Volvo Cars, a subsidiary of Swedish manufacturer Volvo Group, said on 4 October that it plans to list on the Nasdaq Stockholm stock exchange in what could be one of Europe’s biggest IPOs of 2021.
Volvo Car’s CEO, Hakan Samuelsson, says the company’s transformation strategy towards electric vehicles (EVs) and direct-to-consumer (DTC) offerings are the reasons behind the planned listing. How will the Volvo Cars share price react after the handbrake is lifted on its public listing?
Volvo Cars IPO could be worth $25bn
Volvo Cars is seeking to raise SEK25bn ($2.9bn) through an IPO, which would see the Swedish carmaker valued at about $20bn, according to CNBC. Volvo has confirmed that its main shareholder Geely Sweden Holdings, a subsidiary of Zhejiang Geely Holdings [0175.HK], will retain its majority shareholding after the IPO.
In 2018, Volvo Cars and Geely, which also owns an 8.2% stake in Sweden’s truck-focused Volvo Group [VOLV-B], postponed plans for Volvo’s IPO due to trade tensions and a downturn in automotive stocks at the time, report Reuters.
Samuelsson said that Volvo Cars’ IPO “could create an opportunity for global investors to participate in our journey to become a leader in the fast-growing premium and intelligent electric vehicle segment, while continuing to deliver on what customers expect from the Volvo brand.”
Amount Volvo Cars is seeking to raise in its IPO
EVs: The driving force behind IPO plans
Volvo revealed it was exploring an IPO in May to help the company fulfil its aim to go fully electric. The carmaker has committed to shifting its entire range to fully electric models by 2030. Other carmakers are following a similar path. General Motors [GM] has said it will only make EVs by 2035, Ford [F] says all its vehicles sold in Europe will be electric by 2030, and Volkswagen [VOW.DE] is targeting 70% of its sales being EVs by 2030, report the BBC.
Volvo Cars is also aiming for annual sales of 1.2 million cars, which would equate to an impressive 56% hike from the 770,000 sold in the year to 20 June 2021. The carmaker expects 50% of its sales to be EVs by 2025, with half of its sales online instead of in dealerships, reports Reuters.
Volvo is confident in its ability to transition to EVs as planned, saying in a statement that its “unique structure and focused strategy makes it one of the fastest transformers in the global automotive industry, with mid-decade ambitions dedicated to electrification, sustainability and digitisation."
Volvo buckles up for fast IPO start
Volvo Cars has been “clearing the way for an IPO”, according to public.com, by buying out Geely from their Chinese joint ventures. Volvo Cars was sold by Ford to Geely in 2010. It means Volvo Cars will have full ownership of its Chengdu plant, sales company in Daqing and R&D facility in Shanghai.
Capital Markets analyst, Hampus Engellau, says this is positive for the Volvo Cars IPO: “The clearer the ownership structure is, and the clearer the stakeholders in the company look, the easier it gets for investors to consider what it is they are investing in.”
The fact that Volvo Cars said the IPO proceeds would go toward accelerating its transition to fully EVs “even in case of a weakening market environment”, reports TechCrunch, underscores how far Volvo has come since Ford sold Volvo Cars to Geely 11 years ago for just $1.8bn – Ford had paid $6.5bn for the Swedish car manufacturer back in 1999. Volvo has grown significantly, having built two vehicle assembly facilities in China plus a factory in South Carolina. And Volvo said in June it plans to invest another $118m into the South Carolina plant, reports TechCrunch.
“The clearer the ownership structure is, and the clearer the stakeholders in the company look, the easier it gets for investors to consider what it is they are investing in” - Capital Markets analyst, Hampus Engellau
Volvo Cars has come a long way since it was sold off in a cut price sale by Ford. And its turnaround is reflected in the carmaker’s latest sales figures – Volvo reported a 17.6% jump in sales for the first nine months of this year, versus the same period in 2020.
All roads seem to be pointing in the right direction for Volvo Cars, with the upcoming IPO appearing to be well-timed as the carmaker gets itself in shape. Sales are growing, assets are in place and it’s on track to deliver on its targets to go fully electric in just over eight years’ time. If Volvo Cars continues to combine innovation in its EV designs with its renowned sense of safety and style, investors will be confident of share price gains when the Volvo Cars IPO drives off the starting blocks, especially if Volvo Cars can replicate Volvo Group’s 93.6% gains since March 2020.
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