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Geely loosens grip on Volvo Cars days before $23bn IPO

The Chinese owner of Volvo Cars has bowed to pressure from Swedish investors to loosen its grip on the group’s voting rights just days before the premium carmaker is set go public in stock market listing that could value it at as much as $23bn.

Institutional investors in Stockholm had complained that Zhejiang Geely, the Chinese carmaker that has turned around Volvo, would sell about 20 per cent of shares in the group but would retain voting rights of about 97 per cent.

Volvo’s turnround is one of the biggest successes of Chinese industry abroad, but amid a souring geopolitical situation between Beijing and the west — with Sweden a particular focus of criticism from China — worries had risen about Geely’s tight control of the carmaker.

Geely Sweden said on Friday that it would convert all its class A shares, which carry more voting rights, into class B shares, ensuring that it only had one type of stock outstanding.

“In interactions with potential investors in Volvo Cars’ initial public offering, it has become clear that investors regard the voting power of the shares to be an important matter. Geely Sweden agrees that having only one share class will emphasise the strong and independent governance of Volvo Cars and has consequently initiated the conversion,” it added.

Some investors had even warned that the IPO could be under threat, after it was shelved once before in 2018 due to the US-China-Europe trade war.

Volvo said it was preparing a supplement to its prospectus and people close to the carmaker said it should show that Geely’s voting rights will now be equal to its equity stake.

The IPO should reduce Geely’s stake to 83.3 per cent, according to the original prospectus, and if the offering is increased due to strong demand, it could fall to 78.4 per cent. Originally, its voting rights in each scenario would have been 97.5 per cent and 96.7 per cent, respectively.

According to people familiar with the matter, bookbuilding ahead of the IPO next week had been proceeding well but Geely had decided to assuage the concerns of Swedish institutional investors, several of whom had been conspicuous in their absence from a list of cornerstone investors in Volvo.

Volvo has some of the most ambitious electrification goals among traditional carmakers, aiming to be fully electric by 2030. However, investors were unwilling to pay a premium for that, instead wanting to value it in line with other manufacturers more dependent on petrol engines and wait to see proof that it would succeed in electric cars, the people said.

The group is set to be valued at between $19bn-$23bn, according to the prospectus, similar to its electric car spin-off Polestar, which is set to go public next year through a special acquisition company valued at $20bn despite selling 98 per cent fewer vehicles last year than Volvo.

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