GGPI merger

GGPI Stock: Why the GGPI merger with Polestar is a big deal

On September 27, 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 GGPI 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 dive into all the key details investors need to know about the Polestar and GGPI merger.

GGPI merger expected to accelerate Polestar growth

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.

“The proposed business combination and listing position Polestar as a financially strong, future proof, global electric car company. It will enable us to accelerate our growth, strategy and most importantly, our mission towards sustainable mobility.”

Thomas Ingenlath, Chief Executive Officer of Polestar commented on the proposed GGPI merger

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. This addressable market is a key catalyst behind the strong investor sentiment surrounding Polestar/GGPI stock.

Polestar stock
GENEVA, SWITZERLAND – MARCH 5, 2019: All-electric Polestar 2 car unveiled at the 89th Geneva International Motor Show.

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 will see Polestar stock publicly trading on the NASDAQ early next year (NASDAQ:PNSY). Shareholders of GGPI stock at the time of the merger will exchange shares for PNSY common stock.

Polestar Stock Forecast for 2025

Polestar released an Investor Presentation at the time of the GGPI merger announcement, outlining the companies financial 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. As Polestar plans to merge in 2022, investors should also be aware of the companies lock up expiry.

Most if not all SPAC’s we have seen over the past two years have had a drop in their share price following expiry of pent-up insider shares. Once this lock up expires, insiders and PIPE shareholders will be able to sell their Polestar shares, increasing the amount available on the public market. This tends to have a negative impact on the share price, as greater supply lowers prices. Lock up periods generally last 180-365 days following the merger completion.

GGPI merger

The Bottom Line – Polestar and GGPI Merger

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 remains volatile and SPAC interest is at a one year low.

Therefore, investors will need to weigh up the potential of Polestar/GGPI stock with the conditions of the current SPAC market. The GGPI merger is expected to close in the first half of 2021, assuming shareholder approval.

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The content above is strictly for informational purposes only and is not financial advice nor does it constitute 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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