Geely reduces Volvo stake; will continue to support Swedish automaker

Chinese billionaire Li Shufu's Zhejiang Geely Holding Group is raising around $350 million selling part of its stake in Volvo Cars, responding to investor concerns about the automaker's limited free float.

Geely, which owns a web of automotive interests in Europe, offered approximately 100 million shares in the company at 37 kronor ($3.49) apiece, 9.4 percent below Thursday's closing price.

The sale of the 3.4 percent stake leaves Geely with a 78.7 percent Volvo holding, Geely said in a statement.

"The placing will increase the free float and further broaden the shareholder base of Volvo Cars. Proceeds received by Geely Holding are intended to be used to support business development within the group," it added.

Geely said it will continue to support Volvo. None of the cash from the share sale went to Volvo.

At 09:00 GMT, Volvo shares were down 10.2 percent at 36.66 crowns, having traded as low as 35.25 crowns.. The share is down 25 percent year-to-date.

The sale follows analyst and investor complaints over the company’s small free float, which has put pressure on the stock and fueled high trading volatility. Volvo debuted in Stockholm two years ago at 53 kronor a share.

Continued support

"This increase in our public float and improvement in trading liquidity benefits both new and existing investors," Volvo CEO Jim Rowan said in a separate statement.

The free-float concerns continue to put off long-term investors "despite the fundamental attractiveness" of the stock, Bernstein analyst Daniel Roeska said this month in a note.

Li's automotive holdings include Lotus Technology and a stake in Aston Martin. It picked up Volvo from Ford in 2010 after the brand had long languished under the U.S. automaker.

Geely earlier this year inked a deal with Renault to pool combustion-engine assets as the industry moves into the electric age.

Volvo launched the EM90 luxury battery-electric van this month aimed at China and Southeast Asia, where upscale vans are gaining in popularity.

Reuters contributed to this report