CLEVON INVESTORS AS ANSWERS TO FREQUENTLY ASKED QUESTIONS REGARDING THE VOLUNTARY TAKEOVER OFFER OF CLEVON AS SHARES TO CLEVON AS SHAREHOLDERS
Introduction
On March 31, 2023, Clevon Investors AS, registry code 16686123, registered address Reinu tee 48, Viljandi, Viljandi County 71020, e-mail address info@clevoninvestors.com (hereinafter the Issuer) made a voluntary takeover offer to the existing shareholders of Clevon AS, registry code 16472103 (hereinafter Clevon), in order to take over their shares with the objective of concentrating at least 90% + 1 of all Clevon shares in the hands of the Issuer (hereinafter the Offer). The stock exchange announcement and the information document for the Offer are available here: https://view.news.eu.nasdaq.com/view?id=be438950da2c8d04572fe4251969a12ee&lang=en.
Following the announcement of the Offer, the Issuer received several questions from Clevon shareholders to whom the Offer is addressed. Furthermore, several topics of discussion related to the Offer have been raised in the public information space.
Hereby, the Issuer wishes to provide answers to questions that are in the Issuer's assessment the most common and frequently asked in relation to the Offer. These answers to the questions must be read together with the stock exchange announcement of the Offer and the information document of the Offer published on March 31, 2023, and in case of possible contradictions, the provisions of the stock exchange announcement and the information document prevail.
The Offer period ends on 21 April 2023 at 4:00 p.m. The shareholders of Clevon may submit transaction orders to participate in the Offer until 21 April 2023 3:00 p.m.
The Issuer has the right to extend or shorten the Offer period on the terms and conditions set out in the information document of the Offer.
Frequently asked questions
What is the aim of the Offer?
As part of the Offer, the Issuer proposes to Clevon's shareholders to exchange their Clevon shares for the Issuer's shares with the exchange ratio of 1:1. This will take place by making a non-monetary contribution in the form of Clevon shares into the Issuer's share capital via AS LHV Pank.
The aim of the Offer is to concentrate at least 90% + 1 of all Clevon shares in the hands of the Issuer.
If the Offer is successful, i.e., provided that the Issuer acquires a minimum of 90% + 1 of all shares of Clevon, and further provided that the Issuer succeeds in finding an investor who will finance the takeover of Clevon shares for a monetary contribution, the Issuer intends to merge Clevon with itself, in the course whereof the shares of Clevon held by the shareholders who did not participate in the Offer, will be taken over for fair compensation. The exact schedule and conditions for the execution of the merger depend on the results of the Offer and the finding of an investor.
The purpose of the Issuer's takeover of all or considerable amount of Clevon shares is to submit a request to Nasdaq Tallinn AS to discontinue trading in Clevon shares in the multilateral trading system First North (hereinafter First North) managed by Nasdaq Tallinn AS.
Why is it necessary to leave First North?
Clevon is a rapidly developing start-up company that is in constant need of additional capital for the development of its main product, i.e., the unmanned vehicle CLEVON 1 and the technology contained therein, as well as for the marketing of the vehicle.
By reason of world events (war in Ukraine, energy crisis, etc.), a situation has arisen in the financial markets, where successful public raising of additional capital by Clevon today and in any subsequent rounds of fundraising has become extremely difficult. This is also confirmed by the fact that already while listing on First North in the summer of 2022, when Clevon was publicly raising 5 million euros, the demand for Clevon's shares was rather moderate. Since the prospects of raising funds within the framework of the public offer are likely not good, it was not practical in the opinion of Clevon to spend time and resources to make a public offer.
Therefore, Clevon is now looking for potential investors outside of First North. Potential investors would be venture capital investors, potential customers of Clevon and other start-up companies in synergy with whom it would be possible to develop the CLEVON 1 vehicle further. Communication with potential investors has shown that in order to attract capital from them for further development, Clevon must leave First North.
How will Clevon's delisting from First North take place?
1. In the first phase, all Clevon shareholders will have the opportunity to exchange their Clevon shares for the Issuer's shares at a ratio of 1:1, thereby becoming shareholders of the Issuer. In turn, the Issuer is a shareholder of Clevon.
1.1. The first to transfer their Clevon shares to the Issuer were larger Clevon´s shareholders and current and former employees of Clevon, who got their shares as part of stock option programs. They made in-kind contributions with their Clevon shares to the Issuer's share capital upon its establishment or immediately thereafter.
It should be noted that as in case of the Offer, also these shareholders, who made in-kind contributions, got their Issuer´s shares at a ratio of 1:1. Nobody of these shareholders got monies in return.
1.2. As a second step of the first phase, the Issuer has announced the Offer, whereby the Issuer offers all Clevon shareholders the opportunity to join the Issuer by making a non-monetary contribution with their Clevon shares to the Issuer's share capital via LHV Pank AS, and thus continue as Clevon investors.
As of today, the Issuer holds 88.06% of all Clevon shares. Since the Offer is still ongoing, the detailed information about the progress of the transaction orders is not public.
2. In the second phase, and on the condition that at least 90% + 1 of all Clevon shares are concentrated under the Issuer, and on the condition that the Issuer succeeds in finding an investor who will finance the takeover of Clevon shares for a monetary contribution, the Issuer plans to merge Clevon with itself, during which the shares of these Clevon shareholders who have not participated in the Offer will be taken over for fair price. The Issuer will continue Clevon's business as its legal successor.
The exact schedule and conditions for the execution of the merger depend on the results of the Offer (the more Clevon shareholders consolidate under the Issuer and decide to continue with it, the less necessary it is to seek additional capital in order to "buy out" the remaining Clevon shareholders, and, therefore, the more the capital of new investors can be directed to the further development of Clevon's business model development) and finding an investor.
3. In the third phase, if all or a considerable majority of Clevon's shares are concentrated under the Issuer, Clevon can submit a request to Nasdaq Tallinn AS to discontinue trading Clevon's shares on First North.
The second and third phases may take place in parallel depending on the results of the Offer.
For what price will Clevon shares be exchanged for Issuer’s shares?
As part of the Offer, the Issuer proposes to Clevon's shareholders to exchange their Clevon shares for the Issuer's shares with the exchange ratio of 1:1. This will take place by making a non-monetary contribution in the form of Clevon shares into the Issuer's share capital via AS LHV Pank.
When exchanging shares, the price is not important from an economic point of view - in any case, every Clevon shareholder who exchanges their Clevon share will receive one share of the Issuer. The nominal value of both the Clevon share and the Issuer´s share is 0,1 euros.
The book share price of Clevon´s share is only important in order to determine the value of the non-monetary contribution with which the Clevon share is transferred to the Issuer's share capital. The book share price of the Clevon share that exceeds 0,1 euros is transferred into the share premium. Given the rules regulating the share premium, it does not matter what is the amount of a specific share price that is transferred into the share premium. It is due to the fact that differently from the share, the share premium does not belong to the shareholders. Hereby we bring a example to illustrate this.
Clevon shareholder 1 exchanges one Clevon share (with the nominal value of 0,1 euros) into one Issuer share. At the moment of the exchange, the price of Clevon share is 1,6 euros. Clevon shareholder 2 also exchanges one Clevon share (with the nominal value of 0,1 euros) into one Issuer share. At the moment of this exchange, the price of Clevon share is 0,8 euros. As the result of shareholder´s 1 exchange transaction, 1,5 euros is transferred into Issuer´s share premium. As the result of shareholder´s 2 exchange transaction, 0,7 euros is transferred into Issuer´s share premium. In sum, the share premium of the Issuer is 2,2 euros. According to the Commercial Code, the share premium can be only used to cover the loss or to conduct a bonus issue. In case of a bonus issue the shareholdings of all shareholders will be increased equally and not depending on the size of the share premium that has occurred as a result of contribution of a specific shareholder. For example if the whole share premium in the amount of 2,2 euros will be transferred into the share capital as a result of a bonus issue, then the shareholder 1 will be issued 11 additional shares at the nominal value of 0,1 euros and the shareholder 2 will be also issued 11 additional shares at the nominal value of 0,1 euros. The fact that shareholder´s 2 “share premium part” at the moment of exchange of Clevon share was smaller, does not matter. This is due to the requirement of the Commercial Code that in case of the bonus issue, the shareholder´s part in the share capital shall increase proportionally to the nominal value of his shares.
In regard to making a non-monetary contribution, the value of the property to be contributed is determined at of the time of making the contribution. The value of a share in the case of a non-monetary contribution is determined based on its ordinary value. Where a non-monetary contribution is made via AS LHV Pank, it is possible to determine (i) what is the normal value of a Clevon share at that moment and (ii) accordingly determine the maximum number of shares so that the total volume of the Offer is not exceeded as well as (iii) the book value (i.e. at with what share premium) the Clevon shares will be transferred to the Issuer's share capital.
The maximum total volume of the Offer is 5,000,000 euros. The maximum total volume 5,000,000 euros does not influence the rules relating to exchange of the shares, as explained above.
What must a Clevon shareholder who wishes to participate in the Offer do?
If the Clevon shareholder has decided to participate in the Offer and subscribe for the Issuer's shares, then the Clevon shareholder must during the Offer period, i.e. until 21 April 2023 3:00 p.m., contact their securities account manager.
The Issuer hereby provides sample instructions on how to submit a transaction order using the internet banking systems of the most common account managers in Estonia, i.e. the largest Estonian banks. The corresponding sample instructions are only intended to illustrate the process; therefore, the Issuer does not take responsibility for the content or correctness of the instructions given by Clevon shareholders. If you have any questions, we strongly encourage contacting your account manager for a consultation.
1. You must first log in to the internet banking system of the bank offering the securities account. There you need to find a subsection that reflects your securities account and securities transactions. There you can find instructions for making a transaction for the Offer. However, not in all internet banking systems it is easy to find the place to do this transaction, so we have provided helpful instructions on how to do this transaction below.
LHV Bank
If Clevon shares are held in a securities account opened at LHV Bank, then in the left menu, you need to go to Raising money > Corporate events and find information about Clevon share there.
Swedbank
If the Clevon shares are located in a securities account opened at Swedbank, then from the top right menu you need to select Collection, investment > Securities> Corporate events, Offers and find information about Clevon share there.
SEB Pank
If the Clevon shares are in a securities account opened at SEB, you need to select Investment> Transactions> Transactions with another in the menu and find information about the Clevon share there.
2. Then, after you have successfully logged in and found the necessary menu, you must fill in the instruction for the transaction order and authorize it with the authorization tools required by the bank. In the transaction order, you must state the desired number of shares and the unit price must be 0 euros.
Please find further instructions for making a transaction order, including the sample input information that is required to fill in the transaction order, in section 5.3 of the information document for the Offer. Please note hereby that different banks´ transaction order forms may be slightly different. If you have questions how to fill this form, we advise you contacting your account manager for a consultation.
What will happen if a Clevon shareholder does not participate in the Offer?
If a Clevon shareholder decides not to participate in the Offer and does not subscribe to the Issuer's shares during the Offer period, nothing directly happens to his shares and he remains a Clevon shareholder. Clevon shares will also continue to trade on First North until such time as Clevon leaves First North.
If in the following, i.e. in the second phase (see the answer to the question How will Clevon's delisting from First North take place?), the takeover of Clevon's shares for a monetary contribution takes place by the Issuer, the remaining Clevon shareholders' shares will be taken over by the Issuer in return for fair compensation.
At what price will the takeover of Clevon shares for monetary contribution take place?
Provided at least 90% + 1 of all Clevon shares are concentrated under the Issuer and provided there is an investor who is willing to finance the takeover for a monetary contribution, the Issuer will take the Clevon shares of those Clevon shareholders who do not exchange their shares for the Issuer's shares over for a fair consideration. As of today, it is not possible to accurately predict or publish this fair price. Since the company is in a difficult situation, the fair consideration should reflect this situation.
What happens if the Offer is not successful?
The financial resources previously raised by Clevon are about to run out, and in order to continue its business, Clevon urgently needs additional capital. As explained above, this capital is not publicly available in sufficient amounts. If Clevon fails to raise the required capital, there is a considerable risk that it would be impossible to further develop the business model of Clevon. The company is also likely to face payment difficulties, and insolvency cannot be ruled out either. As a result, all Clevon shareholders, including those who have already transferred their shares to the Issuer, may lose their investments either completely or to a large extent.
The Offer is conditional on the Issuer concentrating at least 90% + 1 Clevon shares. If this condition is not met, the Issuer has the right to cancel the Offer, which means that those Clevon shareholders who subscribed to Issuer´s shares in the course of the Offer will remain Clevon shareholders and will not receive the Issuer's shares.
What happens if the Offer is successful?
If the Offer is successful, i.e., as a result of the Offer, the Issuer concentrates at least 90% + 1 of all Clevon shares, the Issuer will be able to proceed with the next planned phases (see the answer to the question How will Clevon's delisting from First North take place?).
If the subsequent stages are also successful, i.e., Clevon's shares are concentrated under the Issuer and Clevon's shares are no longer tradable on First North, the Issuer can start involving new investors. Negotiations with such investors are ongoing, and there are potential investors who are interested in investing in Clevon.
Raising additional capital will allow Clevon to continue the development and marketing of the vehicle CLEVON 1 and to implement its business plan.
What will change for a Clevon shareholder if he becomes a shareholder of the Issuer and Clevon shares are no longer tradable on First North?
The main difference between Clevon's shares and the Issuer's shares is that because Clevon's shares are currently publicly traded on First North, this entails:
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an obligation on Clevon to distribute periodic information to shareholders (i.e., the disclosure of half-year and financial year reports) and information on important events that have an impact on Clevon's operations and value of Clevon´s shares;
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the possibility to trade Clevon shares publicly on First North.
In regard to the Issuer's shares, the shareholders retain the option to transfer them freely, if they find a corresponding buyer, but not via First North. In addition, all major investors of Clevon want to receive money for their investment at some point in the future. To this end, Clevon investors plan to find buyers for their shares in the future. If larger investors sell their shares in the future, small investors will also have the opportunity to sell their shares under the same conditions. If Clevon's business plan succeeds, every Clevon investor (i.e. shareholder of the Issuer) will have the opportunity to profitably sell their shares in the future. Further in regard to the Issuer, the obligation to disclose the audited financial year report and other rights of shareholders in accordance with the provisions of the Commercial Code remain.
Moreover, it cannot be ruled out that in the future, if the economy and Clevon's level of development favour it, Clevon will again be listed on a stock exchange, in which case its shares will become freely tradable again.
Arno Kütt
Clevon Investors AS member of the management board
arno.kutt@clevon.com
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