| Reverse recapitalization |
Note
21. Reverse recapitalization
As
described in Note 1, the Company completed the Reverse Recapitalization on the Closing Date. The transaction was structured as a merger
of Legato III with and into Merger Sub (a newly formed, direct, wholly owned subsidiary of Einride), with Merger Sub surviving the Merger
and Legato III ceasing to exist. As consideration, Einride AB issued its own Ordinary Shares, in the form of ADSs, to the former Legato
III shareholders. Following the Merger, Merger Sub remains a direct, wholly owned subsidiary of Einride AB. References in this note to
the “Reverse Recapitalization” comprise the Merger together with the related recapitalization steps described in Note 1.
The PIPE Financings, the conversion of the Company’s convertible debenture and the de-SPAC compensation shares closed concurrently
with, and conditional upon, the Merger but are separate transactions that are accounted for separately as described below and in Note
1.
Legato
III was a special purpose acquisition company (SPAC) incorporated in the Cayman Islands for the sole purpose of effecting a merger. Legato
III had no operating activities, employed no employees, owned no intellectual property, and generated no revenue other than investment
income on assets held in its Trust Account.
The
Reverse Recapitalization is not within the scope of IFRS 3, Business Combinations. Einride was identified as the accounting acquirer,
primarily because existing Einride shareholders held the largest voting interest in the combined company, the members of the board of
directors were predominantly Einride nominees, Einride’s senior management continues as the management of the combined company,
and Einride is the larger entity and the only operating company within the combining companies. Furthermore, Legato III does not meet
the definition of a “business” in accordance with IFRS 3, as it consisted primarily of cash held in the Trust Account and
had no organized workforce or other processes capable of contributing to the creation of outputs; as such, the transaction was accounted
for by applying the principles of IFRS 2, Share-based Payment by analogy. Under IFRS 2, an entity measures the goods or services received
in equity-settled share-based payment transactions at the fair value of the goods or services received, unless that fair value cannot
be estimated reliably, in which case it measures them by reference to the fair value of the equity instruments granted. As the fair value
of the stock exchange listing service received cannot be estimated reliably, the increase in equity has been measured by reference to
the fair value of the shares issued by Einride to the former Legato III shareholders. Any excess of fair value of equity instruments
issued by Einride over the fair value of Legato III’s identifiable net assets acquired represents compensation for the service
of a stock exchange listing for its shares and is expensed as incurred.
These
interim financial statements have been prepared as a continuation of Einride with:
| ● | the
assets and liabilities of Einride recognized and measured in the interim financial statements
at their carrying amounts immediately prior to the Reverse Recapitalization; |
| | | |
| ● | the
pre-transaction equity balances of Einride AB including share capital, share premium, foreign
currency translation reserve, and accumulated deficit are also carried forward without restatement; |
| | | |
| ● | the
identifiable net assets of Legato III received in the transaction (principally cash net of
redemptions, less accrued expenses, deferred underwriting commissions (a pre-existing contractual
obligation of Legato III to its IPO underwriters that became payable upon consummation of
a business combination and was settled out of the Trust Account at Closing), warrant liabilities
assumed, and other payables) are recognized at their fair values at the Closing Date. No
goodwill arises because the transaction is not a business combination under IFRS 3; |
| | | |
| ● | the
equity instruments issued by Einride AB to former Legato III shareholders are recorded in
share capital (at par value) and share premium (for the excess), measured at the fair value
of the equity instruments issued. The fair value was determined at the Closing Date by reference
to the equity value of Einride of USD 1,350 million negotiated in the Business Combination
Agreement (equivalent to USD 10.90 per Ordinary Share, the price at which ADSs were issued
in the concurrent PIPE Financing), multiplied by the Legato III shareholders’ ownership
interest in the combined company, and translated at the USD/SEK exchange rate prevailing
on the Closing Date; |
| | | |
| ● | the
excess of the fair value of the equity instruments issued by Einride AB over the fair value
of the identifiable net assets of Legato III received is recognized as a listing expense
in the statement of comprehensive loss in accordance with IFRS 2; and |
| | | |
| ● | the
comparative information presented in these interim financial statements is that of Einride
AB. |
Upon
closing of the Reverse Recapitalization, the Company received SEK 1,768,521 thousand from the Trust Account, after deducting interim
redemptions paid in connection with Legato III’s extension meeting prior to Closing. After deducting cash paid to Legato III shareholders
that exercised their redemption rights at Closing and payment of deferred underwriting commissions and Legato III’s other transaction
costs paid at Closing, the Company retained net proceeds of SEK 8,579 thousand. The following table reconciles the elements of the Reverse
Recapitalization to the interim statements of cash flows and the interim statement of changes in equity for the six months ended June
30, 2026:
Schedule of Interim statements of cash flows and changes
| (SEK
in thousand) | |
Amount | |
| Cash held in Trust
Account, net of interim redemptions | |
| 1,768,521 | |
| Add: Other Cash transfer received
per Legato III closing balance sheet | |
| 1,527 | |
| Less: Shareholder redemptions
at Closing | |
| (1,737,642 | ) |
| Less: Payment of deferred
underwriting commissions | |
| (19,382 | ) |
| Less:
Transaction costs and professional fees paid at Closing (a) | |
| (4,445 | ) |
| Proceeds
from Reverse Recapitalization, net | |
| 8,579 | |
| | |
| | |
| Less: Legato III Public and
Private Warrant liabilities assumed | |
| (270,886 | ) |
| Less: Accrued liabilities
for Legato III’s unpaid transaction related costs assumed | |
| (11,779 | ) |
| Less: Notes payable liability
assumed | |
| (4,775 | ) |
| Add:
Listing expense (IFRS 2 charge) | |
| 636,267 | |
| Issuance
of shares in Reverse Recapitalization, net | |
| 357,406 | |
| (a) | | Represents the
fair market value as of the Closing Date of certain warrants over the Company shares (“SPAC warrants”) issued by Einride
to replace Public and Private Warrant previously issued by Legato III. The new warrants have the same terms and conditions as the warrants
issued by Legato. As the terms of the Legato III’s Public Warrants and Private Placement Warrants are substantially the same before
and after the completion of the Reverse Recapitalization, the Warrants are not deemed to be additional consideration under IFRS 2 but
rather the Legato III Public Warrants and Private Placement Warrants were assumed as part of the Reverse Recapitalization. The assumed
warrant liabilities are deducted from the net assets of Legato III in determining the IFRS 2 listing expense, which increases the listing
expense amount. |
The
amount of SEK 357,406 thousand presented as “Issuance of shares in Reverse Recapitalization, net” in the table above, represents
the deemed fair value of the equity instruments issued to the former Legato III shareholders, which equals the gross credit recognized
in equity in connection with the Reverse Recapitalization.
The
net cash received in connection with the Reverse Recapitalization is presented within financing activities in the interim condensed
consolidated statement of cash flows, reflecting the substance of the transaction as a capital-raising and listing
arrangement that is, in substance, an issue of equity instruments for cash.
The
following table displays the reconciliation of the total market capitalization attributable to Legato III shareholders and the reverse
recapitalization impact to share premium as of June 9, 2026 and the calculation of the listing expense recognized for the six months
ended June 30, 2026:
Schedule
of reverse recapitalization impact
| Description | |
Amount | |
| Fair value of
Einride (negotiated equity value per the amended BCA) on Closing Date in USD | |
| 1,350,000,000 | |
| USD/SEK exchange rate at the
Closing Date | |
| 9.4234 | |
| Fair value of Einride in TSEK | |
| 12,721,590 | |
| Legato
III shareholders’ ownership interest in the combined company at Closing | |
| 2.81 | % |
| Deemed
fair value of shares issued to Legato III shareholders in TSEK | |
| 357,406 | |
| Less: Net
assets of Legato III: | |
| | |
| Cash and cash equivalents
(Trust, net of redemptions) in TSEK | |
| 8,579 | |
| Less: Notes payable liability
assumed in TSEK | |
| (4,775 | ) |
| Less: Accrued liabilities
for Legato III’s unpaid transaction related costs assumed in TSEK | |
| (11,779 | ) |
| Less:
Legato III Public and Private Warrant liabilities assumed in TSEK (a) | |
| (270,886 | ) |
| Total
net assets of Legato III as of the Closing Date in TSEK | |
| (278,861 | ) |
| Listing
expense in TSEK (b) | |
| 636,267 | |
| (a) | | Represents the
fair market value as of the Closing Date of certain warrants over the Company shares (“SPAC warrants”) issued by Einride
to replace Public and Private Warrant previously issued by Legato III. The new warrants have the same terms and conditions as the warrants
issued by Legato. As the terms of the Legato III’s Public Warrants and Private Placement Warrants are substantially the same before
and after the completion of the Reverse Recapitalization, the Warrants are not deemed to be additional consideration under IFRS 2 but
rather the Legato III Public Warrants and Private Placement Warrants were assumed as part of the Reverse Recapitalization. The assumed
warrant liabilities are deducted from the net assets of Legato III in determining the IFRS 2 listing expense, which increases the listing
expense amount. |
| (b) | | The listing expense
of SEK 636,267 thousand has been recognized in the condensed consolidated interim statement of comprehensive loss as part of general
and administrative expenses within operating loss, separate from financial income/expense items. The listing expense recognized is a
non-cash charge. |
The
following table displays the reconciliation of the total market capitalization attributable to Legato III stockholders and the reverse
recapitalization impact to share premium for the six months ended June 30, 2026:
| Description | |
Amount | |
| (SEK in
thousand) | |
| | |
| Deemed fair value
of shares issued to Legato III shareholders | |
| 357,406 | |
| Less: Ordinary shares issued
(par value of shares issued) | |
| (16 | ) |
| Additional
share premium from Reverse Recapitalization, net | |
| 357,390 | |
The
Reverse Recapitalization also involved:
| ● | the
Company’s outstanding convertible debenture with a carrying amount of SEK 235,585 thousand
(host debt component at amortized cost) and an associated embedded derivative liability of
SEK 4,712 thousand (conversion feature measured at FVTPL) converting into Einride ordinary
shares. Upon conversion, the host debt component and embedded derivative liability (conversion
feature) were derecognized, and the corresponding equity was recognized in share capital
by SEK 11 thousand and SEK 240,286 thousand in share premium. The conversion of the convertible
debenture did not result in any gain or loss, as the conversion was effected in accordance
with the original contractual terms (see Note 16); and |
| ● | professional
services expenditure of SEK 202,912 thousand, incurred to facilitate listing on Nasdaq, which,
in addition to the SEK 636,267 thousand described in the table above, has resulted in a total
of SEK 839,179 thousand related to the share listing and associated expenses being recognized
in the profit or loss. |
|