Volvo Cars (VOLCARb.ST) posted the biggest IPO of the year in Europe on Friday, boosting the emergence of new emissions markets and the automakers’ vision of an electric future.
Earlier this week, the Gothenburg-based company scaled back its IPO to less than the previously announced range for a valuation of just over $18 billion, the second largest IPO in Sweden.
As European automakers undertake a difficult transition to electric vehicles (EVs), the deal’s success and the strong market reaction – putting its valuation at about $22 billion – may provide a boost to their industry.
Additionally, it shows that although the euphoria over IPOs is over, the market is open to new listings of great companies with a compelling story to tell.
The chief executive of Volvo Cars, H*kan Samuelsson, said the listing showed recognition of the company’s transition plans. He also added that it would be necessary for Volvo to demonstrate it is on track to become the “fastest transformation.”
“The market is far more interested in investing in electric car makers as opposed to conventional automakers”. “So we have an interest in following through with what we promised,” he told Reuters.
The carmaker’s shares were trading at 64.70 Swedish kronor ($7.59) at 1057 GMT. Chinese conglomerate Geely is holding the majority of the shares (GEELY.UL).
Volvo is on track to electric-only cars by 2030. The group also owns 49% of Polestar, which is planning a $20 billion IPO next year.
“They are already electric… showing in some ways what the potential would be for Volvo if this (transformation) is done the right way.”
According to a source familiar with the Volvo deal, the outcome of this week’s IPO was good. Even though investors pushed back and forced Volvo to price at the bottom of its range.
Investor enthusiasm has also been dampened by concerns over how much control Geely will retain over Volvo, global supply chain issues, and fears that automakers will be caught up in trade wars involving China.