AF in Swedish stands for Aktie- och Fond-konto (Shares and Funds account).  It is a capital gains taxed account (25% for unlisted and 30% för listed shares) from Strivo – which is provided for free to Polynom shareholders.

Business angels are individuals who typically enter at a very early stage to support a company with both expertise and capital. They usually invest smaller amounts compared to venture capitalists and often serve as a complement to them. Entrepreneurs can gain access to capital, expertise, and valuable contacts through a business angel. A business angel often has personal experience in running a business. They also have the time, strong commitment, and capital to invest in new, promising business ideas in rapidly growing industries. At the same time, the business angel aims for a good return on their investment and is therefore willing to contribute through their own efforts to the development of the company.

Another Wall Street term that stands for a company with a small market capitalization (in the US, under $500 million). This term was coined back in the 1950s, and it comes from the idea that small crawling children or dogs can only bite at an adult’s ankles. As an investment, ankle biters tend to be quite volatile and are often thinly traded. On the plus side, ankle biters often have greater growth potential than larger stocks and typically encompass new technology.

An initial public offering, or IPO, is just as it sounds – when a company goes public on the stock exchange. When a company goes public, its shares become available for trading on a regulated marketplace, such as the Stockholm Stock Exchange. It’s worth noting that shares in unlisted companies can also be traded, but they naturally have lower liquidity.

“Dead cat bounce” is a term in the world of finance, originating from New York and Wall Street. It refers to a minor recovery of a stock after a significant decline in its price. The term comes from the notion that “even a dead cat will bounce if it falls from a great height,” such as a skyscraper, and suggests that the stock is not likely to continue rising.

Due diligence is a process in which a thorough and systematic examination of a company or a business is conducted to assess its financial, legal, and operational status. The purpose is to gather relevant information and analyze it in order to mitigate risks and make well-informed decisions. During the due diligence process, the company’s financial documents, legal agreements, ownership structure, operational processes, environmental impact, and other relevant factors are examined. The results of due diligence are typically used to evaluate whether a business or investment is profitable and if there are any potential risks or obstacles that need to be addressed. Read more in our article HERE.

An issuance or new share offering, known as an “emission” in Swedish, occurs when a company needs to raise new capital by issuing new shares through a public offering. The company makes an offer which investors subscribe to and pay for. The company then sends out documents such as payment receipts (certificates of who has paid) and registration documents to the Swedish Companies Registration Office (Bolagsverket), which then issues the shares. An issuing agent then registers the shares in the custody of a depositary institution.

A so-called “emissionsinstitut” is a fund manager or a bank. An emissionsinstitut is engaged by companies for the planning, management, and execution of issuances. In the latest issuance, Polynom has engaged Nordic Issuing.

EV/EBIT and EV/EBITDA are multiples that complement or expand upon the more traditional P/E ratio. Both multiples take into account the company’s debt, which P/E does not. The latter, EV/EBITDA, also considers depreciation and goodwill impairments, which can significantly impact the result in certain companies.

– EV = Enterprise Value (Market value of the company’s equity + net debt).
– EBIT = Earnings Before Interest & Taxes (Operating profit or profit before interest and taxes).
– EBITDA = Earnings before interest, tax, depreciation and amortization (similar to EBIT but before Depreciation and Goodwill impairments).

Interest coverage ratio shows a company’s ability to cover its financial costs, i.e., interest expenses, with its annual earnings. This ratio is usually expressed in decimal form, but it can also be presented as a percentage. A number below 1.0 indicates that the profit is lower than the company’s financial costs, which is not favorable!

A directed share issue is exactly what it sounds like – an issue targeted towards a selected group of investors. For instance, investors who already own shares in the company. A directed share issue can also refer to an issue directed at external investors.

Venture capital, also known as risk capital, is a form of financing directed towards early or growth-stage companies with high potential. It is provided by specialized investors, venture capitalists, who are willing to take higher risks in exchange for the potential for high returns on their investment. These investors become stakeholders in the company and can offer financial support, guidance, and business networks to help the companies grow and develop. Venture capital plays a crucial role in driving innovation and growth, particularly in the technology sector and for startups that need capital to develop their products, expand their operations, and reach the market.

The policy rate, or repo rate, is the interest rate set by the central bank for short-term loans to commercial banks. It is a crucial tool in monetary policy as it affects the banks’ cost of liquidity, thereby regulating the amount of money in circulation in the economy (and can consequently influence inflation). Often, it influences the interest rate path that the central bank announces (i.e., how the central bank views the policy rate in the future), and banks are usually quick to adjust the interest rates they charge their customers (as homeowners, we can see this on our mortgages). The Swedish policy rate is called the repo rate (after “repa,” slang for the English term “repurchasing agreement”). The central bank lends money by buying repos from banks, which are then sold back after a period (this is called a reverse repo) with an interest markup, forming the “repo rate.”

A Corporate Finance firm is an advisor that acts as an intermediary between companies in need of capital and investors. Their main tasks are to provide companies with advice on how to address their financial challenges and to assist them in raising financing, whether it be through stock offerings, bond issuances, or derivative products. Every bank has a Corporate Finance department, but there are also specialized firms like Sedermera or Sciety.

The International Securities Identification Number (ISIN) is a code designed to uniquely identify a security. The ISIN code consists of an alphanumeric sequence of twelve characters. The code has three components: it begins with a two-digit country code according to the ISO 6166 standard, followed by a nine-digit alphanumeric sequence, and then a check digit calculated using the Luhn algorithm from the previous eleven characters. For example, Polynom’s B-share ISIN code is SE0015531058.

Dilution occurs when the ownership stake of existing shareholders is reduced due to the issuance of new shares. In a simple example, if you own 100% of a company with 100 shares, but the company needs to raise more money (for example, to fund operations) and issues 10 new shares, you still own 100 shares, but your ownership percentage decreases to 91% (100/110 = 0.909). Your ownership has been diluted. In most cases, this is considered negative for existing shareholders.

However, in the case of Polynom, there are a few factors to consider. First, Polynom currently does not pay dividends, so the dilution effect of having more shares to share profits with is less significant. Second, Polynom aims to provide the best possible return. For example, if you own 100 shares and the price is 1 SEK, and there are 1,000 shares in the company, your 10% stake is worth 100 SEK. In the future, if 1,000 new shares are issued, your stake is diluted to 5%, but now the stock is valued at 3 SEK, making your stake worth 300 SEK. In this scenario, dilution is not as critical. You can read more about Dilution in our article HERE.

Venture capital firms are financial or investment companies that provide funding in the relatively early stages of a company’s development, typically when the company is transitioning from a developmental phase to starting sales or further expanding. These firms are composed of professional investors, aiming to achieve a good return on investment for their shareholders and backers. They usually operate with funds provided by their investors and often take a 20% to 40% ownership stake in the companies they invest in.

TO stands for Teckningsoption in Swedish. A teckningsoption is a security that grants the holder the right to purchase a newly issued share at a specific price during a predetermined period.

Volatility refers to the price movements of stocks and other financial assets. It is used as a measure to assess the market risk (systematic risk) associated with a financial asset. A stock with high volatility experiences significant (either negative or positive) deviations from its average value.

Zombie company: There is no “official” threshold, but it is commonly defined as companies that have had an interest coverage ratio of less than 1% for at least three years. This means companies that are unable to finance their operations and must take out loans to continue their business. This situation typically works when interest rates are low; however, if interest rates rise, it poses a threat of bankruptcy.