Ericsson faces $170 million lawsuit, shareholders allege stock depressed due to Iraq activities disclosure
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Bern: Ericsson, the Swedish telecoms company, is facing a significant legal challenge as 37 of its shareholders have collectively filed lawsuits seeking a total of 1.8 billion Swedish crowns (approximately $170 million or Rs. 1,405 crore).
The shareholders claim that the disclosure made by the company's CEO, Boerje Ekholm, regarding activities in Iraq had a detrimental impact on the stock, leading to financial losses for investors. The news of the lawsuit was reported by business daily Dagens Industri on Friday.
Ericsson and its CEO, Boerje Ekholm, have faced intense criticism over the past year due to their handling of an internal investigation into the company's operations in Iraq. The company has been embroiled in a scandal involving potential payments to the Islamic State.
The group of shareholders, which includes several investment firms and pension funds, has filed separate lawsuits in a Swedish court, but their actions are said to be coordinated. The shareholders are seeking compensation for the significant decline in Ericsson's share price, which occurred after CEO Ekholm's disclosure about the company's activities in Iraq during an interview on February 16, 2022. Since then, the company's share price has halved, currently standing at 52.71 crowns as of Friday, reported Reuters.
In response to the lawsuits, Ericsson has issued a statement denying the claims and vowing to vigorously defend itself in the matter. The company expressed that this legal action is unprecedented in Swedish litigation and contradicts fundamental principles of Swedish corporate law.
The Swedish court has not yet provided any response or comment regarding the lawsuits.
The shareholders' dissatisfaction stems from CEO Ekholm's revelation in the interview, which led to a substantial decrease in the company's share value. The disclosure was related to an internal report about Ericsson's activities in Iraq. As the share price plummeted, the investors decided to take legal action to seek compensation for their losses.
In May 2023, Nasdaq Stockholm conducted a review of Ericsson's public disclosures concerning the internal report. The review concluded that the report's content did not provide sufficient grounds for a reasonable investor to use the information in their investment decision-making process.
