By
Chimamanda U. Martha
October 10th, 2023
While there have been different anticipations for Volvo valuations, at $20 billion, the company’s valuations will be at six times its earnings.
Europe is all set to witness one of the year’s biggest public initial offerings (IPO). As per the industry reports, Volvo’s parent group Geely Holdings is in advanced talks to list Volvo Cars in the coming weeks. As per the Reuters report, Volvo Cars is aiming for valuations above $20 billion at its IPO. Also, citing some industry sources, the publication said that the listing will likely happen by September-end in Stockholm.
Banking giants like the SEB and Goldman Sachs will be leading the transaction. Besides, other banks like Carnegie, BNP Paribas, and HSBC will also be a part of the deal. Note that these are just rumors as of now, All the sources named in the deal have declined to comment.
China’s Geely Holding took over the acquisition of Volvo from Ford Motors back in 2010. This was one of the biggest overseas automobile acquisitions by a Chinese company. Before this, Geely was also planning for Volvo’s public listing back in 2018. However, it rolled back the plan citing trade tensions and the downturn in automotive stocks.
With Tesla leading the shift towards electric vehicles, Volvo Cars have also joined the trend. The Swedish automobile maker introduced its first electric car back in 2019. Volvo plans to shift to “all-electric” by the year 2030. Besides, the company also holds a 49.5% stake in electric car maker Polestar.
Understanding the Volvo Cars Valuations Ahead of Its IPO
Multiple sources familiar with the matter are suggesting valuations in the range between $16 billion to $30 billion. By considering a $20 billion valuation, this will be nearly six-time its earnings.
This will put Volvo Cars in direct competition with giants like BMW and Daimler, the parent company of Mercedes. Just to give a perspective Tesla’s valuations are currently at 70 times its earnings.
Frank Schwope, NordLB’s automotive analyst, puts a fair valuation in the range of $10-$15 billion. Speaking to CNBC, Schwope said:
“The strong margins seen in the first half of 2021 are unlikely sustainable as the market benefited from a strong post-pandemic rebound that is unlikely to continue”.
However, Volvo has already warned that the sales volumes for the second half could fall. A lot of automakers in the market are facing chip shortage issues. Also, the material supply shortages had led to major production cuts. Even Tesla Inc (NASDAQ: TSLA) delayed the launch of its Roadster to 2023.
Amid the recent wave of electric cars, companies operating in this domain are pegging even higher valuations. Last week, American electric carmaker Rivian rolled out its first electric truck off the production line. It is also pegging the valuation of $70-$80 billion.