A deal could be made by the end of the month.
Things are looking bright for Volvo right now. Despite the challenges brought by the global pandemic, the Swedish automaker celebrated record sales in 2020. Volvo is also seemingly immune to the semiconductor chip shortage as its US sales have increased for 15 consecutive months.
As Volvo prepares to go all-electric by 2030, the automaker is preparing to launch its first dedicated electric car, the C40 Recharge, following the XC40 Recharge. To raise the funds needed to switch to electric cars, Volvo's parent company Geely is reportedly securing an initial public offering for Volvo valued at around $20 billion.
According to Reuters, Geely is now in "advanced talks" to launch Volvo's IPO at the end of September. If approved, it will be one of the biggest IPOs in Europe this year.
Reuters reports that Geely is seeking a valuation of $20-30 billion, but a source suggests $16 billion is a more realistic valuation. A $20 billion valuation for Volvo would be equivalent to six to seven times its earnings, which is on par with Daimler and BMW. Tesla's valuation, on the other hand, is more than 70 times its earnings.
But while Volvo had a strong start to 2021, its luck might be about to run out. The Swedish automaker expects sales to drop year-on-year in the second half of the year due to supply shortages.
"The strong margins seen in the first half of 2021 are unlikely sustainable as the market benefited from a strong post-pandemic rebound that is unlikely to continue," said NordLB's automotive analyst Frank Schwope, who estimates a valuation of $10 billion to $15 billion. This won't be the first time Geely has tried to make Volvo go public. The last attempt was back in 2018 with a valuation worth $16-$30 billion but the deal was pulled due to trade tensions and automotive stocks losing value.