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Gores Guggenheim Stock Is a Hedge, But Also a Wedge

The last time I went to fill up my tank, I was in for a shock: premium gasoline (the type required for my SUV) was around $5.50 a gallon. That was last week. I hate to think what it is now. But from a cynical perspective, Gores Guggenheim (NASDAQ:GGPI) – which will take Polestar public – may draw more interest, boosting GGPI stock.

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

Naturally, plenty of folks are eyeballing electric vehicles. Eventually, if circumstances in eastern Europe don’t improve – and indications are that they will worsen due to the vitriolic nature of the crisis – then GGPI stock will likely enjoy a cynical tailwind.

For one thing, Polestar will serve as many price points as is financially feasible. Unlike say Lucid Group (NASDAQ:LCID), which specializes exclusively (for now, at least) for affluent customers, Polestar is aiming for the middle income or upper-middle income bracket with its Polestar 2 EV. Further, since it’s a new vehicle, it should qualify for a federal tax credit.

Logically, this should give Polestar a significant advantage in the volume game over Lucid and Tesla (NASDAQ:TSLA). As well, consumers might lose the brand snobbery they have toward Tesla. With gasoline prices possibly set to rise to $6 or $7 – I mean, who knows where they can go? – Polestar on paper looks mighty attractive. By deduction, GGPI stock could enjoy significant investor sentiment.

Moreover, a Bloomberg report revealed that Ukrainian President Zelensky has called for a boycott of Russian oil exports. With violence escalating in his country, it’s not an unreasonable prospect for western nations to abide by such a request. The U.S. announced its own boycott on March 8, raising pressure on Europe to follow suit.

That’s going to lead to higher gas prices, though, which only emboldens the bullish case for GGPI stock. So, this is a no-brainer, right?

GGPI Stock Gets the Wedge

Initially, GGPI stock does seem like a no-brainer. If anything, it would appear to be a hedge against rising oil prices. Even if western nations led by the U.S. don’t block oil exports, Moscow could retaliate by refusing to ship out fossil fuels to countries which supported the recent sanctions against Russia.

Again, we’re talking greater pain at the pump, which makes GGPI stock and many other EV plays attractive. But if that sounds like a thesis too easy to believe, it might be.

You know how pundits across the political aisle have asserted that Ukraine is not significant to U.S. interests and therefore, it’s not worth risking a military conflict with Russia? Well, according to the New York Times, that might not be true. Per journalist Hiroko Tabuchi:

Ukrainian researchers have speculated that the country’s eastern region holds close to 500,000 tons of lithium oxide, a source of lithium, which is critical to the production of the batteries that power electric vehicles. That preliminary assessment, if it holds, would make Ukraine’s lithium reserves one of the largest in the world.

Rather than merely being empty speculation, Ukraine’s potential lithium reserves have drawn the attention of Chinese and Australian investors. Now, Ukraine is under bombardment, posing a serious dilemma for the west.

Essentially if the lithium claims are true, then Russia would effectively put a wedge between our green future and the mechanization to achieve it. It’s complete speculation but perhaps the Russians don’t care about Ukraine per say but rather its resources.

The way things are going, whoever controls lithium supplies would control the world.

Therefore, GGPI stock and other EV plays seem risky so long as the U.S. is committed to watching instead of intervening.

A Genius Move?

Having reflected on the lithium angle, it raises the possibility that Russian President Vladimir Putin may be even more of an evil genius than people have given him credit for. If claims about Ukrainian lithium are correct, he would have access to global transportation’s past, present and future.

Dealing with someone like him would be utterly disastrous for EV companies, which should give everyone pause about GGPI stock and its ilk.

Even worse, no good options exist regarding how to mitigate the situation. Again, if those lithium claims are correct, the west would have little choice but to intervene. Already, the EV industry is dependent on China.

Being dependent on China and Russia? I’m not sure that’s a future the free world can accept willingly.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


Article printed from InvestorPlace Media, https://investorplace.com/2022/03/ggpi-stock-is-a-hedge-and-wedge/.

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