In September 2021, Electric Vehicle manufacturer Polestar announced its plans to go public via a merger with SPAC company Gores Guggenheim (NASDAQ:GGPI). The proposed SPAC merger between GPPI and Polestar is unique in the fact that the Swedish based company is already generating significant revenue in the EV space.
In fact, Polestar is considered a highly established EV brand. Polestar is jointly owned by Volvo and Chinese automaker Geely Automobile. The company even has high profile investors such as Leonardo DiCaprio contributing to the companies Owner’s Equity. With the merger closing in, investors are now asking how Polestar stock will perform once it is publicly listed on the NASDAQ.
GGPI & Polestar to merge under one ticker “PSNY” – Polestar Stock
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.
The SPAC transaction will include a $250 million PIPE investment alongside $800 million in cash currently held in Gores Guggenheim’s trust account. The combined funds raised will finance Polestars ongoing investment in new EV models and the expansion into new markets.
The company will be named Polestar Automotive Holding UK Limited, and listed on the Nasdaq under the ticker symbol “PSNY”.
Polestar expects to generate $3.2 Billion in 2022
In the first year as a publicly traded company, the company forecast revenues to reach $3.2 Billion with 65,000 Polestar 2 deliveries. For comparison, last year Polestar delivered 10,000 vehicles which generated US$645 Million. With revenues exceeding $3 Billion, the company estimates gross profit to reach $500 Million which represents a 16% YOY improvement.
The catalyst for the strong projected revenue in 2022 includes the companies 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.
As for the companies expenditure for 2022, Polestar forecasts Research and Development costs to be $400 Million while its Capital expenditures will be $600 Million. The expenditures are expected to be partially offset by the influx in cash raised from the GGPI merger. In turn, the funds raised will help Polestar maintain a healthy level of cash on hand.
The Big picture Polestar investors are excited about
The Swedish Electric Vehicle company Polestar has impressed investors with their high performance EV models. The Polestar 2 has an impressive range of 540km and goes 0-100km/h (62 miles/hour) in under 5 seconds. The companies vehicles intertwine high performance with high-tech design, which places the company in the Luxury EV sector.
Future models including the Polestar 3 and 4 will aim to target the luxury SUV sub-market, which is growing at a rapid pace. We have seen other companies such as NIO and Li Auto targeting the EV SUV market which is growing exponetnialy in China. By targeting this market over the next 4 years, Polestar sees deliveries growing at a compound annual growth rate (CAGR) of 78% while revenue is expected to grow at a CAGR of 83%. Even in the EV sector, these CAGR forecast numbers are high.
By 2025, the company expects to deliver 290,000 Electric Vehicles to the market. Polestar expects the Polestar 2 model to remain the backbone of sales, 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.
High Expectations for Polestar stock outlook
With strong forecasts, comes higher investor expectations. It will be important for Polestar to capture marketshare in countries whereby EV demand is skyrocketing. Polestar has already expanded its sales to the U.S, China, Canada, Belgium, Germany, UK and Sweden among others. Marketshare in China, North America and the UK are arguable the most competitive in the world.
Investors can expect these markets to become even more clustered as EV start ups continue to emerge across the globe. Therefore, investors are banking on Polestars unique luxury design and high quality performance to compete with the likes of Tesla and Ford.
Final thoughts – The Future for Polestar Stock
Overall, the Polestar and GGPI merger is a big deal. As noted earlier, the injection of cash will be vital for Polestar’s expansion and will assist the companies R&D and Capital expenditures as they develop future models. The reverse merger with SPAC company Gores Guggenheim will see Polestar stock publicly traded on the Nasdaq (NASDAQ:PSNY).
The merger is expected to close sometime in the first half of 2022. It is worth noting the SPAC market has been volatile and investor SPAC interest has dissipated in comparison to 2020 levels. Therefore, we can expect further volatility as investors weigh up the potential of Polestar stock and the conditions of the market.
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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.