Volvo reportedly preparing for upcoming $20 billion IPO

The proprietor of Volvo, China’s Geely Holding, is in superior discussions with banks to listing the automaker within the coming weeks, three sources informed Reuters, in what is predicted to be certainly one of Europe’s largest preliminary public choices this 12 months.

Volvo is aiming for a valuation of about $20 billion within the deliberate Stockholm itemizing, the sources stated, with one saying the launch was penciled in for the tip of September.

Goldman Sachs and SEB are main the transaction, whereas different banks together with BNP Paribas, Carnegie and HSBC are additionally concerned within the deal, the sources added.

Volvo declined to remark. Geely didn’t instantly reply to an emailed request for remark outdoors regular enterprise hours in China. SEB and Goldman Sachs declined to remark. The different banks weren’t instantly out there.

Geely, which purchased Volvo from Ford greater than a decade in the past within the largest acquisition by a Chinese agency of a overseas automotive maker, sought to drift shares within the Swedish agency in 2018 however then pulled the deal citing commerce tensions and a downturn in automotive shares.

Traditional carmakers have fallen out of favor lately, as Tesla has risen to be one of the world’s most valuable companies, placing the give attention to electrical autos.

Geely chief Li Shufu holding a microphone and speaking
Geely founder Li Shufu purchased Volvo for $1.8 billion greater than a decade in the past.
AFP by way of Getty Images

Many European companies have pivoted towards the electrical sector, together with Volvo which aims to only make fully electric cars by 2030 and owns a 49.5 p.c stake in electrical automotive maker Polestar.

Valuation

Gothenburg-based Volvo goals to safe a valuation of roughly $20 billion, one of many sources stated, whereas one other talked about a attainable vary of $20 billion to $30 billion.

A 3rd supply prompt a $16 billion valuation was extra life like, citing the agency’s income outlook.

Closeup of Volvo logo on the front of a Volvo vehicle
Volvo’s IPO may happen as quickly as the tip of September, in accordance with Reuters sources.
NurPhoto by way of Getty Images

A $20 billion valuation for Volvo can be equal to 6 to seven occasions its earnings, a stage some analysts say is excessive though it might put it consistent with rivals Daimler and BMW. Tesla’s valuation is greater than 70 occasions.

NordLB’s automotive analyst Frank Schwope estimated a valuation vary of $10 billion to $15 billion.

“The strong margins seen in the first half of 2021 are unlikely sustainable as the market benefited from a strong post-pandemic rebound that is unlikely to continue,” Schwope stated.

For Geely founder Li Shufu, who purchased Volvo for $1.8 billion, the itemizing is a milestone on the highway to move of the longer term, the place automobiles are a part of an electrified community of mobility companies producing knowledge and enterprise alternatives.

A Volvo car on display
Shortages of supplies wanted to fabricate its autos may influence gross sales, Volvo warned. The forecast was made forward of reviews the corporate is eyeing an IPO within the coming weeks.
Getty Images for Festival of Arts of Laguna Beach

A slew of startups have tapped into the investor frenzy for electrical autos this 12 months. Rivian, which rolled its first electrical pickup truck off the manufacturing line this week, will search a valuation of about $70 billion to $80 billion when it goes public on the finish of this 12 months, sources have informed Reuters.

Nordea Chief Investment Officer John Hernander stated the financial institution was serious about shopping for Volvo shares if a large enough chunk of the corporate was bought to maintain liquidity excessive.

“That is key. We and many others have been really disappointed in the low liquidity in Traton,” he stated, drawing parallels to the 2019 IPO of the truck unit, during which proprietor Volkswagen floated 11.5 p.c of the shares.

Volvo warned this month that gross sales volumes within the second half of 2021 may fall 12 months on 12 months after it had been compelled to chop manufacturing attributable to materials shortages.

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