Volvo shares fall to record low as Chinese owner sells small stake in car firm
Cars Volvo None Went The Of Share To Sale The From Cash
Shares of Swedish car maker Volvo fell as much as 14% to a record low after its majority shareholder, China's Geely, sold a small part of its stake at a deep discount to the previous day's closing price.
Geely had launched a placing of 100 million Volvo Cars shares, which the deal's bookrunners said after the market close were sold at around $350m in total. The sale of the 3.4% stake leaves Geely with a holding in Volvo Cars of almost 79%, the Chinese company said in a statement.
"The placing will increase the free float and further broaden the shareholder base of Volvo Cars. Proceeds received by Geely Holding are intended to be used to support business development within the group," it added.
None of the cash from the share sale went to Volvo Cars.
"This increase in our public float and improvement in trading liquidity benefits both new and existing investors. It allows a wider base of shareholders to invest in Volvo Cars," the Swedish company's chief executive Jim Rowan said in a statement.
Volvo Cars declined to comment further on the share sale.
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.
Geely has built an empire of European car nameplates with stakes in Lotus, Mercedes-Benz and Aston Martin since picking up the Volvo brand from Ford in 2010. It has ambitions to broaden global sales and most recently started its premium electric car Zeekr brand in Europe, alongside Polestar and Lynk models.
Volvo Car is among electric vehicle makers in Europe fighting over market share amid intensifying competition from Tesla and Chinese brands pushing into the continent. The manufacturer has vowed to cut costs after its third-quarter earnings came in below analyst projections.