The Helsinki District Court ruled in favour of Talvivaara mining company founder and former CEO Pekka Perä and two others on Wednesday, when it dismissed charges of stock market offences against them.
The three defendants were accused of aggravated misuse of insider information relating to the sale of the troubled mining firm’s share subscription rights in March 2013. Companies can issue share subscription rights to shareholders, who can then use them to purchase new shares at a cheaper price than the existing trading price. The tactic also allows companies to raise extra cash.
The deal was executed by Talvivaara Management, a holding company whose board comprised Perä, then-commercial director Pekka Erkinheimo and Talvivaara chief financial officer at the time, Saila Miettinen-Lähde.
The prosecution argued that the holding company sold the mining firm’s share subscription rights while in possession of undisclosed information about nickel production forecasts. When a new, less-favourable production forecast was released, Talvivaara’s share price fell.
The prosecutors said that the accused knew from the firm’s daily reports that when the share subscription rights were sold, Talvivaara was well behind production targets set. In July, the firm released a negative production update in which it abandoned its annual forecast.
Court: Information irrelevant from share price perspective
The Helsinki court noted that at the time of the transaction, Talvivaara was five percent behind its annual production target and that nickel production was on a downward trend. The judge said however, that in and of itself, this was not essential information that would have had a significant effect on the value of the subscription rights issue.
When the company scrapped the annual production forecast in July, its share price fell by nine percent or one cent. The court found that in light of this, any information about declining nickel production when the transaction was being finalised in March was not likely to have had a major impact on share value.
Based on these considerations, the court ruled that the accused did not have any insider information at the time of the alleged offences and dismissed all charges.
The Talvivaara mining outfit stumbled into restructuring after racking up more than one billion euros in debt to creditors. In 2015, government stepped in to bail out the firm and ensure continued mining operations under the name Terrafame. The mining subsidiary was renamed Ahtium in March 2017 and later declared bankruptcy in 2018.