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Cevian reduces stake in Ericsson, looks to new investments

Ericsson HQ.png

Activist investor Cevian Capital has reduced its stake in Ericsson by 1%, less than two months after criticising the firm's approach to growth targets.

Confirmed by Cevian on Wednesday the news is likely to be welcomed at Ericsson, however Cevian said the "freed up capital" will be redirected to a new investment and that Ericsson will continue to be one of its largest investments.

In its full year financial results for 2020, Ericsson recorded a 12.5% operating margin, which it said, "exceeded our 2020 target and reached the 2022 group target range two years early".

However, in an interview with Bloomberg on the day the results were announced, Ericsson CEO Börje Ekholm relayed that Cevian Capital had said the targets are too low.

This latest development will see Cevian's total shareholding reduced from 5.45% to 4.55%. Ericsson shares dropped 2.2% in value on Wednesday morning.

Commenting on the reduced holding, Cevian managing partner and co-founder, Christer Gardell, told media he expects Ericsson to "continue to exceed market expectations".

"The 5G market continues to grow rapidly and Ericsson is gaining market share, both from Huawei and Nokia… We still believe that today's valuation is far too low," he said.

Cevian started buying Ericsson shares in May 2017 and became the company's largest shareholder in November of that year.

In April of last year Cevian reduced its stake to 7.4% after saying that Ericsson comprised too large a share of its overall portfolio.

At the time Gardell told Reuters: "With our divestments we have now adjusted the portfolio weight to a suitable level." Again Cevian said proceeds would be redirected to other investments.

However, Cevian continued to pressure the equipment maker telling Ericsson in May that it should sell its 83.3% stake in Iconectiv.

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