(Bloomberg) -- Saab AB shares fell further amid an inquiry by the US Department of Justice into the Swedish defense contractor’s sale of fighter jets to Brazil a decade ago.
They declined as much as 3.9% as of 11:19 a.m. in Stockholm on a bad day for European defense contractors. The stock lost 6.4% on Thursday when Saab said it received a subpoena from the DoJ regarding its deal to sell Gripens to the South American nation — a contract worth $5.4 billion when announced in 2014.
While the details of the inquiry haven’t been made public, the development adds “significant overhang” to the Swedish stock, whose valuation has surged in the past two years amid a surge in defense spending across Europe, according to SEB analysts.
The bank, which rates Saab shares as a hold, said that while the company’s long-term investment case still looks solid, a potential US regulator probe adds downside risk to the stock. The shares might already be weighed down by “much tougher” year-on-year comparisons than earlier, according to analysts at SEB.
A Saab spokesperson told Bloomberg on Friday that the firm intends to meet the request and had no further details to share. “It’s far too early to say how this might impact Saab and nothing we wish to speculate on. Our focus is to continue our deliveries to Brazil,” Head of Media Relations Mattias Radstrom said by email.
Analysts at Carnegie said the hitherto share reaction might be impact enough. In a note to clients Friday, the broker said the decline of Saab’s market capitalization appears to fully account for any potential DoJ fine, which it said range from $200 million to $800 million in similar cases.
The stock has lost about 11 billion kronor ($1.1 billion) in value since Wednesday. Despite the selloff, it’s still up 36% this year.
--With assistance from James Cone.
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