Euronext - 2020 Universal Registration Document

Operating and Financial Review

Overview

The management of Algomi decided to change its strategic course of direction in the second half of 2018, by focusing on their “Alpha” product, rather than further maintaining the “Honeycomb/Synchronicity” network. This has resulted in many banks terminating their contracts with Algomi. The Honeycomb/ Synchronicity network is the major source of data to feed the MTF and without this data the MTF is not expected to generate any trade. The Group expects that this change in focus will have an adverse impact on the financial situations on both Algomi and Algonext, as these entities will not be generating license fee revenues going forward. Considering this, the Group recorded a downward revaluation of its investment in Algomi to reflect its revised estimated fair value (to zero), which is recognised in Other Comprehensive Income as per 31 December 2018. Further in 2018, it recognised an impairment of its investment in joint venture Algonext bringing its carrying value to zero. Certain assets that were recognised for Algomi exclusivity rights and prepaid expenses for the joint venture have been impaired for which a charge has been recorded in Exceptional items. In 2019, fair value (zero) did not change for this investment. In Q1 2020, the Group sold its 7.74% minority stake in Algomi Ltd. to BGC Partners for a consideration of €2.6 million, comprising €1.9 million of cash receipt and €0.7 million of deferred receivable, pending any post-transaction settlements. The investment was remeasured to fair value through Other Comprehensive Income at €2.6 million. Subsequently, the investment was derecognised. n Oslo Børs VPS Holding ASA (“Oslo Børs VPS”) On 24 December 2018, Euronext announced it had approached the Board of Directors of Oslo Børs VPS Holding ASA (“Oslo Børs VPS”) to seek its support for a €625 million cash tender offer for all the outstanding shares of Oslo Børs VPS, the Norwegian Stock Exchange and national CSD operator, headquartered in Oslo. As per 31 December 2018, following share purchases made by the Group at end of 2018, the Group held a 5.1% ownership interest in Oslo Børs VPS amounting to €31.7 million. The Group irrevocably elected to classify the 5.1% investment in Oslo Børs VPS as an equity investment at fair value through other comprehensive income. The Group considered the purchase price of NOK 145 per share to be best proxy for fair value as per 31 December 2018, supported by prices of Oslo Børs VPS shares traded at the end of December 2018 and beginning of 2019. During 2019, the Group made additional share purchases for €22.1 million, increasing its ownership in Oslo Børs VPS to 8.3%, before acquiring the majority stake on 14 June 2019. Immediately before obtaining the majority stake and as part of the total purchase consideration, the equity investment was revaluated to its acquisition-date fair value of €57.4 million (at NOK 158 per share plus interest payments) resulting in a gain of €3.6 million, which was recognised in Other Comprehensive Income. As a consequence of the transaction, the equity investment in Oslo Børs VPS was fully derecognised and its historical revaluation gain, recognised in Other Comprehensive Income, was transferred to retained earnings on the date of acquiring the majority stake.

As per 31 December 2017, following the above, the fair value of the investment in Euroclear was measured at €96.2 million and the fair value of the investment in Sicovam Holding S.A. was measured at €41.7 million. In 2018, the Group increased its interest in Euroclear from 3.34% to 3.53%, which was due to the acquisition of the Irish Stock Exchange Plc., that holds an 0.19% ownership interest in Euroclear valued at €5.5 million on acquisition. In 2018, as part of the fair value estimation of its investment in Euroclear the Group considered two observable transactions for the determination of the fair value in addition to its primary valuation technique and applied a weighted approach taken into account a illiquidity discount for the limited number of transactions. This ultimately led to an increase in fair value of the Group’s investments in Euroclear and Sicovam S.A. of €45.0 million in 2018. This revaluation was recorded in Other Comprehensive Income. As per 31 December 2018, following the above, the fair value of the investment in Euroclear was measured at €133.8 million and the fair value of the investment in Sicovam Holding S.A. was measured at €54.5 million. In 2020, the Group considered two most recent transactions observed in 2019 and 2018, while two transactions observed in 2018 were considered in 2019 for the determination of the fair value in addition to its primary valuation technique. In both years, the Group applied a weighted approach taking into account an illiquidity discount accounting for the limited number of transactions. This ultimately led to an increase in fair value of the Group’s investments in Euroclear and Sicovam S.A. of €6.7 million in 2020 (2019: €9.1 million). This revaluation was recorded in Other Comprehensive Income. As per 31 December 2020, following the above, the fair value of the investment in Euroclear was measured at €145.3 million (31 December 2019: €140.4 million) and the fair value of the investment in Sicovam Holding S.A. was measured at €58.9 million (31 December 2019: €57.1 million). n Algomi Limited Investment (“Algomi”) In November 2016, Euronext announced a 10-year partnership with would have used fixed-income technology provider Algomi Limited (“Algomi”) to create a long-term joint venture “Algonext”. This JV, initially capitalised by Euronext for $2.3 million, would have deployed Algomi’s technology to a new multilateral trading facility (“MTF”), owned and operated by Euronext. Based on shared ownership and governance, Euronext has recognised its 50% shareholding in Algonext as an “Investment in associates and joint ventures” from the date of incorporation. On 2 March 2017, Euronext acquired a 7.59% stake in JV partner Algomi for $10 million. This investment is recognised as an “Financial asset at fair value through OCI” from acquisition date. As part of the purchase agreement, Euronext was granted a warrant, allowing it to purchase 88,384 additional Algomi shares, that was exercised in the second half of 2017. The investment was recognised as an available-for-sale financial asset at fair value for €9.6 million as per 31 December 2017.

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2020 UNIVERSAL REGISTRATION DOCUMENT