Geely's HK$2.3 Billion Share Buy-Back: Strategic Value Realization or Short-Term Signal?

In the ever-evolving landscape of China's automotive industry, Geely Auto's recent HK$2.3 billion share buy-back has sparked intense debate among investors and analysts. Framed as a strategic move to reinforce confidence in its restructuring efforts and integration of new energy vehicle (NEV) brands, the buy-back raises critical questions: Does this action align with long-term value creation, or is it a short-term signal to stabilize market sentiment? To answer this, we must dissect the financial mechanics, strategic rationale, and shareholder dynamics underpinning Geely's decision.

Share Buy-Back: A Signal of Confidence or Capital Allocation Dilemma?

Geely's share buy-back, executed by its parent group and Chairman Li Shufu, increased their combined ownership stake to 80.62% (41.4% for Li and 39.22% for Geely Group), according to an Investing.com report. The move, which repurchased 48.4 million shares at an average price of HK$13.04, underscores a clear message of confidence in the company's restructuring and the synergies emerging from its NEV portfolio. According to Geely's H1 2025 results, revenues surged 27% year-over-year to RMB 150.3 billion, with net profit attributable to shareholders rising 102% to RMB 6.66 billion, as highlighted in a GearMusk article. Electrified vehicle sales, now accounting for a significant portion of total output, grew 126% to 725,000 units, reflecting the success of brands like Zeekr and Lynk & Co, according to Geely's H1 release.

However, critics argue that the buy-back could divert capital from critical R&D investments in emerging technologies such as autonomous driving and battery innovation. While Geely's "One Geely" strategy emphasizes brand integration, the allocation of HK$2.3 billion to repurchase shares-rather than funding next-generation EV platforms-risks short-termism. As noted in a Bloomberg analysis, "Buy-backs can artificially inflate earnings per share, but they don't address the structural challenges of competing in a market where Tesla and BYD are setting new benchmarks."

The Zeekr Buyout Controversy: Strategic Consolidation or Undervaluation Risk?

Parallel to the share buy-back, Geely's proposed $2.2 billion take-private offer for Zeekr has drawn sharp criticism from major investors. The offer, valuing Zeekr at $6.5 billion (a 24% premium over its pre-announcement share price), has been labeled inadequate by stakeholders such as CATL, Intel Capital, and Boyu Capital. These investors, who initially valued Zeekr at $9 billion in 2021, argue that the EV brand's stronger cash flow and profitability metrics justify a higher valuation relative to peers like Nio and Xpeng.

Geely's rationale for the buyout-streamlining operations and enhancing decision-making efficiency-aligns with its broader "One Geely" strategy. Yet, the pushback highlights a tension between Geely's control-oriented approach and the market's demand for independent valuation. As noted in a Reuters report, "Geely's 65.7% stake gives it de facto control, but the lack of transparency around funding sources and long-term integration plans could erode trust among minority shareholders."

Balancing Short-Term Gains and Long-Term Positioning

The dual actions of the share buy-back and Zeekr buyout reveal a nuanced strategy. On one hand, the buy-back signals immediate confidence in Geely's financial health and operational turnaround, supported by robust H1 2025 results. On the other, the Zeekr deal risks underestimating the EV brand's potential, potentially alienating key investors and limiting future growth avenues.

From a shareholder value perspective, the buy-back's impact is twofold. In the short term, it reduces share dilution and boosts EPS, which could attract value-oriented investors. However, the long-term implications depend on whether Geely can leverage the consolidated resources to accelerate innovation. For instance, the merger of Zeekr and Lynk & Co has already generated synergies in higher-market segments, suggesting that integration, if executed effectively, could enhance cross-brand R&D and cost efficiencies.

Conclusion: A Calculated Gamble?

Geely's HK$2.3 billion share buy-back and Zeekr buyout represent a high-stakes bet on its ability to balance capital allocation with strategic integration. While the immediate financial metrics are compelling-revenue growth, profit margins, and shareholder stake increases-the long-term success hinges on Geely's capacity to innovate and adapt in a fiercely competitive EV market.

For investors, the key question remains: Is Geely prioritizing shareholder value through disciplined capital returns, or is it masking structural vulnerabilities with short-term signals? The answer may lie in the company's ability to translate these strategic moves into sustainable growth, particularly as it aims to launch six new electrified models and target 3 million annual sales by 2026.