Shares in Volvo Cars rose by almost a fifth as the Chinese-owned premium carmaker made its stock market debut after a lengthy and potholed journey to being listed.
Volvo’s Chinese owner Zhejiang Geely, which will still own about four-fifths of the carmaker, was forced last week to convert its vote-heavy shares into normal stock after protests from potential Swedish investors. The scaled-back initial public offering, a previous attempt at which was cancelled in 2018 owing to trade tensions between the US, Europe and China, had been priced at the lower end of its range.
Volvo’s shares rose from their offer price of SKr53 to SKr63.17 in midday trading in Stockholm on Friday, an increase of 19.2 per cent.
The carmaker will raise SKr20bn ($2.4bn), which could climb to SKr23bn if an overallotment option is exercised in full, which it is planning to use mostly to fund its push into electric vehicles as part of its pledge to stop selling petrol-fuelled cars by 2030.
“It’s an important milestone. We have talked for 10 years that we should be acting as a public company. We tried a number of times so it is a bit of a relief,” chief financial officer Bjorn Annwall told the Financial Times.
Friday’s trading pushed Volvo’s market capitalisation from $18bn to about $22bn, still below the more than $30bn that people close to the carmaker had targeted at the start of October when the IPO process was launched.
It is also, strikingly, the same valuation as Polestar, the electric car start-up that Volvo half owns and that sold just 10,000 cars last year, is set to have when it goes public next year as part of an acquisition by a special acquisition company.
Annwall said that investors had faced a “dilemma” due to the “two worlds of valuation” for the car industry currently: high valuations for pure electric start-ups such as Polestar and Tesla, which is worth more than all publicly listed carmakers put together; and far lower multiples for traditional carmakers.
Chief executive Hakan Samuelsson said in a separate interview with the FT that to get a better valuation Volvo needed “to be credible in telling investors we’re on our way to being 100 per cent electric”.
Volvo has the most advanced plans of any traditional carmaker to move to sell only electric vehicles, but such cars only make up 3 per cent of its sales, leading investors to value it at lower than it initially wanted.
“We used to be in the second camp but we’re quickly going to the other. As we now deliver on our plan [for electrification] and build more trust that we have quite good prospects of coming out as a winner, then we hope we will be valued accordingly,” said Annwall.
If the overallotment option is exercised in full, Volvo’s free float should be about 14 per cent. Alongside Geely — which would still control 82 per cent of the shares and votes — would be two Swedish pension funds, which first invested in the group in 2016 and hold a combined 4.4 per cent stake.
Annwall hailed the move by Geely to convert its vote-heavy class of shares into normal stock as “an important signal” to minority investors that the Chinese group and its owner Li Shufu, also chair of Volvo, would listen to them.