William John Market Report 30-10-21
William John Market Report 30-10-21Category: Reports
Volvo cars, trading under the ticker VOLCAR-B, completed its IPO listing on 29/10. Having been oversubscribed in the lead up to its equity offering, the manufacturer said the IPO would see the entire company add more than 200,000 new shareholders, according to Reuters.
Shares jumped as much as 27% on the Nasdaq Nordic exchange in Stockholm during the first day of trading. Priced at 53 Swedish Krona (SEK), the share price surged to a high of 67.31 SEK as of 12:24 CET (Central European Summer Time), giving the company a valuation of approximately $22 billion USD ($1: 8.52 SEK), including the market capitalisations of its Volvo A and Volvo B classes of shares already publicly listed.
The strong market reaction to the IPO is good indication of the increasing demand, popularity and ultimate investor backing of car manufacturers that have a strong focus on electrification. This has been exhibited by the rapidly increasing valuation of Tesla – the first prominent electric vehicle manufacturer. Looking at the stock price of Tesla:
Source: William John Analytics, Yahoo Finance
Since October 2019, the stock price of Tesla has climbed from approximately $63 to over $1,000 on a monthly basis, represented a total return of 1600% in 2 years, before taxes and transaction costs. The growth of Tesla has led its Chief Executive, Elon Musk, to become the world’s wealthiest individual and the company itself to a $1 trillion valuation – more than all publicly listed carmakers put together.
Hence, it is not surprising that companies such as Volvo have made a strong, confident push towards complete electrification. Volvo’s 49% ownership stake in Polestar is likely to have had a strong impact on investor demand for its IPO. Polestar, a Swedish electric car maker that sold just over 10,000 units in 2020, is set for a public listing next year after striking a $20 billion deal with SPAC Gores Guggenheim – ironically roughly the same valuation of the entirety of Volvo.
Volvo’s commitment to Polestar and its other electric vehicle initiatives seems to have assured investors that such a high valuation is justified. However, according to its “First 6 months of 2021 Financial Report”, just 93,795 of its 380,757 units of retail sales were from its “Recharge” line-up of electrified models, or roughly 1 in 4 cars sold. Clearly, it has a long way to go to achieve full electrification. The company has set itself a target of putting 1 million electric vehicles on the road by 2025 and 50% of sales to be electric by 2025 also.
Its Volvo Car IPO, the largest European IPO so far this year, is a strong indicator that Volvo is highly valued in 2021. Whether or not it can build upon this valuation into 2025 and beyond will depend on how it can achieve its ambitious goals and compete with its peers (and Tesla of course) as the car market evolves to complete electrification.
Any opinions expressed in these documents are those of William John and are provided for information only. E&OE.