The new Volvo S90. Picture: VOLVO
The new Volvo S90. Picture: VOLVO

London/Hong Kong — Initial investor feedback has valued Volvo Cars far below owner Zhejiang Geely Holding Group’s top-end estimates for a potential listing, people familiar with the matter said.

Select institutional investors have indicated the Swedish car maker is worth about $12bn to $18bn in early meetings to discuss an initial public offering (IPO), the people said, asking not to be named as the deliberations are confidential. China’s Zhejiang Geely and Volvo had discussed a value of $16bn to $30bn, people familiar with the matter said in May.

Representatives for Zhejiang Geely and Volvo declined to comment.

A mismatch on the car maker’s worth could mean Volvo stays private for longer, the people said. Zhejiang Geely had sought a significant premium to the multiples commanded by other car makers, including Daimler and BMW, they said.

The Chinese owners were planning to sell shares as early as the fall in Hong Kong and Sweden, people familiar with the plans said previously. Closely held Zhejiang Geely acquired Volvo in 2010, and refreshed its line-up of vehicles to make it a popular alternative to German luxury stalwarts.

Investors have been responsive to Volvo’s initiatives, such as autonomous driving and electrification, helping it achieve a premium to some peers, one of the people said. Volvo said it was the first global car makers to announce plans to move exclusively to electric vehicles (EVs) starting next year.

Daimler, which has dropped about 17% so far this year, is trading at about 6.13 times earnings, while BMW trades at about six times, according to data compiled by Bloomberg. A valuation of $12bn for Volvo would imply the car maker is being valued at about 7.5 times 2017 operating income.

Zhejiang Geely’s Swedish unit holds 99% of Volvo, while a group of Swedish institutional investors holds the remaining 1% through another class of shares, according to its website.

Companies and their shareholders globally have sold stock worth almost $126bn in IPOs so far this year, compared with $119bn in the same period in 2017, according to data compiled by Bloomberg. The largest listing was by Chinese smartphone giant Xiaomi, which raised $4.7bn after selling stock at the lower end of its marketed range.