Published in Svenska Dagbladet, 2024-09-16. Translated from Swedish.
The crisis at Northvolt is deepening. Money is running out and the options are few. Who can save the company now?
More than 100 billion kronor has been pumped into Northvolt. Now the ground is shaking beneath the giant battery factory in Skellefteå before it has even reached full production. Customers have pulled out, employees have been given redundancy notices — and the money is running out.
When a company is doing well, its shareholder list resembles a hall of fame — representing those who saw something before others did, believed in the vision, and are now richly rewarded at a sale or listing. In the opposite scenario — when a company looks to be on its last legs — being on that list is not so glamorous. Owners must then ensure the company survives. Having to inject more money into a struggling business can feel painful. But it may also be the only way to rescue the investment already made.
In Northvolt’s case the shareholder list is long — and the names are well-known. The question is how many of them are willing to help the company out of its crisis, and whether it will be enough.
The largest shareholder is Volkswagen, with a 22 percent stake. But the German automotive giant has its own problems, which may make it difficult for them to step in. Earlier in September it was reported that Volkswagen was considering closing factories in Germany — which would be the first time in the company’s history. The aim is to cut costs, but it is unclear when negotiations with German trade unions would begin. Is this the right moment to inject more capital into a struggling Swedish battery factory? Hardly. On Monday Bloomberg reported that Volkswagen was in “close contact” with Northvolt — but no concrete investment figures were mentioned, and more importantly, no conditions were specified.
The second-largest shareholder is investment bank Goldman Sachs. A market capitalisation of around $150 billion gives an indication of the resources available. But it is unclear to what extent the bank actually holds Northvolt shares on its own behalf, as it also trades on behalf of clients. The position may be registered in Goldman Sachs’ name but actually consist of many smaller investors channelling money through the bank. Goldman Sachs has declined to comment on the ownership structure.
Third largest is Vargas Holding, the investment company of Harald Mix. He has told Affärsvärlden that they “will of course continue to support the company financially if that becomes relevant.” Well and good — but Vargas’ pro-rata share of a rights issue would be around one billion kronor, while the total investment made by Vargas and Harald Mix’s private holding company Kallskär amounts to 175 million kronor. To defend their stake they would in other words need to more than quintuple their investment.
The full shareholder list is long, but only the two largest own double-digit percentages. There is no dominant major shareholder beyond them — a weakness for Northvolt in this situation. A rights issue of this magnitude would require considerable time and scrutiny from the investor community. Moreover, many of the smaller players tend to look at how the larger ones act. If the biggest shareholders participate in a new round, the others may follow. But the reverse is equally true.
There are of course other forms of financing beyond rights issues. Loans and credit have been mentioned frequently in connection with the company. The Swedish National Debt Office has issued loan guarantees, for example — though these relate to loans that have not yet been disbursed, according to finance minister Elisabeth Svantesson, who has also stated that it is “not relevant” for the government to assist with the company’s financial problems.
So why is Northvolt not drawing on the state loans, if it is facing a liquidity crisis? Most likely because they are conditional on a rights issue. This structure is common for late-stage technology companies: the combination of a rights issue and a loan allows the money to go further without diluting existing shareholders’ stakes as much. But it typically requires the rights issue to be in place first — which Northvolt appears to be struggling to arrange right now.
A final possibility is that a completely new player decides to step forward — a white knight. It is unusual but not impossible. Such an actor would however need to explain to themselves why they understand Northvolt’s future potential better than the existing shareholders who have chosen not to invest. That reasoning tends to be difficult to make. There is one exception: if the valuation can be pushed down far enough that a large stake can be acquired for a relatively small sum. But if a player is looking at Northvolt from that perspective, why would they be in any hurry? Buying a company out of receivership will be cheaper and quicker than negotiating right now.
Many parties are likely watching and would be ready to act if that opportunity arises. But they will not rush the process toward it. The only one who is in a hurry right now is Peter Carlsson, Northvolt’s CEO — and time does not appear to be on his side.
