Existing Volvo shareholders will gain a larger stake in EV maker Polestar, as the former looks to allocate resources toward its own operations.
Earlier this month, Volvo Cars announced it would draw down funding from its electric offshoot brand, leaving a burning question as to whom would fill the void. Now, the company’s board of directors made another announcement Friday clearing up how it plans to reduce its ownership stake. Based on today’s statement, the Swedish automaker proposes to distribute 62.7% of its shareholding in Polestar (worth $920.2 million, or 9.5 billion crowns) to Volvo shareholders, depending on the outcome of a vote at its 2024 Annual General Meeting.
If shareholders and regulators approve the proposal, then the stake distribution will go out to Volvo shareholders through a 2:1 stock split, followed by an automatic share redemption process. The two companies will continue to collaborate, and Volvo Cars will still have a financial relationship with Polestar through an outstanding $1 billion convertible loan. (A convertible loan is a form of debt financing where the loan amount converts to shares in the company at a later point, so Volvo Cars could increase its holding in Polestar again through that loan.)
Through the distribution, Volvo Cars will retain an 18% stake in Polestar, while it will also extend the terms of that existing shareholder loan by 18 months, with a maturity date at the end of 2028.
“The proposed distribution positions Volvo Cars strategically,” said CEO Jim Rowan in today’s announcement, “and provides direct exposure to the Polestar share for our shareholders [by offering more direct investment, as Volvo holds less of a stake]. 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 percent stake in Polestar. That said, Volvo cars will not provide further funding to Polestar (emphasis added).”
China’s Zheijiang Geely Holding, both Volvo Cars’ and Polestar’s parent company, will provide ongoing operational and financial support to Polestar.
Check out one of our most recent Polestar videos below:
