Despite Market Chaos, Upcoming Polestar SPAC Still Holds Appeal

Gores Guggenheim, Inc. (NASDAQ:GGPI) stock hasn’t fared too badly. At least by special purpose acquisition company (SPAC) standards, anyway.

A close up of a Polestar vehicle in front of a company sign.
Source: Jeppe Gustafsson / Shutterstock.com

Gores Guggenheim intends to merge with electric vehicle (EV) player Polestar early in 2022. And, despite the bloodbath in the SPAC and EV stock arenas as of late, GGPI shares are actually still trading above $10. Not far above $10, mind you, but in today’s market, it’s a win nonetheless.

Before the stock market as a whole crumbled, GGPI stock had traded up to $16 in November. Even with electric vehicle companies losing their charge in recent months. Polestar was able to generate substantial trader interest. And, as I previously detailed, there is good reason for that.

GGPI Stock Is Already Commercially-Proven

Polestar delivered more than 10,000 vehicles even in pandemic-stricken 2020. Its 2021 full-year deliveries are up sharply. The company will also have brought in more than $1.6 billion in full-year 2021 revenues.

This means that Polestar is already a demonstrated success in terms of attracting a meaningful customer base. Look at all the struggling electric vehicle stocks that listed recently. Firms like Nikola (NASDAQ:NKLA), Arrival (NASDAQ:ARVL), Faraday Future Intelligent Electric (NASDAQ:FFIE), and Canoo (NASDAQ:GOEV) all share a common ingredient. They still don’t generate substantial amounts of revenues.

Even some of the seeming leaders of the new electric vehicle space, like Lucid (NASDAQ:LCID) and Rivian Automotive (NASDAQ:RIVN) are just reaching the point of starting to sell significant volumes of vehicles. Polestar, by contrast, already has a sound operational business that has sold an impressive number of cars at a workable price point. There’s proof that the business model is workable.

Polestar Is A Platform Company

Another attractive feature to Polestar is that it is going for a full range of electric vehicles. The Polestar 1 is a premium performance hybrid, and the Polestar 2 offers drivers a 100% electric experience with an impressive 336 mile range.

Coming up, Polestar plans to launch one new vehicle each year. This year will bring a luxury aero SUV. Next year, Polestar will unveil a sport SUV, and in 2024, the Polestar 5, a GT 4 Door will launch. Overall, Polestar envisions getting to nearly 300,000 vehicles sold annually by the end of 2025.

If a company like Nikola or Canoo said they will make 300,000 vehicles a year, we’d take that with a grain of salt. Those companies failed to meet the first steps of their initial business plans, inspiring little confidence toward reaching their additional goals. Polestar, however, already has built two successful models and generated a ton of momentum. It’s far more credible hearing them lay out a measured growth plan including rolling out one new vehicle type per year.

Polestar’s backers also inspire confidence. Polestar originally came about as part of Volvo (OTCMKTS:VLVLY) and still benefits from its partnerships. Volvo offers global reach, marketing, and distribution. In Polestar’s investor presentation, it notes that only it and Tesla (NASDAQ:TSLA) have true international brands across multiple EV types. Other players are limited to certain regions or vehicle types. Polestar, by contrast, has the chance to truly rival Tesla on a global scale.

Don’t Fret Short-Term Market Jitters

GGPI stock got up to $16 after the planned merger with Polestar was announced. This is a great deal as far as SPACs go, and investors wanted to get involved. With the recent market meltdown, however, the valuation on most companies of this sort have plunged. GGPI stock has slid in sympathy with them, and is back near its original $10 offering price.

That’s hardly a disaster given the state of the SPAC market. Polestar also attracted a private investment in public equity (PIPE) deal to inject more capital into the company at $9.09 per share.

In a frothy SPAC market, a PIPE deal going off below $10 would not be ideal. But given current times, having investors being willing to pony up more funds not far below the opening price should offer some support for GGPI stock. In any case, it should stop the SPAC from plunging the moment that the merger ends and the company changes to its new name and ticker symbol.

GGPI Stock Verdict

You’ve got to be something of a gunslinger to be aggressively buying stocks here. And that’s doubly true for shares of unprofitable companies that have yet to prove out their business model. This is where Polestar shines, however. It has already demonstrated significant commercial success with its first vehicles.

Polestar has solid backers and a credible story. This is not just another fly-by-night EV SPAC with a nice prototype or two. There’s a real team here and a commitment to making a serious run at large-scale electric vehicle production.

Now look, automobiles are not an easy industry. Most players are likely to ultimately fail, based on the historical track record. However, as far as early-stage electric vehicle companies go, Polestar has the right ingredients to have a shot at lasting success. Only time will tell if Polestar can execute. But it’s at least got a decent chance, putting it ahead of many of its electric vehicle peers.

On the date of publication, Ian Bezek 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.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a sizable New York City-based hedge fund. You can reach him on Twitter at @irbezek.


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