After closing off Europe’s largest IPO of the year so far, Volvo Cars shares soared 22 per cent on their Stockholm market debut on Friday, boosting new issue markets and the vision of the carmakers to have an electric only future.
While cutting down the size of its IPO, the Gothenburg-based firm on Monday also priced its IPO towards the low end of a previously disclosed range, which valued the company at slightly over $18 billion. That made its IPO the second largest ever for Sweden.
At the same time, a boost for the European automotive sector, which is undergoing a difficult transition to electric vehicles (EVs), was provided by the successful deal and the strong market reaction – which has pushed the valuation of the company to about $22 billion.
The stellar market debut of the company also demonstrates that, while the initial public offering (IPO) frenzy of the first half of 2021 seems to have passed out, the market remains available for future listings of large firms that have compelling stories to woo investors with.
The public listing was a recognition for the company’s ambitions and plans for a transition, said Volvo Cars CEO Hkan Samuelsson, and added that it is now critically important for Volvo to show that it is on pace to become the “fastest transformer.”
“There’s a much bigger interest in the market to invest in electric car makers than in the conventional ones. So we better do what we said we would,” he told Reuters in an interview.
Volvo has a 49 per cent share in EV startup Polestar, which announced in September of its intention to get publicly listed in a $20 billion deal, in addition to the car maker’s pledge to become a fully electric car manufacturer by 2030.
Polestar, according to Samuelsson, had an “excellent value.”
“They are already electric… showing in a way what the potential would be for Volvo if this (the transformation) is done in the right way.”
Even though investors fought back and forced Volvo to price at the bottom of the specified range, reports quoting sources familiar with the deal claimed that the outcome of this week’s IPO was positive.
“The company had to compromise on size and the governance structure. They were hoping for a read across on Polestar, but they were clearly not getting that,” said sources according ot reports.
Investor euphoria was dampened by concerns over how much control Geely will keep over Volvo, issues in the global supply chain, and fears that carmakers could be entangled in trade disputes with China.
According to Samuelsson, the worldwide semiconductor shortage is still a concern, but it is improving.
“In the fourth quarter it looks better, though we will not see the volumes we had last year.” he said, adding the situation would hopefully further normalise next year.
At the time of acquisition of Volvo, Geely’s goal had been to send “the tiger back to the mountains,” said Geely chairman Eric Li.
“Now our goal is to give that tiger wings and let it soar,” he said in a pre-recorded video during a webcast opening ceremony on Friday.
(Adapted from Latestly.com)