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Volvo reportedly preparing for upcoming $20 billion IPO

The proprietor of Volvo, China’s Geely Holding, is in superior discussions with banks to checklist the automaker within the coming weeks, three sources instructed Reuters, in what is anticipated to be considered one of Europe’s largest preliminary public choices this yr.

Volvo is aiming for a valuation of about $20 billion within the deliberate Stockholm itemizing, the sources mentioned, 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 exterior regular enterprise hours in China. SEB and Goldman Sachs declined to remark. The opposite banks weren’t instantly accessible.

Geely, which purchased Volvo from Ford greater than a decade in the past within the largest acquisition by a Chinese language agency of a overseas automobile 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.

Conventional carmakers have fallen out of favor lately, as Tesla has risen to be one of many world’s Most worthy firms, placing the give attention to electrical automobiles.

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 Photographs

Many European corporations have pivoted towards the electrical sector, together with Volvo which goals to solely make totally electrical vehicles by 2030 and owns a 49.5 % stake in electrical automobile maker Polestar.

Valuation

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

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

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

A $20 billion valuation for Volvo could be equal to 6 to seven occasions its earnings, a stage some analysts say is excessive though it will 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 sturdy margins seen within the first half of 2021 are unlikely sustainable because the market benefited from a robust post-pandemic rebound that’s unlikely to proceed,” Schwope mentioned.

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 vehicles are a part of an electrified community of mobility providers producing knowledge and enterprise alternatives.

A Volvo car on display
Shortages of supplies wanted to fabricate its automobiles might influence gross sales, Volvo warned. The forecast was made forward of studies the corporate is eyeing an IPO within the coming weeks.
Getty Photographs for Competition of Arts of Laguna Seaside

A slew of startups have tapped into the investor frenzy for electrical automobiles this yr. 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 yr, sources have instructed Reuters.

Nordea Chief Funding Officer John Hernander mentioned the financial institution was thinking about shopping for Volvo shares if a sufficiently big chunk of the corporate was bought to maintain liquidity excessive.

“That’s key. We and plenty of others have been actually dissatisfied within the low liquidity in Traton,” he mentioned, drawing parallels to the 2019 IPO of the truck unit, by which proprietor Volkswagen floated 11.5 % of the shares.

Volvo warned this month that gross sales volumes within the second half of 2021 might fall yr on yr after it had been pressured to chop manufacturing as a result of materials shortages.

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