1. Ericsson – Right issue 2002 • April 19, 2002 Q1 results published • SKr 30bn righ issue announced. • Stock price : 35.90 • April 22, 2002 Stock price: 27.30 (-24%) • July 02, 2002 Stock price: 14.90 • Michael Teschow, Ericsson chairman : • "We are focusing on completing our rights offering as planned before the end of third quarter."

  2. July 19, 2002 Ericsson prices issue at deep discount • FT.com site; Jul 19, 2002 • Ericsson, the world's leading supplier of wireless infrastructure, moved to end the uncertainty surrounding its SKr30bn ($3.26bn) rights issue, by pricing the offer at a deeply discounted SKr3.8 per share and saying it would be fully underwritten by shareholders and banks. But Ericsson shares were seen as opening sharply down on continuing concerns about the issue and a gloomy industry forecast by the company..At one point the shares, which closed at SKr14.50 on Thursday, were trading down 17 per cent on the Instinet electronic trading system, later recovering to trade at at around SKr11. • Each Ericsson A or B share will give the holder the right to buy one new B share at SKr3.8. • The subscription period will run from August 15 to September 13..

  3. Why such a deep discount? • Amount to be raised fixed SKr 30 b • Number of old shares: 7,909 m • Number of right to use to buy new share

  4. Value of right • August 8, 2002 Last price cum right: 8.55 (Pcum) • Number of shares (A & B) outstanding: 7,909 m • Number of new shares issues: 7,909 m • Subscription price: 3.80 • Old shares: 7,909 m * 8.55 = 67,622 m • New shares: 7,909 m * 3.80 = 30,054 m • Total: 15,818 m 97,676 m • Price per share ex right : 97,676 / 15,818 = 6.17 • Value of right: 8.55 – 6.17 = 2.38 • August 9, 2002: First price ex right = 6.00

  5. Sept. 09: Ericsson says rights issue oversubscribed • Preliminary results indicated that more than 99.5 per cent of the new B shares offered had been subscribed to by the exercise of rights. On top of this, new B shares representing around 35 per cent of the total rights offering had been applied for on a non-preferential basis. • Due to the success of the rights subscription there was now no need to allocate new B shares to the underwriters, Ericsson said. • By setting the issue price at SKr3.80 the company heavily discounted the process. However, due to the uncertainty in the stock markets it also asked its main Swedish owners and a consortium of banks to underwrite the issue. • The international and Swedish banks involved in the underwriting will receive SKr1.15bn in fees and expenses and with the issue now secured Ericsson is likely to be criticised for both discounting and paying such heavy underwriting fees. In its defence the company will point to the extreme volatility of Ericsson's stock price in the last month. At one stage it seemed as if it would fall below the SKr3.80 level.

  6. Happy end February 6, 2004 Stock price = SKr 19

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