Ericsson shares drop after new report on alleged ISIS payments sparks downgrade

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Ericsson (NASDAQ:ERIC) fell 8.8% in premarket trading after a new report over the weekend revealed more details about alleged payments the telecommunications company made to ISIS. The company was also cut to neutral from buy at Citi with the firm calling the company "uninvestable."

The report revealed that the Swedish-based firm allegedly made "tens of millions of dollars in suspicious payments " over nearly a decade to keep its business in Iraq, according to a International Consortium of Investigative Journalists report, which cited a leaked internal investigation.

"If the reports are confirmed true, then management’s credibility and judgement will be called into question; even if they are ultimately untrue, we think it will take some time before innocence can be proven," Citi analyst Andrew Gardiner wrote in a note with the ERIC downgrade. "Either way, we expect Ericsson stock to be uninvestable for most investors for the foreseeable future."

The investigative journalist report comes after at Ericsson (ERIC) disclosed earlier this month that it may have paid bribes to the Islamic State terrorist group.

Shares of Vonage Holdings (NASDAQ:VG), which is being sold to Ericsson for $6.2B, fell 1.5% in premarket trading on investors concern about the deal, specifically that a national security or CFIUS review of the $21/share deal could be delayed due to the report on ISIS.

Also see from earlier this month, Vonage (VG) stock pares losses on report that Ericsson told DOJ about Iraq probe in 2019.