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Northvolt plans Stockholm listing for potential $20bn IPO

Battery maker could go public as soon as next year in one of the largest IPOs for a European company in recent years

Northvolt is looking to list its shares in Stockholm over other venues for one of the largest flotations for a European company in recent years.

The Swedish battery maker has invited investment banks to pitch formally for roles in the deal that could value the company at roughly $20bn, while Rothschild & Co has been providing advice on the initial public offering process, according to people familiar with the matter.

The company, which was founded in 2017 by two former Tesla executives to become Europe’s largest homegrown battery maker, could go public as soon as next year. However, its plans are preliminary and could change, especially as market conditions remain volatile, the people said.

Northvolt and Rothschild declined to comment.

“They want to be ready to go, whenever the market conditions are right. They want everything in place,” said one person familiar with the proposed listing.

Andreas Pettersson Rohman, its head of corporate finance, told the Financial Times’s sister publication Sifted this year: “We have worked for more than a year to get all processes and internal controls in place and then it will be up to the market to judge. Let’s see how the market looks in the next year or two.”

Northvolt is backed by investors including Goldman Sachs Asset Management and Volkswagen. It raised €1.2bn in convertible bonds from investors including the world’s largest money manager BlackRock this year.

It is also planning to unveil more than $5bn in debt financing in the coming weeks, confirming a FT story from March, as it cements its status as the European start-up that has raised the most capital.

Northvolt, whose investors include BMW, Siemens and Blackstone, needs the funding for the four gigafactories it is building or planning as well as several battery recycling facilities and other plants in Europe and North America.

It will start construction of the factory just outside Montreal in Canada this year and aims to start production in 2026 as part of a $5bn bet on the North American market, as well as an attempt to secure better access to crucial minerals needed for batteries.

European and North American countries are locked in a subsidy battle to attract local battery makers to rival the dominant Asian players. VW told EU officials this year that US subsidies — which Canada has largely promised to match, according to companies — were worth about €9bn-€10bn per factory.

Qatar last year signaled it wanted to be a much bigger investor in tech when its $475 billion sovereign wealth fund backed Elon Musk’s takeover of Twitter. Now, the war between Israel and Hamas—a Palestinian terrorist group with ties to Qatar—may hamper those ambitions.

The petroleum-rich Persian Gulf nation has been trying to follow in the footsteps of neighboring Saudi Arabia and the United Arab Emirates, which have long invested in marquee companies such as Uber and Cruise. It’s been preparing a glitzy conference for tech founders and venture capitalists in the capital of Doha this coming February, where partners at venture capital firms including Coatue Management and 500 Startups were scheduled to speak. Coatue and others abruptly canceled those plans this week.

• Qatar officials have sought meetings with U.S. VC funds, AI startups

• Sovereign wealth fund met with OpenAI’s Altman

• Some U.S. investors have flagged nation’s ties to Hamas

In the last two months, officials from Qatar have tried to meet with early-stage VC funds, according to a partner with First Round Capital and a second investor. The nation’s largest government-backed fund, Qatar Investment Authority, has also held meetings with some AI startup founders, including OpenAI’s Sam Altman, who has begun to strike deals for his company in the Middle East.

A spokesperson for OpenAI said Altman met with QIA during his world tour this year that included stops in Qatar and other Middle Eastern countries such as Israel and Jordan. His engagement with the fund was limited to that meeting and one follow-up conversation since then, the spokesperson said.

Representatives for QIA did not respond to multiple requests for comment.

Qatar’s startup interests reflect the growing relationship between Silicon Valley startups and Middle Eastern sovereign wealth funds—as well as the periodic fraying of that relationship when the region’s politics intervene. Some details of Qatar’s efforts emerged after U.S. venture capitalists flagged its ties to Hamas, the group behind the Oct. 7 attacks on Israel.

While Qatar maintains its aid in Gaza has only been for humanitarian purposes, some counterterrorism experts say Qatar has financed Hamas and some of the group’s leaders reside in the country. At the same time, Qatar is also a major U.S. ally and its role helping negotiate the release of hostages taken by Hamas could help its image.

Attracting sovereign wealth funds to tech investing is windfall from rising oil prices that’s enriched the region. These oil-rich nations are intent on transforming their economies into ones based on tech and other knowledge sectors. Funds including the QIA, Saudi Arabia’s Public Investment Fund and the United Arab Emirates’ Mubadala Investment Company are sitting on a combined $4.3 trillion, according to tracker GlobalSWF.

At the same time, U.S. venture funds and startups are in need of cash. Fundraising by U.S. VC funds has sunk more than 70% this year as institutions and wealthy individuals limit their investments into private tech. The environment has encouraged fund managers to court Middle Eastern backers, including at high-profile conferences in Saudi Arabia. They’re returning after many managers and financial institutions had cooled to one of the region’s biggest, Saudi Arabia’s $777 billion Public Investment Fund, after Saudi agents murdered Washington Post columnist Jamal Khashoggi in 2018.

At the start of this year, Qatar, a nation of 2.9 million people, outlined its plans to become a bigger presence in the tech sector. In January, the CEO of the Qatar Investment Authority, Mansoor Al Mahmoud, told Bloomberg Television the fund planned to use challenges in the global economy to rebalance its portfolio and focus more on tech, financial institutions and soccer.

By then, the fund had already become invested in Musk’s $44 billion buyout of Twitter, putting $375 million into the app now known as X. (Since then, Fidelity, another X investor, has marked down the value of its stake in the company by two-thirds.)

QIA has picked up a few more tech investments. In May, the QIA’s Ahmed Ali Al-Hammadi led a $250 million deal for Builder AI, a startup whose software makes it easier to build apps, investing alongside Iconiq Capital and Insight Partners. Five months before that, QIA led a $197 million deal for Snyk, a cybersecurity startup, valuing the company at $7.4 billion. Co-investors in the Snyk round included Evolution Equity Partners, G Squared and Irving Investors.

In recent months, funds from Qatar, as well as Saudi Arabia and UAE, have told investors that they have a new strategic mandate to make more investments directly into startups as opposed to backing VC funds, which they have increasingly done, according to two investors who spoke to these Middle Eastern sovereign wealth funds. The largest AI startups like OpenAI, Anthropic and Cohere are expected to need huge amounts of cash and computing power to train their large language models, and these funds are obvious sources they could turn to.

OpenAI’s Altman, who has privately said his company may need $100 billion in funding, on Wednesday disclosed a deal with Abu Dhabi-based technology conglomerate G42, which implied it would help OpenAI sell its AI to companies in the UAE. G42 oversees a $10 billion technology expansion fund, raising the prospect of a future financing deal between the companies.

Qatar’s tech investing ambitions may get caught up in the escalating Israel-Hamas conflict, however. Earlier this week, some U.S. venture capitalists pointed to that relationship as a reason funds and founders should distance themselves from the country after the Oct. 7 attack.

“I don’t want to take money from a [narcotics] drug dealer in Mexico just because he has billions of dollars,” said Ben Pouladian, an early-stage startup investor. “The startup and venture community is realizing not all LPs are created equally.”

On Monday, First Round co-founder Josh Kopelman published an email from Sept. 5 in which Paddy Cosgrave, the co-founder of Web Summit, offered to facilitate a meeting between First Round and Qatar, and Kopelman implied that Cosgrave was working on behalf of Qatar. Web Summit has organized the February conference with Qatar, which they say will host 300 investors and 600 startups in Doha’s convention center. (Update: On Saturday, Cosgrave resigned from the CEO position.)

Kopelman’s post on X, the site formerly known as Twitter, followed Cosgrave’s comments that called Israel’s retaliatory strikes in Gaza “war crimes.” (Cosgrave also had “liked” posts on X that said Hamas’ killing of civilians was self-defense and that Israel was committing genocide, but has since unliked them. Cosgrave later apologized for his remarks.)

Founders Fund partner Keith Rabois threatened to avoid working with anyone who attends the Doha summit. Rabois has also called it “immoral” to raise money Saudi Arabia, though the venture arm of the Saudi Public Investment Fund has said it has a partnership with Founders Fund. The VC firm declined to comment on the relationship between Founders Fund and these firms’ investments.

Writer AI CEO May Habib and Flexport CEO Ryan Petersen were among the speakers who canceled plans to participate in the conference, according to people familiar with the matter. The site also removed mention of two other VC firms, Bessemer Venture Partners and Accel. The two VC firms had been included on the conference’s sites without their knowledge, according to spokespeople for Bessemer and Accel. It’s not clear whether 500 Startups CEO Christine Tsai is still planning to speak.

Web Summit, for its part, redoubled its support for Qatar. In a statement, a spokesperson for Web Summit said “Qatar has been a very close partner to the United States on a broad range of issues that are crucial to both of our countries and to this region ... The United States and Qatar share the goal of preventing this conflict from spreading.”

The private-equity firm would pay $23 a share for the customer engagement and payments software business

Vista Equity Partners is close to a $4 billion deal to acquire business-software company EngageSmart ESMT -2.18%decrease; red down pointing triangle, a sizable buyout at a time when many private-equity firms are sitting on the sidelines.

Under the terms of the deal, shareholders in the customer engagement and payments software specialist would receive $23 a share in cash, according to people familiar with the situation. The deal could be announced as soon as Monday, barring any last-minute snags.

Based in Braintree, Mass., EngageSmart develops cloud-based software used by clinicians to manage their practices. It also offers electronic-invoice technology that helps governments, utilities and financial-services firms bill clients more efficiently. Nonprofits and other organizations that rely on donations, meanwhile, use the company’s products to bolster their fundraising efforts, its website says.

EngageSmart is listed in New York and controlled by General Atlantic, another investment firm. Reuters earlier this month reported that the business was seeking a buyer. It services more than 100,000 customers, mostly among small and mid-sized businesses, and generated a profit of $20.6 million last year, its latest annual report said.

Vista manages more than $100 billion of assets, focused on enterprise software, data and other technology companies. The take-private would be one in a string of recent deals for Vista. In February the firm completed the $4.6 billion purchase of cybersecurity firm KnowBe4, and more recently closed the $2.6 billion acquisition of software company Duck Creek. The Austin, Texas-based firm recently sold its portfolio company Apptio to IBM for $4.6 billion.

Historically, such investigations have foreshadowed broader crackdowns

Billionaire entrepreneurs tend to say what they think. That certainly applies to Terry Gou. The founder of Taiwanese iPhone maker Foxconn, has trumpeted that he will take no orders from Beijing or bow to its threats.

This helps Guo’s positioning in the race to become the next president of Taiwan, an independent island long-claimed by China. For Foxconn, standing up to the Chinese dragon will be harder.

Chinese state media has reported official probes at Foxconn’s mainland manufacturing bases on tax and other compliance grounds. China’s natural resources department conducted on-site investigations into land use by Foxconn enterprises in Henan and Hubei provinces.

This is a shrewd way for Beijing to remind Taipei of its power. The audits come just months before Taiwan’s January presidential election.

Putting pressure on one of Taiwan’s largest companies tells Taiwanese to watch their step. Targets include Gou, who has resigned from Foxconn’s board but remains the largest shareholder. Another is leading candidate vice-president William Lai. He is expected to take a hardline stance against Chinese aggression

The land use probes are especially worrying. One focuses on Zhengzhou, the capital of east-central China’s Henan province, and home to Foxconn plants that makes products for global brands including Apple. Known as “iPhone City” it employs 200,000 workers.

Disruption from government raids or penalties could prove costly for Foxconn and its global clients. Worker protests that shook the Zhengzhou plant last year meant about $1bn each week in lost iPhone sales, according to analysts’ estimates.

Local competition is growing. For more than a decade, Foxconn had an unrivalled lead in assembly and production of high quality products at a scale that was needed for global groups such as Apple. Now, foreign customers are ordering growing volumes of premium products from Chinese contract manufacturers such as Luxshare.

Shares of Foxconn slipped on Monday. The stock of China-listed subsidiary Foxconn Industrial Internet fell by its daily limit of 10 per cent. Foxconn trades at 11 times forward earnings, Chinese rival Luxshare Precision Industry trades at more than a 50 per cent premium to Foxconn

Historically, Chinese probes into companies have foreshadowed broader crackdowns. Police recently raided the Shanghai offices of WPP-owned media agency GroupM and questioned staff at consulting group Bain. Beijing may be readying a push against foreign multinationals as a whole.

Trian Fund Management, activist hedge fund led by Nelson Peltz, has built a stake in Allstate Corporation (ALL), one of the insurers struggling to cope with the fallout of natural disasters, Reuters has reported.

According to the news agency, the move could increase pressure on Chief Executive Tom Wilson to turn the company around following five quarters of losses. For the second quarter of 2023, the insurer saw a net loss applicable to common shareholders of $1.4 billion.

Allstate has argued that natural disasters, sometimes amplified by climate change, have been the main driver for its poor performance.

People familiar with the matter said that the company has hired investment bankers to develop a response. Trian’s exact stake and plans for Allstate are still unknown. Allstate and Trian did not immediately respond to requests for comment, Reuters added.

Allstate shares jumped 6% on the news, to $127.46 in Monday trading in New York. Prior to news of Trian’s involvement, Allstate’s stock price had dropped 9% year-to-date, significantly underperforming a 4% rise in the S&P 500 Property & Casualty Insurance index (.SPLRCINPC), due to its exposure to losses in property and auto insurance.

According to KBW’s (Keefe, Bruyette & Woods) Melissa Roberts, historically, financial stocks in which Trian has invested have outperformed both the S&P 500 (SPX) and SPX Fins on the day of the investment’s announcement, and over both the week and the month following the announcements of Trian’s investments.

If Reuter’s report is accurate and Trian plans to push for changes, KBW analysts commented, there could be at least two (non-mutually exclusive) key opportunities.

1. Divesting the non-Property Liability segments (i.e., Allstate Services and Allstate Health and Benefits) to simplify ALL’s operations and boost its capital; and/or

2. Improving ALL’s execution – and consequently its underwriting profitability – to more closely resemble PGR’s and GEICO’s.

“We think that ALL is very unlikely to issue equity capital, especially as Hurricane Season 2023 winds down and as the combination of accumulating auto rate increases and apparently stabilising personal auto claim cost inflation implies near-term capital generation, rather than erosion, from earnings. Still, capital adequacy (most recently reflected in ALL’s suspended share repurchases) remains a key investor focus,” KBW stated.

Analysts estimate that selling Allstate Services (which includes Allstate Protection Plans, Allstate Dealer Services, Allstate Roadside, Arity, and Allstate Identity Protection) and Allstate Health and Benefits, could generate at least $3.6-4.3 billion of pre-tax proceeds.

Assuming a consolidated multiple – businesses do not need to be sold together – of 10-12x implies total proceeds of $3.6-4.3 billion, which should largely address concerns over ALL’s capital needs, according to the report.

“We believe that ALL management is very committed to these businesses, but we believe that very few of ALL’s current or potential shareholders are as invested in keeping them as part of ALL; we encounter virtually no questions about these units,” KBW said.

According to analysts, an activist investor could also help ALL improve execution. Over the long term, ALL’s private passenger auto premium growth has trailed both PGR’s and GEICO’s, KBW explains.

Adding: “To be sure, PGR and GEICO benefit from significant exposure to direct-to-consumer distribution, for which demographics represent a considerable tailwind, while the much slower-growing captive agency channel still accounts for a significant majority of ALL’s Property-Liability premiums. On the other hand, ALL’s private passenger automobile book hasn’t really produced the superior underwriting results that should stem from a stickier but slower-growing customer base.”

Even ignoring the particularly unprofitable 2022 results, ALL’s statutory PPA combined ratio averaged 97.3% between 1996 and 2021, versus PGR’s 94.1% and GEICO’s 95.6% over the same period.

“To some extent, we think ALL suffers unfairly from the “obvious” comparisons to the uniquely phenomenal PGR; the rest of the industry’s consolidated average 1996-2021 combined ratio was 101.5%. Still, we think it’s very reasonable for an activist investor to contend that considerably more value could be extracted from ALL’s various businesses than has actually been the case,” KBW analysts concluded.

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