Will SPAC Strengthen Polestar, for Competing with Tesla

Volvo Controlled, Swedish-headquartered, Polestar is set to  go public via SPAC route at enterprise valuation of approx. $20 Billion. It will be acquired by Gores Guggenheim Inc. a SPAC, sponsored by Guggenheim Partners and The Gores Group.  Under the proposed business combination, the merged entity is expected to list under the name of Polestar Automotive Holding UK Limited on the Nasdaq stock market. Gores Guggenheim Inc is the sponsor of SPAC. Transaction is expected to close tentatively by first half of 2022, subject to approval of shareholders and other regulatory approval. Transaction involves approx. USD 800 million of cash from sponsors and USD 250 million of cash from anchor investors. Transaction will provide Polestar with necessary funds to focus on future growth.

Company was founded in 2017 by Volvo cars and  Zhejiang Geely Holding Company and have presence in Europe, North America and Asia. Company has plans to sell approx. 2.9 Lakhs vehicle, per year by 2025.

 Polestar has a significant presence in premium EV category in fourteen markets and have target to cover the distribution in approx. 30 markets, based in three continents by year 2025. Company is planning to develop a Carbon Neutral car by 2030 and actor t Leonardo DiCaprio is also one of the investor in it. Company is expected to launch Polestar 3 in 2022, which will help the company to compete with Tesla.  

Earlier Volvo Car s acquired additional stake from private investment company PSD Investment, controlled by Eric Li, chairman of both Volvo Cars and parent company Geely, taking its stake to 49.5%.  Geely controls Volvo AB and Daimler AG.

EV market is set to undergo revolution.  EV fast-charging network company EVgo raised money through SPAC. Earlier, Arrival Ltd was valued above $5billion in Spac transaction. Company combined with CIIG Merger Corp. Company is developing commercial car for Uber, and had raised funds from BlackRock and  Hyundai Motor. However there is an inherent risk in the SPAC transaction as the associated risk are huge. Earlier Nikola raised the money through SPAC transaction but now its CEO Trevor Milton is facing charges of fraud from SEC. Lucid Motors formed by former Tesla executive also went public using SPAC .

Tesla has approx. $800bn market cap. The biggest threat Tesla can have is not from its competitor but dependence on Musk appeal and larger than life personality that stands by the Brand. Today, Tesla as a brand is not bigger than Elon Musk. In the long run an Institutional Company, with a right product mix and an appeal of brand that fosters trust amongst its customer, may have better chances to be ultimate winner. Today Polestar has an enterprise valuation of $20 billion, However given the financial strength gained through SPAC, development of strong product line, lineage of trust build by Volvo over decades and immense market potential, Polestar may emerge as a strong competitor of Tesla

Bureau Galactik Views

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