Looking for the next special purpose acquisition company (SPAC) for electric vehicles? If so, Gores Guggenheim (NASDAQ:GGPI) stock is certainly worth understanding.
In late September, Gores Guggenheim announced that it will be taking EV company Polestar public. Polestar itself is an offshoot of Volvo (OTCMKTS:VLVLY) and Geely Automobiles (OTCMKTS:GELYF).
Polestar currently has two vehicles, the Polestar 1 and 2, both for sale across Europe, North America, and Asia. It anticipates increasing 2020 sales of 10,000 vehicles to 290,000 vehicles sold in 2025.
Meanwhile, Gores Guggenheim has completed 13 SPAC transactions in its existence.
Use of Funds
Back in September when the initial merger was announced, it was noted that Gores Guggenheim would provide $800 million in cash. Further, an additional $250 million in PIPE financing is being provided in the deal.
As announced then, “Proceeds from the business combination are expected to be used to help fund significant investment in products and the expansion of operations and markets to create a leading company in the rapidly growing global premium EV market.”
The two firms have provided recent updates to those initial plans. Polestar vehicles are available in 14 markets. In 2021 Polestar will expand into eight additional markets in Europe, the Middle East and Asia Pacific.
Those funds will also be used to increase its manufacturing footprint. Polestar is manufactured at two plants in China, with future manufacturing planned in the U.S.
So, that’s where the funding is being spent. The company intends to increase its market presence to 30 distinct geographies by the end of 2023.
The big news though, is that Gores Guggenheim has announced a clearer date for the close of the business combination.
The Nov. 15 news clarified that the business combination is expected to occur in the first half of 2022. There hadn’t been much news since the September announcement. Consequently, prices had been flat. The Nov. 15 announcement renewed interest, spiking prices from $10 to $15. They’ve since fallen back to about $13.50.
That’s what investors should expect heading into the first half of 2022. A series of announcements and corresponding spikes in price and interest around Polestar vehicles.
Investors likely want to know what Polestar’s future lineup will look like.
Polestar will release three vehicles, one each year in 2022, 2023 and 2024. The company makes it very clear that it is aiming to erode the market position that Porsche (OTCMKTS:POAHY) has carved out for itself.
Polestar will release a competitor to the Cayenne SUV in 2022. Then it plans to release a vehicle slotted against the smaller Porsche Macan SUV in 2023. In 2024, it plans to release a luxury sedan to compete with the Panamera.
Each of those vehicles are stated to have a range of 600 kilometers, or roughly 370 miles.
The Bottom Line on GGPI Stock
Given the fact that EVs are hot again, I anticipate GGPI stock rising. You simply have only to look at Rivian’s (NASDAQ:RIVN) recent IPO success to understand that EV stocks aren’t going anywhere. Rivian and Polestar are vastly different to be sure. You could argue that Rivian has much more that makes it exciting. I’d agree. But the fact remains that investors are scrambling to understand which private EV company might be the next to become publicly traded.
That strongly implies that GGPI will be pulled up as more investors simply become aware that it is bringing Polestar public.
But the venture won’t be cash rich from day one. In fact, it likely won’t have free cash flow until 2025. Tesla (NASDAQ:TSLA) first recorded free cash flow in 2019. That coincided with its massive upward growth. I’m not stating that it was solely responsible for Tesla’s growth, only that Polestar will be in a similar situation until 2025.
That’s something to consider as the first half of 2022 nears, and excitement around Polestar inevitably builds.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.