Volvo’s Relaunch of Independent IPO: Will the 'Geely-Volvo Integration' Encounter New Uncertainties?

During its acquisition by Geely, Volvo Cars’ sales and financial performance continued to grow steadily. Last year marked Volvo’s seventh consecutive year of sales growth, and its financials successfully turned from losses into profits. Although the cooperation between Volvo and Geely is widely regarded in the industry as a win-win arrangement, Volvo appears dissatisfied with its current status as a wholly owned subsidiary of Geely. As early as the end of 2016, Volvo issued convertible preferred shares through three Swedish institutional investors, raising 5 billion Swedish kronor (approximately RMB 3.7 billion). These investors acquired a 1% stake, reducing Geely Holding’s shareholding to 99%. This move was widely interpreted externally as a precursor to Volvo’s independent IPO. In response, Li Donghui, CFO of Geely Holding, publicly denied reports, stating that Volvo had no plans for an independent listing. In 2018, rumors of Volvo’s independent IPO resurfaced. This time, however, Geely did not fully deny them. Håkan Samuelsson himself responded modestly, saying that any specific listing plan would be decided by parent company Geely Holding. Volvo’s desire for financing is unsurprising. As the automotive industry advances toward the ‘four new trends’—electrification, connectivity, intelligence, and sharing—major automakers are ramping up investments in emerging technologies. In June 2018, Volvo unveiled its ten-year mid-term plan, aiming for half of its annual sales to consist of pure electric vehicles and one-third to be autonomous vehicles by then. Achieving this goal naturally requires substantial capital investment. Nonetheless, Volvo’s initial IPO plan ultimately fizzled out. Reports indicated that multiple valuation firms assessed Volvo’s worth at USD 16–30 billion, whereas senior executives at Geely Holding valued it at USD 30–40 billion—a significant gap. From ‘Merger’ to ‘Collaboration’ On the other hand, technical integration between Geely Auto and Volvo continues deepening—from the slogan ‘Volvo is Volvo’ to increasing numbers of new Geely-branded vehicles being built on shared platforms with Volvo. According to Geely Holding’s original plan, following technological integration, Geely Auto and Volvo would gradually undergo business restructuring and ultimately merge into a single entity. Post-merger, Volvo’s assets would be incorporated into Geely Auto’s Hong Kong-listed company, enabling access to global capital markets. However, this merger process encountered numerous setbacks. In interviews with media, Samuelsson revealed that a full merger would likely trigger greater organizational conflicts and power struggles. In June 2020, Geely Auto—listed on the Hong Kong Stock Exchange—announced its return to China’s A-share market via the STAR Market (Sci-Tech Innovation Board), prompting Volvo to immediately announce the suspension of the merger plan. After a year of discussions, in February this year, Geely Auto and Volvo jointly announced they had reached a ‘best-possible merger solution’. Under the new agreement, collaboration will focus primarily on forward-looking technologies—including powertrains, electrification, battery & charging systems (‘three-electric’), and high-level autonomous driving—while both companies retain their existing equity structures. With corporate equity structures preserved, Volvo’s plan for an independent IPO has recently been revived. A New Win-Win? Clearly, Volvo’s independent IPO would inevitably dilute Geely Holding’s equity stake. Yet many industry insiders view Volvo’s equity diversification not as wholly detrimental to Geely Holding, but rather as potentially forging a new win-win scenario.

Geely’s Financial Engineering | The ‘Fission’ of ‘Geely-Volvo’

Following the restructuring, Geely will not only hold 100% ownership of Volvo, but also incorporate brands such as Lynk & Co and Polestar into the new automotive group. Based on 2019 sales volume and market capitalization estimates, the merged entity would achieve annual sales of 2.22 million units and a market cap of approximately USD 35 billion—comparable to Ford Motor Company’s USD 36.32 billion market cap, which ranked ninth globally among automakers that year. If this merger proceeds successfully to listing, Geely Auto’s market capitalization could very well surpass SAIC Motor’s, making it China’s most valuable automotive group. Let us first revisit the situation a decade ago. Amid widespread skepticism, Geely acquired the struggling Volvo from Ford for USD 1.8 billion plus USD 0.9 billion in deferred payments. At the time, Geely’s revenue barely exceeded RMB 20 billion—less than one-quarter of Volvo Cars’ 113 billion Swedish kronor (approx. RMB 82.2 billion) in revenue. Geely’s successful acquisition of Volvo in 2010—widely hailed as a ‘snake swallowing an elephant’ feat achieved via leveraged buyout—was rooted in its earlier strategic use of the shell resources of China Resources Holdings, controlled by Anhui native He Xingchu, to list in Hong Kong. That experience cemented Geely’s understanding of the importance of capital operations. Deep involvement by Rothschild & Co., the French financial advisory firm, further enabled the acquisition—and helped Geely advance its mastery of financial engineering. Using such leverage, Geely disrupted the entrenched structure of the global auto market and continuously expanded. During this expansion, Geely also tapped into local government financing platforms, giving itself ‘golden wings’. While leveraging external support, Geely never relied on government ‘crutches’; instead, it pursued equal, mutually beneficial, and deeply collaborative partnerships—transforming potential ‘crutches’ into ‘golden wings’. This is where Geely stands head and shoulders above all other domestic brands. Within just ten years, Geely has grown into the leading indigenous Chinese automotive brand—turning what once seemed like a ‘fairy tale’ into reality. So why does Geely seek to merge and list with Volvo? Because Geely fully understands that this ‘Geely-Volvo merger’ promises not only deep operational synergy—where 1 + 1 > 2—but also amplified financial engineering benefits—where 1 + 1 > 2 in capital markets as well. Geely’s historical stock price reflects three distinct phases of its capital operations. From 2008 to 2010—the period before Geely completed its 100% acquisition of Volvo on March 29, 2010—China’s A-share market experienced a major bull run, coinciding with Geely’s first explosive surge in share price. Thereafter, Geely’s stock entered a six-year period of wide-range volatility, until late 2015 and early 2016, when its share price began surging again—driven by explosive growth in revenue and profit starting in 2014. However, Geely’s revenue growth slowed to 14.91% year-on-year in 2018, and net profit growth decelerated to 18.05%, continuing to ease through 2019—accompanied by a corresponding decline in its share price. Looking at share price performance: On February 12—the third day after the merger announcement—Geely Auto closed at HKD 135.48 billion (approx. RMB 120 billion), far below its peak near HKD 270 billion in early 2018. On April 1, amid pandemic-related impacts, its market cap even fell to HKD 99.77 billion. So, can the merger with Volvo generate fresh market narratives to support the stock price—and open up broader imagination for investors?

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