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Chinese billionaire Li Shufu’s Zhejiang Geely Holding Group Co. sold a $350 million stake in Volvo Car AB, responding to investor concerns about the automaker’s limited free float.
Geely, which owns a web of automotive interests in Europe, offered approximately 100 million shares in the company at 37 kronor ($3.49) apiece, according to a statement.
The sale follows complaints over the company’s small free float, which has put pressure on the stock and fueled high trading volatility. The offer price is 9.4% below Thursday’s close and a 30% discount to Volvo Car’s trading debut in Stockholm two years ago.
The timing of the placement “might surprise a bit with Volvo Car share price close to the historical lows,” Oddo BHF analysts said in a note.
Volvo Car declined as much as 14%, to 35.25 kronor. The stock is down around a quarter this year.
Geely has built an empire of European auto nameplates with stakes in Lotus, Mercedes-Benz and Aston Martin since picking up the Volvo brand from Ford in 2010. Li has ambitions to broaden global sales and most recently started its premium EV Zeekr brand in Europe, alongside Polestar and Lynk models.
Volvo Car is among EV makers in Europe fighting over market share amid intensifying competition from Tesla Inc. and Chinese brands pushing into the region. The manufacturer has vowed to cut costs after its third-quarter earnings came in below analyst projections.
The placement is equivalent to 3.4% of Volvo Car’s issued share capital and 4.1% of Geely’s holding, and further broadens the shareholder base, the Chinese investor said. The shares sold represent just over a fifth of float.
“This increase in our public float and improvement in trading liquidity benefits both new and existing investors,” Volvo Car Chief Executive Officer Jim Rowan said in a separate statement. Geely said it will continue to support the automaker.
Goldman Sachs, BNP Paribas and Skandinaviska Enskilda Banken AB are acting as joint coordinators and bookrunners for the placement.
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