Shares of Volvo Cars fell by as much as 13 percent to a record low on Friday.
Source: BiznisinfoMonday, 20.11.2023. | 14:01 -> 18:07
This happened after their largest shareholder, Geely, sold part of their ownership stake at a large discount compared to the market value.
China’s largest privately owned carmaker Geely said it has decided to sell 100 million Volvo Cars shares to increase its free float (the proportion of shares available for trading to the public) as a way to “increase” the value of the Swedish firm.
Jim Rowan, chief executive of Volvo Cars, said in a statement: “This increase in public trading and improved trading liquidity benefits both new and existing investors. It enables a wider base of shareholders to invest in the company.”
In a subsequent statement, the Chinese firm, which bought Volvo Cars in 2010, said it earned about $350 million from the sale. That means it sold the shares for about SEK 37 per share, a discount of almost 10 percent from their price of SEK 40.84 on Thursday.
The transaction reduced Gili’s stake in Volvo Car by just over 4 percent. After the sale closes on Nov. 21, that stake is expected to be 78.7 percent, according to a statement from Gili.
The proceeds will be used to fund Gili’s global business development, it added.
An attempt to boost the value of Volvo Cars’ shares – which are down almost 23 percent year-to-date – appears to have backfired, at least in the immediate future.
Daniel Dongui Lee, CEO of Geely, described Volvo Cars as “one of the world’s fastest-growing automakers and most iconic automotive brands” and said Geely was “unwavering” in its commitment to supporting the Swedish firm in “its transformation towards becoming a fully electric cars”.
In 2021, after investor resistance, Gili abandoned plans to merge with Volvo Cars, which would have created the first Chinese automaker with a true global reach, Biznisinfo reports.
Gilley said at the time that the two firms would maintain their independent corporate structures, but would join forces on electric and autonomous driving technology.