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Ericsson shares are worried about higher fines when the SEC starts an investigation



(Reuters) – Ericsson shares fell 2.5% on Friday as the chances of them being fined increased as the US Securities and Exchange Commission launched a separate investigation into the company’s handling of misconduct in Iraq.

US authorities investigated the company earlier, which resulted in Ericsson having to pay a $ 1 billion fine in 2019 as part of the settlement of a bribery case. It also had to enter into an agreement on deferred prosecution.

“We believe that the total penalty to be paid in this round of investigations is likely to be slightly higher than the previous one, in light of the repeated misconduct, breach of the DPA and corruption in Iraq,” Jefferies analysts said in response. to news that the SEC investigated.

The Ministry of Justice had already begun to do so.

The controversy, which erupted in February, relates to Ericsson̵

7;s own investigation in 2019. It showed that payments had been made to the militant group Islamic State in Iraq.

Although the irregularities did not take place under the current management, the company did not share the entire report with the Ministry of Justice, which prompted it to investigate.

Outraged investors voted against the discharge of board members for 2021. The board members could be held personally responsible for their actions.

Ericsson has lost about a third of its market value since February. Analysts have said that although any fines are likely to be priced in the shares, it creates an overhang until a settlement is reached.

They estimate that it is unlikely that a deal will come this year and may even derail Ericsson’s $ 6.2 billion deal to buy the American cloud communications company Vonage.

“Both parties are still working to close the deal in the first half of this year,” said a spokesman for Ericsson.

Mads Rosendal, analyst at Danske Bank Credit Research, wrote that the new survey “may also mean further delays for the Vonage acquisition, which we now see has a slightly higher probability of being canceled.”


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