Answers to journalists' questions
1. Why is Arco Vara going to reduce its share capital to such a large extent?
Reducing share capital does not mean bringing the money out of the company or changing the size of holdings of shareholders.
Share cancellation (reverse split) is performed in order to decrease the share volatility and increase the efficiency of pricing. Today, a change in share price by 1 eurocent results in a price change of about 5%; after the reduction of share capital, a change in share price by 1 eurocent will result in a share price change of about 0.25%.
The reduction of share capital provides Arco Vara with opportunity to strengthen the capital structure in the future if needed. In the today’s situation, every company has to use all the possibilities for its development. New share issue is one of the possibilities that Arco cannot use today since the market price of its share is below share’s nominal value of 10 kroons. According to the Commercial Code Arco Vara is not able to issue shares for a price lower than 10 kroon nominal price.
The choice of reduction ratio is based on technical reasons – it is significantly easier to calculate the new shareholdings applying a round ratio.
2. Is it related to the restructuring of company’s financial obligations?
3. Does it mean that Toletum and HM Investeeringud will buy 95% of other shareholders’ shares?
No, the shareholding of all shareholders, including Toletum and HM Investeeringud will be reduced proportionally – thus, the distribution of the shareholdings will remain practically unchanged. Only very minor changes in the shareholding distribution will take place due to the fact that not all shareholdings can be divided by 20. A compensation system will slightly reduce the holding of Toletum and HM Investeeringud, but its extent is virtually non-existent (approximately 0.01% of the total share capital).
4. On what level and when the compensation price of shares will be fixed?
There will be no compensation price nor any payments will be made to shareholders in the course of the reverse split. The reverse split is a technical transaction with no monetary gains/losses incurred by any of the shareholders.
5: What will be the structure of Arco Vara’s shareholders after the reduction of share capital?
As said, the structure will not change.
6. Is the further purpose of this action to delist Arco Vara as the liquidity is reduced?
No, there is no plan to delist Arco Vara. Thanks to increased pricing efficiency and smaller spreads, the liquidity should increase and the volatility decrease.
7. Is one of the reasons for share cancellation the alleged attempt of hostile takeover by Toomas Tool? Is it meant to eliminate it?
No, it is not related.
8. If the reduction of share capital is aimed at increasing the share price then what is the targeted share price for you on the stock exchange?
Reverse split should result in a mathematical increase of the share price – there will be 20 times less shares so one can expect 20 times higher price per share as the equity will not change. There is no target price.
9. A small shareholder with e.g. 500 shares will have 45 shares as a result of reduction? Did I understand the reductions scheme correctly?
A shareholder with 500 shares will have 25 shares (500 shares divided by 20 (i.e. the reduction ratio) = 25 shares).
10. Who is entitled to compensation? How much will you pay for compensation?
Compensation is a technical term and will be applied to those shareholders holding a number of shares that does not divide by 20. For example, a person holding 505 shares currently will retain 26 shares, of which 25 shares will be entitled for 500 shares that he owns that can be divided by 20 and 1 share will be entitled for 5 shares that he owns that cannot be divided by 20. 15 missing shares that will be cancelled will be taken from the compensating shareholders (Toletum and HM Investeeringud).
11. Is the purpose of this action pushing away Toomas Tool from the company?
Please see response to question 5.
12. Why are five shares of both Toletum and HM Investeeringud cancelled first? What is the purpose of it?
This is a technical exercise for the total number of shares of Arco Vara to divide by 20.
13. Why will there be a three-month gap between the general meeting and the cancellation of shares?
This is a legal requirement set in the Commercial Code.
14. What is the purpose of share cancellation? How does reduction of share capital help strengthen the capital structure? What does the reduction of share capital mean for Arco Vara shareholders?
Please see response to question 1.
15. Why the only compensating shareholders are Toletum and HM Investeeringud and not the biggest shareholder Freier Projekt OÜ? On what basis the compensating shareholders are determined?
The representatives of Toletum and HM Investeeringud are members of the Supervisory Board of Arco Vara and hence are the first choices for the role of compensating shareholders.
16.Is the share cancellation decision related to the speculations related to Toomas Tool? If yes, then how?
Please see response to question 7.
17. Does this mean that the reduction of capital is followed by a new capital raising? When and how much capital are you going to raise?
Please see response to question 1.
Member of the Board of Arco Vara AS