The price of Volvo Cars shares fell as much as 14 percent on Friday, causing it to reach record lows. However, the drop was prompted by a sale from the automaker’s owner, Geely, which says this is all part of its long-term plan.
At its peak, the Chinese company held an 82 percent stake in Volvo and contends that the resulting limited availability of public shares led to price volatility. This is a challenge that VinFast faces as well, as its owner commands around 99.7 percent of the company’s shares, causing sharp fluctuations in its value.
In an effort to address this issue, Geely opted to divest 100 million of its Volvo Cars shares for $350 million, as reported by Reuters. These shares were sold at a rate of 37 Swedish crowns (US$3.51 at current exchange rates) on Thursday, which was below the market value of 40.84 Swedish crowns (US$3.87) when trading concluded for the day.
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Due to this transaction, along with an earlier one driven by similar considerations, Geely’s ownership of Volvo Cars has been reduced to 78.7 percent. In a statement, Geely noted that this move aims tol “increase the free float and further broaden the shareholder base”.
Volvo CEO Jim Rowan was also in favor of the move, saying that the “increase in our public float and improvement in trading liquidity benefits both new and existing investors.” Geely was clear that it continues to believe in Volvo.
“As the majority shareholder, we remain steadfast in our commitment to continue our support of Volvo Cars on its transformation towards becoming a fully electric car maker, and we look forward to continuing this ongoing global success story,” said Daniel Donghui, Geely Holding Group CEO.
While some of the share price losses are showing signs of recovery, as reported by CNBC, Volvo shares have still declined by 25 percent year-to-date. On a positive note, Geely has stated that the proceeds from this trade will be directed toward its business development efforts.