I mean, there's other shareholders, particular private equity. They don't seem to step in. If they could comment, on this, that would be quite helpful. I think these would be my two questions.
As I said, I think what we the intention with what we now have done is, as I said, is twofold. One is to sort of put us in a situation where we is able to reduce our overall debt leverage. Because we have sort of been above our target range for quite some time. We also have sort of been in a situation where we need to have a plan for refinancing then of the shorter-term debt due to the coming or as a result of the M&A transactions that we did back in 2020, 2021.
Of course, you could argue that sort of the debt leverage of 3.5 as we have today is not shouldn't be a problem, given the fact that we have the ownership stake in Adevinta, which is, as we proved yesterday, is a rather liquid asset. Still, I think it has been important for us, given also the macroeconomic development and then circle around that, going into 2023, it was a priority for us to sort of bring the leverage down. At the same time, that and of course, how to do that, we'd also addressed as pure straight sale of Adevinta shares has been a discussion. We think, still think that there is a significant upside in Adevinta.
We strongly believe in the continued development of Adevinta. That is why we have chosen an instrument that keeps the exposure to the company. With, of course, what we think is the potential upside long term, even though it might sort of have both, sort of have fluctuations that might be, might be a positive or a negative in the, let's say, in the shorter term, depending on the development in the stock markets. Selling shares now, the 2% that we de facto have sold, for us, it sort of makes sense.
We have said all the time that we are willing to sell some, and of course, with the present share price development for Schibsted, compared to Adevinta, it makes sense for us to come into a position where we are able to do share buybacks of Schibsted shares in the present situation. That is the reasoning behind that. Then, this overall transaction, there are some elements, let's say, governing elements in the agreement that we have with eBay on what, how much we can sell down and so on, and the opportunities to tag them partly in such situations.
3%, but we also have had an agreement with eBay, which had no objections to us doing something that is in total up to 5% as we did yesterday. Which you can see as a positive that also eBay have a positive view on the continued development of eBay
Perfect. I mean, in theory, you could sell down further to, like, I think 25% until this kind of lock-up starts to kick in. Why should we think that there are more placements? I think if you believe in buying back your own shares for selling Adevinta, I mean, that can go along further than what you just did today. Can you help us understand what your thinking is about the remaining shares that you can actually sell? I hand it over. Thank you.
Yesterday's transaction implies a 90-days lock-up for further sell-down. That is sort of the, in the, in the short term, sort of that is definitely something that is in place. I would also say that for us, carrying out a 4% buyback potentially also will take some time. That has to be done. It must take into consideration then the sort of the natural free float of the Schibsted shares on the stock exchange and so on. This is, it's not a sign of us starting to sort of have a systematic sell-down. It's more taking, let's say, It's more given the present situation and the opportunities that we see for now.
Of course, we are working on the longer-term plan for what could be our options to realize value through a sell-down or through reducing our ownership in Adevinta. That is something that we will continue to do a lot, given also the, let's say, the restrictions that still implies until October next year with the lock-ups that we have agreed upon with both Permira and Adevinta. Excuse me, and eBay.
Perfect. Yeah. Thank you.
Okay. Thank you, Marcus. I think next in line, this is Adam. Adam, please go ahead.
Yeah. Hi, good morning. Thanks for doing the call. One conceptual question, two very specific questions. The conceptual question is, you know, the TRS makes a lot of sense because you get all the cash up front and then you still get upside if Adevinta share price goes up over the next 12 months. Why didn't you do the whole 5% under the TRS? Why sell the 2%? I think you announced last night you sold it, had to sell that at discount to market price. Was there some restriction on how much the bank was willing to do with you on that? That's the first question. The two specific questions are, when you do the share buyback, will you be buying back A shares or B shares?
Are there any transaction costs that we should be modeling in because of these two transactions? Are they material for 2023? Thank you.
On the TRS, we could have done sort of a larger TRS, or structured everything around the TRS. I think, one thing is that having one TRS then also, meaning that when we terminate the TRS, we will sell 5% for instance in the market. It's a very significant, let's say, portion then of shares that will be taken to the market at the same time. That is one consideration that we don't see that feasible. Of course, it's a little bit also. The fact that the, sort of the TRS has a 12-month, let's say, maturity. We have opportunities to, let's say, roll the TRS. That is important to say. We are to...
We are in a situation where we can to some extent influence then the timing of when the shares are coming to the market. It's not so obvious that it will happen on the, let's say, in 12 months from today. It's also a little bit about the total, let's say, risk structure that we will have on sort of when you look at the total transaction. Meaning that, there are upsides in having a TRS. There's also some downsides in the, in the shorter term of having such an instrument on the balance sheet.
With respect to the share buybacks, I think, of course, we will try to naturally try to do that sort of when, sort of what, sort of focusing on the, let's say, the lowest priced shares, meaning the B shares for the time being. I think also that looking at the volumes of the free float of the share, that then naturally we'll also buy, we end up buying both A and B, sort of to have a certain sort of. To be able to do the buybacks within a sort of reasonable time limit.
I think your last question on the transaction cost from the transaction yesterday, I think we at this stage will not comment on that. Is my take. I don't know if, Ramneek, you want to say something.
You can notice, I think is okay to say is that for the TRS, let's say that you can see that more or less we have that has a cost attached to it, which is more or less similar to a bank loan. Even though we consider the, let's say the terms on the TRS as very favorable compared to comparable financing in today's market. Of course, there will be a fee to the bank when the shares are sold to the market at a certain point in time, in line with natural sell downs, as we did yesterday.
Thank you very much.
Thank you, Adam. I think next in line is Adrian. Are you here?
Yeah, I'm here. Thanks for the call. Thanks for the bright and early start. I've got a couple of questions please, if that's okay. First of all, why did you decide to go for a share buyback versus a special dividend given the fairly low liquidity around the Schibsted shares? Secondly, what's the timing of that share buyback? I mean, when will you start to implement it? Thirdly, I realize this is a call related to this Adevinta stake disposal, but is there anything that you can tell us about Q4, sorry, trends or the 2023 framework? Thank you.
I didn't get your last question, Adrian, on 2023 on the framework. If you can just raise it again.
Sorry. Let me just rephrase it then. Is there anything that you can tell us? 'Cause Adevinta, for example, gave us some indication for the 2023 trading. Is there anything that you can share with us in terms of how you're thinking about 2023 at this moment?
I don't think we will comment any, sort of give any comments now on 2023 today. Focus on the, on the, on yesterday's transaction. On the share buyback, so I think we have looked into sort of various ways of addressing sort of the lower share, the lower pricing of the Schibsted share for the time being. We have sort of it's on the, sort of the consideration is that the share buybacks is a transparent and visible way of doing so. That's why we have chosen that instrument. Did you have one more question or did I miss something?
The timing of the buyback, when will it start?
The timing, we will start, sort of rather immediately. We will come back with some more information on that, in the coming days.
Thank you both.
Thanks, Adrian. Next in line is Sylvia. Good morning.
Thanks. Good morning, everyone. A few more questions from my side. First, just wanted to get a sense of how much you intend to repay in terms of net, interest-bearing debt. It sounds like the buyback pretty much corresponds to the size of the Adevinta stake sale. Should we assume that the proceeds from the TRS are going to be dedicated to that repayment? Related to that, what sort of impact could we expect on the interest expenses? Is there anything that you can tell us? You commented a little bit about the cost of the TRS being somewhat similar to a loan. Net, net, are we gonna see much changes on the interest expenses?
Even though one lock is one lock, it's sort of difficult to say whether the lock is sort of gone for share buybacks or reducing debt. In principle, you can say that the intention is to primarily use the proceed equal to the TRS to reduce debt. The leverage whereby the direct set of shares will sort of is intentionally meant to be used for buybacks. That is sort of the overall thinking, meaning that we roughly target the a debt leverage of around two after the transaction, even though of course it will be lower until we have sort of done the buybacks. That is the thinking.
I saw that it
On the, let's say, on the, like I said, you, there is a cost attached to the TRS. As I said, it's to some extent comparable to debt financing. There will be a slightly decreased net finance cost from the transaction, but it will not be sort of significant.
Okay, thanks. Can I just ask a follow-up, a little bit more practical about what would happen to the shares at the end of the TRS, just to, you know, to understand better the structure of the contract?
At the time when we decide to terminate the contract, the shares will be sort of sold in the market through an ordinary sort of book-building process. That will happen at the time of the termination. It's important then to just inform you that so we can choose to terminate, let's say, the agreement sort of prior to the 12 months period, or we have also the opportunity to ask the bank for prolongment of the agreement. That's why we have some flexibility to do so, and normally we will not be in a position to terminate or sell the shares either if we are in a, let's say, in a closed period for any reason due to us being also having board members and sort of in the Adevinta board.
Okay, thanks. Maybe just a final quick one, Cesari, but, I mean, how often are you going to receive payments from Danske linked to the performance of the shares?
There are no payment until termination unless we prolong the agreement during the termination period.
Okay. Thank you.
This goes both ways, right? I mean, both on the upside but also on the downside, right?
That's right.
Understood. Thanks.
Okay. Thanks, Sylvia. Next in line, Will, the floor is yours.
Hi there. Thanks for taking my questions. Just, I suppose, to clarify a couple of things based upon the previous answers. You can't sell any more Adevinta shares for three months, and then when we get to the end of that three-month period, if the same circumstances are in place, you would therefore be likely to sell more, if the same stub issues remain in terms of valuation or have I misunderstood? If there's no change, the rationale would still be firmly in place and you would have the permission to do so.
Secondly, to your comments about why now, did I read between the lines that, you know, perhaps there's some further organic operating pressure, which is why you've decided to do this now in the context of the macro, or is that a misunderstanding? Finally, you talked to in your initial remarks, kind of eBay sort of allowing you to sell this 5% would tag-along. I didn't really get specifics, so could you just repeat that comment? Thank you.
I won't sort of give any comments to what we might do, sort of later, let's say, at the expiry of the 90 days. The agreement that we today have with Permira and eBay going back to the original transaction with eBay is that we both have a sort of we have tag-along rights for every share sold on that one of us do, either eBay or Schibsted, from, so let's say from 30% down to 25. Meaning that sort of we have to agree, if either one of us are in a position where we would like to sort of reduce on the Schibsted stake below 30.
We cannot do sell down below 25% till October next year when the lock-up period between the parties expire. That is sort of the overall framework that we are working within. That sort of means that we need-
Sorry to interrupt. Just to clarify, therefore, the other parties could have stopped you going below 30%?
They couldn't have stopped us. They could eBay could have asked for a tag-along.
Okay. Right. Sorry. Thank you.
That we did beyond the three. That is the only thing. I think we will always look at what we think is value creative for our shareholders, but also of course, looking to what we think is the longer term valuation for Adevinta, not for us then being a shareholder in that. That is the balance that we always have. Of course we are financial in Adevinta and as we have said before, we are constantly monitoring ways of making sure then that ownership creates value for our shareholders in the longer term as well.
That is something that we sort of will continue to focus on, of course.
On the results and no, this is sort of no comments that sort of give any flavor to the direction of the results, coming up now for Q4 or for next year. As we have said in the early calls, there is a significant uncertainty related to the macroeconomic development going into 2023 and how that might influence sort of our revenue growth. Of course, then being in that situation, we think it's prudent to sort of have a rather solid balance sheet and not sort of be having that also as something that adds uncertainty to the, to the development of the company as such.
If I can add to this, I mean basically, again, like summarizing, right? We did this transaction basically to do things, right? One is really addressing like the leverage, which is above our target range for the time being. The second one, addressing like the discount in our shares. I think using the TRS was basically a possibility to address the leverage while still being exposed to Adevinta and showing that we support the strategy and develop great potential going forward here.
Thanks for the color.
Before I go to the next question, there's a question on the chat here. If you can comment on that, Ragnar. Could we draw from the conclusion from the transaction that the Lendo sale is put on ice, or is this the deal still current?
That is a good question. What we can say then is that it's We have experienced that the present conditions in the financial market, sort of both with respect to debt financing and equity financing, have had some impact on the process around selling Lendo. We are still sort of in process, but we also see that we potentially will need to spend some more time going into Q1 next year to see whether we actually will be able to succeed with the sale or not. That is that's another comment to give.
Next in line is Lisa. Lisa, please go ahead.
Hi. Morning. Just have one question left. I'm just wondering if you can share maybe what were the other options you might have, you know, considered or have been discussed. I mean, if you look at a year ago, eBay sold, I think 10% to Permira. I'm just wondering, you know, given the current share price and, you know, have you had any sort of approach from maybe financial players for, you know, a stake? If anything can be shown, that would be great.
I will, sort of... I won't comment what other options we have actually sort of looked at. We have executed on the option that we think are the best one. That is sort of the core thinking around the sell-down. It's also worth mentioning then that an added element in using the, sort of in the totality is that we buy these sell-downs then still maintain a significant ownership stake in Adevinta. Of course that together with the eBay and other shareholders, that is also, let's say, a part of a controlling stake in the company, and I think that is part of the one element that we have sort of been focusing also then when we have done this.
Can I just clarify? Like, when you do Obviously, you don't need approval from the other major shareholders to do something like this. If, you know, in future sell or if, you know, eBay would also consider selling part of their stake, do they have to at least inform you and Permira and vice versa?
Both. If eBay or Schibsted is selling down to 25%, we both have tag-along rights on the, let's say, on each other's sort of potential sale. We cannot say no or actually prevent the other one from selling, but we have tag-along rights, meaning that we need to coordinate the sell-down down to 25%. Beyond that, Schibsted and eBay are prevented from selling below 35% until the lock-up is sort of ending in October next year. Permira has a lock-up for their shares until also October next year. If that was clear for you.
That's it. Okay, thank you.
Mm-hmm.
Thank you, Lisa. Next in line is Elena. Elena, please go ahead.
Hi, morning. A couple of technical questions, please. What are the regulations? How much can you buy on the market? What's the maximum can you be of the daily volume? Therefore, if you could share, what is your estimation of how long it would take you to complete the buyback?
Yeah, I think if when it comes to this, I think we, you know, we'll come back to the details of the buyback. In general, you know, if you look at our previous buyback programs, it was, we used like the 30-day average of the transaction in the market, and then used like up to 25% of that average, right? There are different options. This is what we have used in the past. Again, like Ragnar said, we will come back to the buyback program, the specifics over the next days, and then it will be also obvious in this stock exchange release how this buyback will be structured.
Okay, thank you.
Next in line then is, Araceli. Please go ahead.
Yes. Hi, good morning. Thank you for hosting this call. I have a couple of questions. I mean, first one is on, like, the fiscal implications of the disposals for you guys. What's kind of the taxation and, did you explore an alternative of just, like, distributing the other shares to your existing holders? That's my first question. My second question is just looking at the discounts of the ABB yesterday, can you explain why you didn't explore doing that with kind of a global bank with maybe a bit more distributing power? 'Cause the discount sounds like quite wide for the size of a stake. Thank you.
The transactions that we did do not have any sort of tax implications for Schibsted, so they are neutral from that perspective. We have sort of for the stake, let's say for those purposes that we sort of addressed with yesterday's transaction, I think, we have not seen the distribution of shares as an alternative for those. I think that is more of an option that's on the table longer term for the, let's say, the remaining stake of the shares. Then, I think on the discount, I would say that looking at sort of benchmark it up against as other similar transactions that has been done lately, we were prepared for a discount roughly in this size.
It's also influenced by also the liquidity of the Adevinta share at the stock exchange and so on. It's a couple of other things that addresses that. We are very, very well satisfied with the job the banks did yesterday evening on the placements as such. I think we sort of got a good result given the present market conditions.
Thank you.
If you have any questions, please use the raise hand function, or you can also contact me on the chat. I think, hear a question from Anil. Anil, please go ahead.
Hey. Hey, morning, guys. Apologies I joined a bit late, so sorry if it's already been asked, but I just want to make sure I've kind of completely understood this return swap. You've put some financing in place with Danske. I'm assuming this is like three-months STIBOR plus some kind of uplift. Does it get mark to market every quarter? I'm just guessing it's a non-cash movement every quarter on the mark to market. In 12 months' time, what you decide if it's, I know, let's say, out of interest, 50% higher than where it is, you have a decision as to whether you wanna keep it, sell it or like... It's still not quite clear how this is working.
I won't sort of go into the specifics around let's say, the terms of agreement with let's say, with Danske. The way the instrument works is that it is, as I said earlier in the call, very comparable with a bank loan. We have a margin on the size of the amount that is outstanding.
Are there any covenants on it then, if it's comparable with the bank?
No. There's no covenant. There is no, let's say, exchange of cash depending on, let's say, the value fluctuations, until the termination agreement, unless we extend the length of the agreement with Danske. A potential extension time. If we do extensions, then there will also be an extension of cash depending, and that could be positive or negative, depending on the shape as well at that point in time. Then the shares will be sold as an ordinary book build through an ordinary book building process at the time of when the TRS contract is expiring.
Okay. Okay. Understood. Fine. From a net interest expense on the P&L, is this a net positive or a net negative or a neutral?
It's close to net. It's net neutral, slightly positive.
Okay. If STIBOR goes up 50 bps, does it become net negative?
It, the contrast is exposed to the, let's say, underlying and interest to the, to the development in interest rates in general, yes.
Got it. Perfect. Thank you.
Yeah. I think at this stage I don't see any more hands or questions on the Q&A. Just as a reminder, we host another call today at 2:00 PM, especially for U.S. investors, but of course also the ones of you who've joined a bit late today. Happy to see you again at 2:00 PM. I think otherwise I will round up the call here, get a cup of coffee for myself. I think it's interesting probably for Google to see that TRS is a word which has a lot of interest probably since since last night. Thank you all for joining and happy to follow up offline with you.
Thank you.