Fingerprint Cards

Research note


Fingerprint Cards sends out invitation to Extraordinary General Meeting

Fingerprint Cards today invites its shareholders to attend the Extraordinary General Meeting (EGM) to be held in Stockholm November 30, 2016. The EGM will resolve on issuance of warrants (to be used for incentive programs) and cancellation of treasury shares.

The AGM is to resolve on four main points:
  • Guiding principles for remuneration of senior executives
  • An issue of warrants and how the warrants are to be transferred to a subsidiary etc.
  • Reduction of share capital through cancellation of repurchased shares and a bonus issue
  • Authorization of the Board to execute minor adjustments to resolutions passed at the EGM in conjunction with the Swedish Companies Registration Office and Euroclear Sweden AB

The guiding principles for remuneration of senior executives basically entail setting new guidelines for what benefits, fixed salary and variable salary should be paid to senior management. The Board of FPC wants to be able to recruit and retain top talent and has identified a need to set new guidelines for remuneration as well as to issue a maximum of one million warrants to be used in an incentive program for the company’s new CEO, Christian Fredrikson, and other current and coming members of the company’s senior management.

At the AGM, no mandate was given to cancel repurchased shares even though a mandate to repurchase shares was given. FPC currently has 10.4 million treasury shares and the Board now seeks mandate to cancel the shares. We have not included the treasury shares in our calculations, but have used the number of outstanding shares fully diluted. Hence, we will not make any adjustments to our fair value should mandate to cancel the treasury shares be given and used. Cancellation of the treasury shares signals that the Board sees the FPC share as undervalued and also that it expects continued cash-build that could be used for acquisitions – potentially together with debt financing. Cancellation of treasury shares increases EPS if EPS is calculated including treasury shares (we do not include treasury shares, and hence our EPS estimates will not change as a consequence).

The minor adjustments mentioned seem to be formalities. What we can see though is that it gives the Board and the President a possibility to disclose information, including FPC’s financial situation.

If the Board believes that FPC is undervalued, the last point would make it possible for the board to disclose information in case there is a hostile bid presented. Furthermore, cancelling the treasury shares has another effect. Should a hostile bidder be successful in taking control of the company, no “free shares” can be seized by the prospective bidder. We do not speculate whether or not this could be a reason behind the EGM, but conclude that FPC states that the purpose of the EGM is mainly to allow for the recruitment and retention of key personnel in order to support the company’s future growth strategy. 

Details on the EGM can be found on Fingerprint Card’s homepage.

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