XPO: Elliott’s trial opens before the Paris Court of Appeal

Thursday will be a watershed day for Elliott, the world’s largest activist fund. At the Paris Court of Appeal, the plea hearing in the XPO-Norbert Dentressangle case will be held in the morning. Elliott will attempt to overturn the decision of the Financial Markets Authority (AMF) Sanctions Commission which ordered him to pay 20 million euros in April 2020. A decision that marked the place of Paris. On the one hand, it is the highest sanction ever pronounced by the AMF (the one against Natixis AM of 35 million was reduced to 20 million by the Council of State). On the other hand, this is the second time that the American has been found guilty by the stock market gendarme. In 2014, he had to pay 16 million euros in the APRR case. A decision then confirmed by the Court of Cassation.

OPA roadblock

The AMF estimated that Elliott had not complied with stock market regulations by taking 9% of the capital of Norbert Dentressangle in 2015. At the time, the French number two in transport had just been bought out by the American XPO Logistics which wants, in the process, to launch a squeeze-out of the quotation. The Elliott Fund is damaging. The case is brought to the Paris Commercial Court. Hostilities between the two Americans lasted four years and ended in a transactional agreement in December 2019: the fund sold its 9% for a price of 260 euros per share (against an initial price of 217.5 euros).

The stock market policeman reproached Elliott for having declared positions in CFD (“contract for difference”) with cash settlement, when it was in fact an “equity swap”. Since the Hermès-LVMH and Saint-Gobain-Wendel affair, the law requires the declaration of the holding of derivative instruments. For Elliott, CFDs and equity swaps are identical instruments. Not for the AMF, which considers that these erroneous statements reflect a clear desire to hide its intentions from the market.

According to the regulator, the fund would also have been slow to say that it would not contribute its securities to the XPO offer on Norbert Dentressangle. For the AMF, he should have done so after having crossed the 2% in the capital of the transporter in securities or derivatives, ie at the end of June. However, he did so 9 days later. Elliott defends himself by explaining that this obligation only applied if the securities were held “hard” and not via derivatives. However, he held almost exclusively derivatives.

Obstruction of the regulator

Last point, Elliott was convicted of obstructing the regulator. He would not have provided all the information requested on time to the investigators. It cost him 10 million euros out of the total of 20 million penalties. The activist, however, always indicated that he had fully cooperated.

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