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Evolution is set to propose a new incentive programme offering key employees the chance to acquire up to 5 million warrants in the company at an extraordinary general meeting (EGM) on 16 February.

Warrants are a derivative that give their holders the right (but not the obligation) to buy or sell a security – most commonly an equity – at a certain price before expiration.

If its incentive plan is approved by shareholders next month, Evolution will be permitted to issue a maximum of 5 million warrants to key employees this quarter, to be exercised during a 30-day period commencing on 20 March 2026.

The warrants may be subscribed for no later than 24 February 2023 and will be allotted on 10 March at the latest. Each warrant will entitle its holder to subscribe for one new share in the company. 

Who is eligible for the programme?

Under the proposed incentive scheme, Evolution CEO Martin Carlesund may be allotted up to 500,000 warrants in the business.

Up to 50 members of Evolution’s senior management and senior key personnel (“Group 1”) may be allotted up to 200,000 warrants each, while a “Group 2” of up to 450 other key personnel may also be allotted up to 200,000 warrants each.

In any case, the maximum number of warrants allotted across the business may not exceed 5 million.

Members of Evolution’s board of directors shall not be allotted any warrants under the proposed programme.

Incentive plan objectives and business impact

The incentive programme is designed to help the business attract and retain competent personnel, while increasing motivation and loyalty among staff.

The programme is also expected to help align employee interests with those of the company’s shareholders, thereby promoting shareholder value and the company’s long-term value creation capability, Evolution said.

The business added that the incentive programme is expected to bring about limited costs. It estimates the total cost of the programme to reach up to around €32.9m, assuming maximum participation among eligible personnel.

Those costs will be recorded as a personnel expense in income statements between 2023 and 2026. By way of reference, Evolution compared the cost to its total personnel expenses for 2021, which came to €207.2m.

Terms of the warrants

The subscription price for each new share will be equal to 130% of an Original Price, which shall be defined as the volume-weighted average price of Evolution shares trading on the Nasdaq Stockholm between 2 February and 15 February 2023.

To provide an idea of the expected value of the warrants, Evolution has provided an example subscription price of SEK1,478.5 per share, based on an Original Price of SEK1,129.6 – Evolution’s closing share price on the Nasdaq as of 10 January 2023.

In accordance with those figures, investment bank Svalner Skatt & Transaktion has provided a preliminary market price for the warrants of SEK113.3, with the final market price yet to be determined by Svalner or another well-reputed investment bank, accounting firm or financial adviser.

Svalner based its preliminary market price of SEK113.3 per warrant on the assumptions of a risk-free interest rate of 2.47%, volatility of 35% and total dividends of SEK79.6 per share during the period until the warrants can be exercised.

A reduction of the value of each warrant was also been factored into the preliminary market price to reflect that the warrants will not be traded on a liquid market.

For each warrant which participants acquire at market price, an additional warrant shall be transferred to the participant free of charge.

Warrants transferred free of charge can only be exercised if the warrants acquired at market price are at least held for the period up to and including the first day on which the warrants can be exercised.

The previously stated maximum number of warrants to be issued to each individual includes both warrants acquired at market price and warrants transferred free of charge.

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