The management board of Clevon AS (registry code 16472103, hereinafter the "Company") decided, subject to approval by the shareholders, to initiate a delisting of the Company's shares from trading on the multilateral trading facility First North operated by Nasdaq Tallinn AS (hereinafter the "First North").
In contrast to the stock announcement published on 31.03.2023 by Clevon Investors AS, that Clevon Investors AS intends to take over all the Company's shares, Clevon Investors AS does not take over the shares of the Company's minority shareholders, because Clevon Investors AS has not succeeded in finding an investor who would be willing to finance the mandatory takeover of the Company's shares.
We note that, in addition to the resolution of the shareholders, the termination of trading in shares also requires the approval of the listing body of Nasdaq Tallinn AS. For this purpose, the Company submits the application immediately after the adoption of the resolution by the shareholders.
Reasons for proposed delisting
1. The Company's financial situation and large capital need forces it to look for alternative financing options
The Company is a fast-growing start-up company that is in constant need of additional capital to develop and commercialise its main product, the unmanned and teleoperated vehicle CLEVON 1, and the technology it incorporates.
The financial resources previously publicly raised by the Company are about to run out. In order to continue its business, Clevon urgently needs additional capital. Taking a loan is not possible due to the lack of possible loan guarantees considering the development stage of the Company. Therefore, the Company must raise capital through a share issue.
According to the estimates of the Company's management board, the need for additional capital may be up to several hundred million euros. Raising such funds through First North is very probably not possible for a company in the growth phase.
2. The macroeconomic environment and the specific nature of the sector does not favour raising money from the public
Due to world events (in particular war in Ukraine, inflation, raise of interest rates and decrease of risk appetite for investors) the situation on the financial markets has occurred, it becomes extremely unlikely for the Company to successfully raise additional capital publicly at this time as well as during future capital raising rounds. In addition, the Company's need for additional capital is so large and constant that it is not possible to finance the corresponding capital need only from the funds raised from First North, and it is necessary to find capital from non-public sources.
The Company has been looking for potential investors outside the First North for a longer period of time. Such investors are venture capitalists, the Company's potential customers, strategic investors and other start-up companies, with whom the CLEVON 1 vehicle can be further developed in synergy.
The fact that several companies in the sector have recently run into financial difficulties makes potential new investors cautious and raising money difficult. For example, the following competitors of the Company have recently become insolvent as far as the management of the Company is aware: Sensible 4, Local Motors and Agro AI. The company's competitor Nuro laid off approximately 20% of its employees (approximately 300 people) and decided to significantly reduce the scale of its operations in May of this year.
3. Restrictions on venture capital investors prevent investing in a public company, and in the current economic environment, strategic investors are generally reluctant to invest without them
Communication with potential investors has shown that in order to raise capital from them for further development, the Company will have to leave the First North.
Approximately ten different venture capital investors from Japan, Saudi Arabia, the USA and other parts of the world have given such feedback to the Company.
The main reason given for leaving First North as a pre-condition for investment is that potential investors have investment policies that restrict them from investing in public companies. Such a restriction is common for various venture capital funds, especially those that have raised funds from, for example, the EBRD or the EIF.
In addition, the disclosure requirements associated with being on the First North, the impossibility of granting preferential rights to larger investors (e.g. appointment of directors or veto rights) and the dependence of the value of the company on trading on the First North are also an obstacle for capital raising.
Raising capital by Clevon Investors AS as the parent company has also not been successful because foreign investors find the multi-level structure of the group difficult to understand. In addition, investors primarily base their opinion on the economic substance of the transaction and assess the structure of the group, which is why the restrictions associated with a publicly listed company are also applicable.
It is certainly also not in the interest of the Company's minority shareholders to use the additional funds raised by the Company to transfer the activities of the Company to the level of Clevon Investors AS.
During negotiations with potential strategic investors, it has become clear that in the changed macroeconomic environment, it is not possible to attract additional capital only from strategic investors. In the current situation, strategic investors want to make investments in companies only together with financial investors, which are mainly venture capital investors, or in companies in which financial investors have already made an investment. Unfortunately, venture capital investors do not want to make investments in publicly listed companies, which has essentially made raising additional capital impossible for the Company.
If the Company fails to raise the required capital immediately, there is a considerable risk that it would be impossible to further develop the business model of the Company, the Company becomes insolvent and is forced to close its activities in its current form in the near future.
In this respect, it is essential to point out that the Company's business model can still be developed and it certainly has the potential to succeed, but as that it is a business model which requires considerable resources, its further development is in constant need of additional funding. If this funding is found, there are no other apparent obstacles to the further development of the Company's business model. Therefore, the above described risk of financial difficulties can be managed by raising additional capital.
4. The probable further successful development of the Company will also increase the value of minority shareholders' shares
Both the Company's management and larger investors continue to believe in the Company's success.
In particular, the recent achievements of the Company in Europe, where a number of pilot projects have been launched with major courier and retail companies such as DHL and Euronics in Estonia, IKI and LastMile in Lithuania, Colruyt in Belgium, as well as in the US, where the Company's subsidiary has been established in Texas and CLEVON 1 has been actively introduced and tested confirm the success.
The Company's management believes that the successful sale of the Company's products is possible. As a result of successful pilot projects, the Company also has its first paying customers. In the near and medium time frame, the Company plans to produce approximately 50,000 vehicles for which there is considerable interest in the market.
The Company is in parallel also in talks with many potential customers around the world to launch new pilot projects.
The Company's development and sales activities have so far gone according to plan or even better than the initial forecasts. The exception is the plans for raising funds. This allows to assume that with the inclusion of additional capital, in the coming years, the Company will be able to further develop the Company's products, services and business model and increase the value of the Company.
The Company has reached the final stage of negotiations with several potential investors, and raising additional capital in the amount required by the Company from outside First North is likely, but the potential investors have made the investment conditional on the termination of trading of the Company's shares on First North.
5. The listing of shares on First North did not fulfill the objectives of the Company
The Company listed its shares on First North on 28 June 2022 in an oversubscribed Initial Public Offering ("IPO"), attracting new investors and setting the basis for the execution of its business plan and growth strategy. The purpose of the IPO was to raise funds for the implementation of future plans, above all for the further development of own activities, including product development, bringing new services to the market, starting new projects and internationalizing the activity. The IPO was expected to increase financial strength and the ability to raise additional capital if needed, while at the same time creating shareholder value and improving tradability.
The current situation has made it difficult for the Company to meaningfully fulfil its objectives of being listed on First North. Furthermore, a delisting is expected to result in significant cost savings, improving through channelling money into development activities, the basis for the Company's continued ambition to increase the value of the shareholders' shares.
6.The protection of minority shareholders when leaving First Norh is guaranteed
Termination of trading of the Company's shares on First North does not harm the interests of investors (minority shareholders). If the Company does not leave First North and does not raise the necessary capital, then the Company will most likely become insolvent, as a result of which the value of all the Company's shareholders' shares will decrease significantly (essentially to zero).
If the Company leaves the First North, then the Company is likely to be able to raise additional capital to continue business operations and the Company will be able to overcome economic difficulties and increase the value of the investors' shares.
Therefore, exiting First North is in the investors' interest so that the value of their shares is preserved and can be increased in the future.
The Company's shares remain freely transferable and the Company has only one type of shares. After trading in the Company's shares on First North has stopped, minority shareholders can transfer their shares to other persons of their own free choice as well as to the Company's existing and future investors. The company's management has set the goal of publicly listing the shares in the medium or long term, so that the Company's investors can exit the investment under good conditions and increase the liquidity and tradability of the shares.
In case of a possible sale of the majority of shares in the future, minority shareholders will also be able to realize their shares. The Company is planning to merge with Clevon Investors AS. The Company plans to extend the tag along right to all minority shareholders of the Company, which is given to minority shareholders by the articles of association of Clevon Investors AS, in a situation where more than 50% of the shares are sold.
All shareholders will be treated equally during the delisting process from First North.
Proposed delisting process
On 25.07.2023, the Company publishes a draft resolution to the shareholders for the adoption of the shareholders' resolution without convening a meeting. The proposed resolution is to stop trading with the Company's shares in First North, a multilateral trading system managed by Nasdaq Tallinn AS. Two-thirds (2/3) of all votes of the Company's shareholders are required to pass the resolution to delist the Company's shares from First North.
If the resolution is adopted by the shareholders, the Company will request First North to delist the Company's shares from trading. The shareholders' resolution to stop trading with the Company's shares does not in itself lead to the automatic delisting of the shares. It is additionally required that the listing body of Nasdaq Tallinn AS satisfies the application submitted by the Company.
The listing body of Nasdaq Tallinn AS will make a decision on whether to approve or reject the request for termination of trading within one month from the submission of the corresponding application. In the event that the listing body requests additional information from the Company during the processing of the application, or if a monitoring procedure has been initiated or some other important events related to the Company are taking place, the listing body will make a decision within three months from the submission of all additional information by the Company or the termination of the monitoring procedure or the disclosure of other important information concerning the Company, but no later than three months after the submission of the application for delisting.
After satisfaction of the application of the Company for delisting the Company's shares from trading, the Company's shares will continue to be tradable until the last day of trading determined by Nasdaq Tallinn AS. Following the last day of trading, the Company's share will be deleted from trading system of First North. The Company will publish a stock announcement in connection with the filing of the application for delisting with Nasdaq Tallinn AS and subsequently upon receiving approval of the delisting and determination of the last day of trading.
The Company's shareholders have no obligation to sell their shares in connection with the process of the Company's delisting from First North. Despite the intention to take over the shares of minority shareholders published as a stock announcement of Clevon Investors AS published on 31.03.2023, Clevon Investors AS will not take over the shares of the Company's minority shareholders. Clevon Investors AS has not succeeded in finding an investor who would be willing to finance the takeover of the Company's shares.
The shareholders of the Company do not have to do anything in connection with the delisting process from First North and the shareholders will remain shareholders of the Company even after the application has been approved by the listing body.
It is not possible for the Company's shareholders to exchange their shares for Clevon Investors AS shares during the process of leaving First North, as the possible exchange of shares will take place during the planned merger of the Company and Clevon Investors AS.
Significance for the Company's shareholders
A delisting of the Company's shares from trading on First North will mean there will no longer be an active marketplace for trading with the Company's shares. Instead, any future trades in the Company's shares will outside of First North. As a result of that the liquidity of the Company's shares will decrease. This will also mean that buying and selling the Company' shares becomes more complex. Also, transactions with the Company's shares may require legal assistance the costs of which shall be borne by the parties to such transactions.
Following delisting from First North, the Company will no longer be covered by the disclosure obligations of the Market Abuse Regulation and other set of rules that apply to companies admitted to trading on First North. The requirements arising from the Commercial Code and the Accounting Act still apply to the Company.
For more information, please contact:
Arno Kütt
Chairman of the Management Board of Clevon AS
info@clevon.com
