This morning, Electric Vehicle manufacturer Polestar announced its plans to go public via a merger with SPAC company Gores Guggenheim (NASDAQ:GGPI). Rumours regarding the $20 Billion merger initially broke in July however both companies have now confirmed investors speculations. The proposed merger will provide $1.05 Billion in proceeds to fund the Swedish businesses expansion model. The size of the Polestar deal is almost double that of the highly anticipated CCIV and Lucid Motors merger. This article will breakdown everything investors need to know about Polestar stock and the GGIP merger.
GGPI merger expected to accelerate growth prospects
Firstly, the proposed merger between Polestar and SPAC company GGPI is a big deal. With a combined enterprise value exceeding $20 Billion and cash proceeds exceeding $1 Billion, there’s no doubt this is one of the biggest SPAC mergers of 2021. The proposed deal will include a $250 million PIPE investment at $10 a share alongside an injection of $800 million in cash currently held in Gores Guggenheim’s trust account. The capital raised will fund Polestars ongoing investment in new EV models and the expansion of the companies operations.
Polestar to generate $1.6 Billion in revenue for 2021
There is a clear upside to Polestar in comparison to other EV prospects such as Lucid Motors. That is, the company is already generating some serious revenue. Polestar delivered 10,000 vehicles in 2020 alone which generated US$645 Million. However, Polestar believes this is only the beginning as the company forecasts 29,000 Polestar 2 deliveries in 2021. The company expects these deliveries to generate $1.6 Billion for the calendar year.
The catalyst for the strong projected revenue in 2021 include a vastly growing addressable market. The growing market is driven by “behavior evolution, technological improvement, increased regulation and choice as well as better charging solutions” according to Polestar. Furthermore, Polestar estimates its lucrative addressable market to grow to $280-$320 Billion by 2025.
GGPI merger expected to close in the first half of 2022
The mammoth deal is expected to close some time in the first half of 2022. Just like the majority of SPAC deals, both companies will need to meet its customary closing conditions as well as receive approval from GGPI shareholders. The Gores Group have a strong track record to date, having announced or closed nine business combinations so far. Assuming the proposition goes ahead smoothly, we may see Polestar stock publicly trading on the NASDAQ early next year (NASDAQ:PNSY).
Polestar stock forecast for 2025
Polestar released an Investor Presentation this morning outlining the companies forecast over the next 5 years. Interestingly, the company has been very clear on its financial objectives. Over the next 4 years, the company expects deliveries to grow at a compound annual growth rate (CAGR) of 78% while revenue is expected to grow at a CAGR of 83%.
By 2025, the company expects to deliver 290,000 Electric Vehicles to the market. Polestar expects the Polestar 2 model to be the backbone of demand, making up 35.86% of the 2025 forecasted deliveries. The rest of the deliveries will be made up of Polestar 3, Polestar 4 and Polestar 5 models. Polestar expects revenue to reach $17.78 Billion by 2025 and adjusted Free Cash Flow to turn positive in the same year.
These forecasts from Polestar highlight the lucrative potential of the vastly growing luxury EV market. However, these forecasts are based on a timeline of variables which may change over the next 5 years. Nevertheless, Polestar has shown investors it can drive serious revenue growth from its 2020 performance.
The Bottom Line – GGPI and Polestar Stock Forecast
Overall, the Polestar and GGPI merger is a big deal. Rarely do we see SPAC deals breaching the $20 Billion valuation mark. With gross proceeds exceeding $1 Billion, the injection of cash will be vital for Polestar’s expansion of the Polestar 3, 4 and 5 models in the near term. However, it is worth noting the SPAC market has been volatile and investor interest is at a one year low. Therefore, we will likely see additional volatility as investors weigh up the potential of Polestar stock and the conditions of the current market.
The information above is not financial advice and does not constitute as a recommendation. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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