Volvo IPO delayed over Trump trade war anxiety

Geely is to delay its initial public offering of Volvo Cars because of concerns over the Swedish company’s valuation in light of the global trade war.

The Chinese owner had planned to list part of the carmaker before the end of the year. But although Geely believed it had the backing secured for a flotation valuing Volvo at $30 billion (€26 billion), it was worried that investors – many of which were due to be Swedish pension funds – would see the stock slip after the float.

"It's important to know that we have headroom, so we can look the investors in the eye a year after the IPO," Hakan Samuelsson, Volvo Cars chief executive, said.

Investors

“It is still an option, a very realistic option, but will not happen immediately,” he said. “The timing has to be optimal.”

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Had it gone ahead this year, Volvo's IPO would have been the largest on the Swedish stock market since Telia in 2000, a flotation that left a bitter taste with the country's investment community after shares in the telecoms group fell following the listing.

Mr Samuelsson added the “conditions right now are not optimal to give certain upside for the investors”.

He said the business also needed “stable market conditions” to list its shares, and that any final decision rested with Geely’s owner, Li Shufu.

Like all large car manufacturers, Volvo is facing potential disruption to its business from the global trade war that has seen the US threaten to ramp up tariffs on automotive imports from Europe and China.

The Swedish carmaker, which has plants in China and Europe as well as a newly built facility in the US, has already begun shifting its footprint to avoid extra costs, with production of its XC60 sports utility vehicles for the US market moved from China to Torslanda in Sweden.

Mr Samuelsson said the outcomes of the trade discussions between the three blocs were “really difficult to predict”.

Tariffs

At present the US is seeking to end an imbalance in trade with both China and the EU, with $50 billion of tariffs already imposed and threats of in excess of $200 billion more.

Separately, the Swedish chief executive has extended his contract with the company for another two years until 2022.

He said the extension was to see the fulfilment of Volvo’s new products, including its first self-driving car in 2021, rather than to pursue a stock market listing by the end date.

“We have no fixed timescale and no hurry,” he said. “I have no ambition to be a listed company CEO. I see that as no more exciting than a CEO of a private company. I’m rather neutral.”

Volvo is still pursuing an ambitious midterm plan to double sales and raise profit margins by 50 per cent by the middle of the next decade, while expanding its fledgling subscription service and selling more vehicles to ride-hailing fleets.

Last week the company unveiled a concept for a vehicle that drives itself completely, while passengers sleep in a bed inside – a product it believes may replace short-haul flights and overnight trains.

– Copyright The Financial Times Limited 2018