Volvo Delays Planned Flotation As Investors Doubt Valuation.
“It is still an option, a very realistic option, but will not happen immediately. The timing has to be optimal”
The planned stock market flotation of Volvo Cars has been delayed with the company citing fears of a trade war, according to newspaper reports, but which more likely means the BMW-level valuation it sought was rejected by investors.
Volvo owner Zhejiang Geely Holding Group was said to value Volvo Cars at $30 billion, but estimates of the company’s worth had been as low as $12 billion.
This could also take the wind out of the sails of the proposed Aston Martin flotation. The hoped for valuation of between $5.3 billion and $6.6 billion of Aston Martin looks steep when compared with the sector leader Ferrari, according to analysts.
News of the Volvo delay was broken by the Financial Times, which said Volvo was worried about the prospect of a global trade war.
Volvo wouldn’t confirm or deny the reports.
“It’s important to know that we have headroom, so we can look the investors in the eye a year after the IPO, (initial public offering)” said Hakan Samuelsson, Volvo Cars chief executive.
“It is still an option, a very realistic option, but will not happen immediately. The timing has to be optimal,” he told the Financial Times.
Volvo Cars, bought by Zhejiang Geely Holding of China for $1.8 billion from Ford in 2010, has been preparing to float on the stock market for some time.
$12 billion to $16 billion
In July, Bloomberg reported that investors would value Volvo Cars at between $12 billion to $16 billion, way below the $30 billion Geely was holding out for. But in August, the Financial Times said Geely had persuaded investors that a true value was $30 billion, quoting “people familiar with the situation”.
This would value Volvo Cars higher than BMW or Mercedes’ parent Daimler.
If it is valued at the lower end, that means investors see the company as more of a Volkswagen or a Renault than a BMW.
According to a report from the Center for Automotive Research (CAR) at the University of Duisberg-Essen, Ferrari, which floated on the stock market a couple of years ago, had a profit margin of 24.6% in the first half of 2018.
Second was Porsche with 18.4%, while BMW, Mercedes, and Audi all notched up profits close to 9%. Volvo managed a creditable 7.9% while British based and Indian owned Jaguar Land Rover barely scraped into the black with 1.7%.
It is much smaller than its German rivals, which sell around 2 million cars a year each, compared with Volvo’s 570,000.
According to Automotive Industry Data, China is Volvo’s largest market followed by Sweden and the U.S. The biggest region is Western Europe with just over 50% of all sales.
Investors expect more spin-offs this year after Volvo Cars, including Aston Martin, and perhaps Porsche, Alfa Romeo-Maserati and VW and Daimler’s trucks.