China’s Geely has sold part of its ownership in Volvo, causing a large drop in the value of Volvo shares, at least in the short term.
Li Šofu, the first man of Geely
Photo: Wikimedia Commons
Geely is China’s largest private car manufacturer, which has been the majority owner of Sweden’s Volvo since 2010. In order to increase the volume of shares available for trading and to attract new investors, Geely decided to sell hundreds of millions of its Volvo shares. He collected 350 million US dollars for them. The sale was fairly cheap, as the deal was made below the value of the stock on the day of the sale. This caused the first negative effects: Volvo shares immediately fell by more than ten percent.
With the sale, Geely’s ownership share decreased by a good four percentage points. When the sale is formally completed, their ownership share will decrease to 78.7 percent.
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The merger was prevented the year before
Geely will use the acquired funds to develop its global business model. The year before last, the Chinese company wanted to carry out a merger with Volvo, which was ultimately prevented by investors. Both Geely and Volvo, both with cars from common platforms and committed to an electric future, continue to exist in the market as two separate automotive entities.