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 Polestar & GGPI merger will provide the combined company $1.05 Billion in proceeds to fund its expansion into multiple markets.
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.
The 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 into different markets/countries.
“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 forecasts 65,000 vehicle sales in 2022
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.
In 2022, the company forecast revenues to reach $3.2 Billion with 65,000 Polestar 2 sold. With revenues exceeding $3 Billion, the company estimates gross profit to reach $500 Million which represents a 16% YOY improvement. The companies growing, addressable market is driving sales growth and this is expected to continue through to 2025.
Polestar estimates its lucrative addressable market to grow to $280-$320 Billion by 2025. This addressable market is a key catalyst bulls are focusing on over the long run.
Polestar 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.
Polestar & GGPI SPAC Lock Up Period
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.
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 2022, 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.