What will the sale of Volvo shares bring to Geely?
Chinese automotive giant Geely has offered some of the shares of Volvo Cars, which it owns, for sale. With this move, Geely aims to both increase Volvo's public offering rate and raise funds for its own business. So, what will the sale of Volvo shares bring to Geely? Here are the details:
Geely to Earn $350 Million Revenue from Volvo Share Sale
Zhejiang Geely Holding Group, the personal company of Chinese billionaire Li Shufu, who owns Geely, has put up approximately 3.4 percent of its shares in Volvo Cars for sale. With this sale, Geely plans to generate revenue of approximately $350 million.
Geely offered nearly 100 million shares of Volvo for sale at $3.49. This price is 2.5 percent below Volvo's last closing price. Thus, Geely's share in Volvo will decrease to 78.7 percent.
In its statement, Geely stated that this sale will increase Volvo Cars' free float rate and further expand its shareholder base. He also stated that he would use the income he earned for the development of his business within the group.
Geely Will Continue to Support Volvo
Geely also emphasized that it will continue to support Volvo regarding the sale of Volvo shares. Geely said it will help Volvo maintain its leadership in areas such as electric vehicles, autonomous driving and digital services.
However, it was also stated that the proceeds from the sale would not be transferred to Volvo. This means Volvo needs to make more efforts to generate its own resources.
Volvo Aims to Increase Its Profit Margin by Increasing its Free Float Ratio
Although Volvo has increased its sales in recent years, its share values have decreased. The reason for this was given that the company's free float rate was quite low. Volvo's free float rate was below 5 percent.
This reduced Volvo's trading liquidity and investor interest. Volvo aims to increase its free float rate to 8.5 percent with Geely's share sale. Thus, Volvo is expected to increase its profit margin and increase its share values.
Volvo CEO Jim Rowan said, “Thanks to this increase in our free float rate, we will see an improvement in our buying/selling liquidity. “Both new and existing investors will benefit from this situation.” said.