3 September 2023

Kernel realizes an additional issue of shares, as a result of which significant dilution of the share of minority shareholders is expected.

On September 1, the company published an official notice, according to which, basing on the results of the tender for the additional placement of the company's shares, 216 million new shares of the company were placed at a price of about 1 Polish zloty per share (the share price on the Warsaw Stock Exchange, even after a significant fall in recent months, is currently PLN 11 per share).

As planned, a total of about $60 million was raised (the company refers to the request from creditors side to increase the capital by this amount, which, in our opinion, does not make sense in the current conditions, when the company has more than $1.1 billion in its accounts, so for us it is obvious that this is a formal statement to cover real reasons to increase the capital).

Taking into account all the restrictions that Kernel has set for the shareholders (except Andrii Verevskyi) to participate in the tender, it can be assumed that Verevskyi is the buyer of most of the new issue of 216 million shares, which means that the total number of shares owned by major shareholder is approximately 278 million pieces (the exact number we will find out soon).

In this case, minority shareholders will own about 15 million shares, or about 5% of the total (compared to 19.6% before the new placement). It now appears that the worst expectations of the minority shareholders are coming true, and the new tender is nothing more than a tool to dilute the share of the company's minority shareholders to 5%. In the event that Verevsky owns 95% of the company's shares, we expect that he will start the squeeze-out procedure - a forced buyout of shares from minority shareholders.

Minority shareholders are preparing to defend their interests in court, but we believe that the biggest negative impact of this story is the significant worsening of the perception of Ukrainian business by European investors and creditors. So in addition to Kernel's minority shareholders, other Ukrainian public companies - Astarta, Ovostar, IMC, as well as companies that could potentially make a public offering of their shares - such as Nova Poshta, Rozetka and others – will suffer the most.