Volvo to reduce its stake in Polestar from 48 to 18 per cent
The fact that Volvo Cars intends to withdraw from its financial participation in the electric car brand Polestar, which it holds jointly with Geely, was already made public at the beginning of the month. Now, things are getting concrete. Volvo Cars plans to sell 62.7 per cent of its shares in Polestar to its shareholders. After completing the planned transaction, Volvo Cars’ stake will amount to 18 per cent of the total outstanding Polestar shares, according to an accompanying press release. It currently holds 48 per cent.
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According to Volvo, the distribution of the shares to the company’s shareholders will be realised through a 2:1 share split, followed by an automatic share redemption process. Put simply, shareholders can choose whether they want to become direct owners of Polestar or whether they want to sell their redemption shares and receive cash. The deadline for the planned share split is 12 April. Before this, all official approvals must be obtained by 5 April at the latest.
Close operational ties will remain
Volvo’s largest shareholder – Geely – expressly supports the transaction. Geely Sweden Holdings AB holds 78.7 per cent of the shares and votes in Volvo Cars and has already agreed to vote in favour of the distribution at this year’s Annual General Meeting on 26 March – and to opt for the ownership option. With this step, Geely will effectively become Polestar’s new major shareholder. It has already confirmed its intention to continue to support Polestar operationally and financially as a precautionary measure.
“Polestar will thus become a completely independent part of the Geely Group,” a spokeswoman for Polestar Automotive Germany GmbH explained in an e-mail statement. It is the first time Geely Holding has held a direct stake in Polestar. “Polestar now joins Volvo, Lotus, Zeekr and all the other Geely brands on an equal footing as a truly independent member of the Geely Group,” she adds.
Close operational ties maintain
It is important to know that in the current shareholder structure, in addition to Volvo (with its 48%), the investment company PSD Investment has a 39% stake in Polestar. PSD is a personal investment company of Geely CEO Li Shufu. Contrary to popular belief that Geely is already the owner of Polestars, the shares are owned by the CEO. Geely Holding Sweden itself does not yet have a direct stake in Polestar.
Meanwhile, Volvo emphasises that the close operational ties between Volvo and Polestar will continue in research and development, production, customer service and sales “to the benefit of both companies.” The Swedes do not want to provide any further funds but are still financially linked to Polestar via an outstanding convertible loan totalling 1 billion US dollars.
All three CEOs commented in detail on the planned new ownership structure: “While this transaction allows us to welcome new shareholders, our relationship with Volvo Cars will remain unchanged,” emphasises Polestar CEO Thomas Ingenlath in the above-mentioned e-mail statement. “Our customers will continue to benefit from our existing collaboration, including in sales and after-sales service, providing certainty and consistency. The increased support from Geely comes at a crucial time for Polestar as we launch our two performance SUVs, Polestar 3 and Polestar 4, an important step in our development.”
“As we embark on the next stage of our transformation, gearing up to lead in next-gen mobility, our focus sharpens on Volvo Cars’ development. The proposed distribution positions Volvo Cars strategically, and provides direct exposure to the Polestar share for our shareholders,” said Jim Rowan, President and CEO of Volvo Cars. “As we have significant operational collaborations with Polestar and a financial relationship, it is logical for us to retain influence through a smaller 18.0 per cent stake in Polestar. That said, Volvo Cars will not provide further funding to Polestar. With Polestar’s strengthened business plan, the launch of Polestar 3 and Polestar 4, and Geely’s commitment and support, the company is well positioned for growth.”
Daniel Donghui Li, CEO of Geely Holding Group, strongly supports the proposed distribution of Polestar shares to Volvo Cars shareholders. “We have strong confidence in Polestar and look forward to 2024 with great optimism […]. As long-term owners of Polestar, we are committed to supporting their announced business plan and financial targets by securing the necessary funding to execute its strategy, and through our global ecosystem of technology, supply chain, and product development. At the same time this enables Volvo Cars to fully focus on its transformation and invest in developing Volvo Cars.”
Polestar fell short of expectations
Volvo Cars had already outlined the financial replacement of Polestar earlier this month as part of the announcement of its financial figures for 2023. Three weeks ago, the company stated that it would use the funds thus released to make its own investments in technology and production facilities. And: Polestar is “entering an exciting phase with a strengthened business plan” and is equipped for future growth. Polestar is known to have missed its targets for 2023 and has subsequently restructured its management team and laid off 15 per cent of its workforce.
Polestar was a private company specialising in tuning Volvo models for a long time. The manufacturer later took over the brand and used Polestar as a label for its sportiest vehicles. With the switch to a strategy focused on sustainability, Polestar was cancelled as a performance label and relaunched as a joint venture with its own parent company Geely – as an EV brand. Subsequently, Volvo Cars also participated in further financing rounds of Polestar with millions of euros.
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