VW and Goldman Sachs write off Northvolt shares

Northvolt just filed for Chapter 11 bankruptcy protection in the US last week, and CEO Peter Carlsson stepped down from his position. The goal was to restructure without having to declare insolvency. And when it rains, it often pours. Now the company’s shareholders are apparently writing off their shares.
Although this does not change Northvolt’s account balance, investors are indirectly expressing their assessment that the battery manufacturer is rapidly losing value.

Volkswagen, Northvolt’s biggest shareholder with a 21 per cent stake in the battery maker, has significantly written down its share. That is according to Reuters, which cites “two people familiar with the matter.” Apparently, it shouldn’t come as a surprise to Northvolt, as “writedowns at Volkswagen were done throughout the current financial year.”

It is not clear at the moment how much of the shares will be written off or what its current value is.

In the case of shareholder number two, Goldman Sachs, that answer is pretty straightforward. According to the Financial Times, the US bank has “at least $896mn in exposure to Northvolt,” and “they will write that down to zero at the end of the year.” Just a few weeks ago, Goldman Sachs was still actively involved in finding a lifeline for Northvolt. There was even talk of the US bank teaming up with other investors to rescue the cash-strapped battery manufacturer. The latter’s involvement was said to be critical to any further investments.

While these two companies might be the most prominent shareholders, they might not be the only ones to cut back on their investments in Northvolt. Swedish pension fund AMF, a top ten shareholder, also said it regularly reviewed and adjusted its stake, but did not go into details.

“As is obvious to everyone, the value of Northvolt is considerably lower than it was compared to a year ago,” an AMF spokesman told Reuters. It had invested the equivalent of 1.95 billion Swedish crowns (169 million euros) in the Swedish company over the years.

Northvolt has been struggling for months

Northvolt filed for Chapter 11 bankruptcy protection in the US at the end of last week. Chapter 11 is often referred to as “reorganisation bankruptcy,” meaning the company holds on to its assets and continues operations while working on a plan to repay creditors. In other words, it will continue honouring customer contracts, fulfilling vendor obligations, and paying employees wages. The battery maker also emphasised that this will only affect the company’s only operating battery factory in Skellefteå, Sweden, and Northvolt Labs in Västerås, Sweden. The company just appointed a restructuring expert as head of the former. 

The factories under construction in Heide, Germany, and the province of Québec, Canada, are supposedly not affected, as they are operated and financed by Northvolt AB subsidiaries Northvolt Germany and Northvolt North America. And the Swedes continue to emphasise that the long-term goal of establishing battery production in Europe will not change. How long they can continue down that path remains to be seen.

Northvolt has been dealing with financial (and production) issues for some time now, and the situation has become increasingly tense in recent months. First, BMW had cancelled an order worth billions due to the delivery delays (caused by the production problems). The combination of cancelled orders and the capital-intensive problems related to ramping up production has put the company in a difficult financial situation.

As a result, the company initiated a strategic review, announced cost-cutting measures and reorganised the Management Board. In the meantime, however, doubts within the industry are growing: Traton brand Scania, which wanted to source all its battery cells for electric trucks from Northvolt, is reportedly looking for alternative suppliers.

reuters.com (Volkswagen), ft.com (Goldman Sachs)