Volvo Cars long-awaited initial public offering took an unexpected turn when the company decided to raise about 20% less than initially proposed while lowering the estimate on the company’s value by about the same amount.
The company revealed earlier this month its plans for an IPO, expecting to raise about $2.9 billion, or 25 billion Swedish crowns, on the Nasdaq Stockholm exchange. At the time, the company estimated its value at about $23 billion to $25 billion.
However, in a new prospectus filed today, the company is now looking to raise just $2.3 billion and perhaps more surprisingly, cut its valuation to $18 billion from the initial $23 billion. Company officials said the revisions reflected what’s going on in the market.
“With the amended structure, we look forward to listing on Nasdaq Stockholm on Friday, which is a major milestone for Volvo Cars,” said Håkan Samuelsson, CEO of Volvo Cars, in a statement. “The proceeds raised from the IPO together with our strong balance sheet will secure the funding of our fastest transformer strategy and the delivery of our mid-decade ambitions.
“We are very pleased with the strong support we have received from long-term institutional investors, and I would also highlight the very high level of demand from retail investors. For all our shareholders, we will work hard to execute our business plan and create further value as a listed company.”
Asking for less in a tougher market
The adjustments to the offering are a testament to just how quicky the market can shift these days. With the semiconductor shortage still hampering production and only guestimates as to when things will return to normal, there is still some uncertainty in the industry.
While that’s problematic, other factors are coming into play as automakers are facing shortages of certain materials and parts, especially tires. With Volvo’s pledge to become an all-electric entity by the end of the decade, the uncertainty of battery production and materials also looms large.
Samuelsson said he was “totally convinced” this would be enough, while the price should not be seen as negative. “We have been listening to the market, humbly,” he told news agency TT.
Even with the reduced numbers, a marked turnaround for a brand that seemed to have a questionable future not all that long ago. In January 1999, Ford purchased Volvo for more than $6 billion. But it subsequently sold off the Swedish automaker for just $1.8 billion in 2010.
Under Geely, Volvo invested heavily to expand and update its product line-up, while also adding new production capacity in both the U.S. and China. It already was shifting toward plug-in hybrids and pure battery-electric vehicles when, in March of this year, it announced plans to completely shift away from conventional gas-powered vehicles by 2030.
Polestar also going public
Meanwhile, it is sharing platforms and technology with the all-new Polestar brand jointly owned by Volvo and Geely.
Polestar in late September announced its own plan to go-public by merging with special purpose acquisition company Guggenheim Partners. That deal is expected to be valued at $20 billion.
The possibility of a Volvo IPO has been circulating since 2018 and it appears to have become necessary to help the automaker complete its transformation into an electric vehicle manufacturer.
Even at the reduced value, it’s nearly more than twice French-based Renault, though not quite a third that of General Motors, and about 20% of Volkswagen. From a market cap perspective, Tesla currently sits as king-of-the-hill, in excess of $1 trillion after Hertz announced plans to buy 100,000 EVs from the company for its new electric vehicle rental fleet Monday morning.