Volvo Shares Plans to Stop Polestar Funding, Sees 26% Share Value Increase

Feb 02, 2024 02:03 AM EST

PHOTO OF WHITE CAR PARKED ON ROAD SIDE VOLVO — (Photo : PEXELS/ERIK MCLEAN )

Volvo shares experienced a significant surge of over 26% on Thursday following the announcement by the Swedish automaker Volvo that it intends to discontinue its financial support for its subsidiary, Polestar Automotive.

Volvo Shares Skyrockets to 26%, Halt on Polestar Funding

The company disclosed the possibility of transferring the management of the struggling luxury car brand, Polestar, to Geely Holding, the majority shareholder of Volvo. Geely Holding holds a substantial 78.65% ownership stake in the company, as per data from the London Stock Exchange Group.

Moreover, reports shared Volvo's statement. According to the brand, Polestar is starting a new and exciting chapter that will be supported by improved cost-cutting and business strategy. They are currently assessing the possibility of modifying Volvo Cars' ownership stake in Polestar, which could involve distributing shares to Volvo Cars' shareholders.

As a consequence, Geely Sweden Holdings may potentially emerge as a noteworthy new shareholder within the company. According to data from LSEG, Volvo Cars possesses approximately a 44% ownership interest in Polestar, a company it acquired back in 2015.

Since its initial public offering in June 2022, the domestic luxury electric vehicle manufacturer has faced challenges, leading analysts to express concerns that it was putting a strain on Volvo's resources.

Polestar's Reaction

In an announcement made on Thursday, Polestar expressed its openness to Geely Sweden Holding becoming a potential new direct shareholder. It also emphasized that Volvo Cars would keep up its major involvement, particularly in R&D, manufacture, after-sales services, and business ventures.

With a growing selection of premium, high-performance cars, Polestar CEO Thomas Ingenlath emphasized the company's potential stage of growth. He was eager to continue working with Volvo Automobiles and to seize additional chances for collaboration with Geely in the area of cutting-edge technology.

Meanwhile Electrek shared Geely, the parent company of both brands, is making preparations to assist Polestar by reassigning shares and has affirmed its commitment to supporting Polestar's autonomy as a brand.

According to a statement issued by Polestar, Volvo would continue to be an important partner in a number of sectors, including R&D, manufacture, after-sales services, and commercial operations. Nonetheless, it is evident that Volvo's actions are quite competitive, leaving uncertainty about Polestar's future direction.

About Polestar

As explained it its website, Polestar automobiles embody a novel paradigm of electric performance, characterized by sleek, minimalist design, groundbreaking technology, eco-conscious solutions, and an unwavering commitment to not making compromises.
Originating in Scandinavia, Polestar has expanded its presence worldwide, with its products and brand reaching various corners of the globe. Retail outlets, corporate offices, manufacturing plants, and service networks have proliferated across numerous countries, underscoring the universal appeal of environmentally conscious electric performance.

According to reports, the Chinese car manufacturer Geely is in a position to come to the aid of the struggling Swedish car brand Polestar. This development highlights the increasing influence of the Chinese automotive industry in the worldwide electric vehicle (EV) sector.

It was also reported that Polestar announced on Thursday that Geely is on the verge of becoming a fresh, direct investor in the company. In this transaction, Volvo is poised to transfer its 48% ownership stake primarily to the Chinese automaker, which also possesses Volvo.