One of the most highly-anticipated special purpose acquisition company (SPAC) mergers in some time has finally come to fruition. Polestar (NASDAQ:PSNY) officially began trading today on what has been an otherwise-strong day in the stock market. Unfortunately, PSNY stock fell as much as 12% at one point today and is down approximately 7% at the time of writing.
Investors in a range of early-stage EV makers like Polestar are seeing selling pressure once again. For the Swedish EV maker, which came public via a SPAC merger with Gores Guggenheim, it’s certainly a difficult market. Investors right now want cash flows and capital return. These early-stage companies aren’t likely to provide significant cash flow for years, making them harder to invest in right now. With rates rising, cash flows located in further out years are discounted at a greater rate. This has also provided downward pressure for the sector as a whole.
However, a 7% downside move is orders of magnitude larger than investors are seeing in the likes of Rivian (NASDAQ:RIVN) or Lucid (NASDAQ:LCID) today. That’s partly because heading into this SPAC merger, Polestar saw significant investor interest. Whether it’s insiders selling on the first day of trading or investors taking short-term profits, there are clearly other factors at play.
That said, let’s dive into what investors may want to watch with Polestar.
Is PSNY Stock a Buy Following SPAC Merger?
As mentioned, the ability for Polestar to show a realistic and clear pathway to future profitability is what investors will be focusing on. In general, de-SPAC stocks have been hit hard nearly across the board due to the demands of the market. With cash flow being king, Polestar’s near-term growth may matter more as a function of its longer-term trajectory than other stocks.
Thus, interested investors need to watch this company closely. Quarter by quarter, Polestar will show progress toward its goals (or a lack thereof.) Accordingly, significant repricing from time to time is likely to occur. That’s a nice way of saying I think PSNY stock could be volatile moving forward.
Thus, like other de-SPAC stocks, it’s “buyer beware” in this market. Polestar has clearly gained some traction, seeing orders of its Polestar 2 vehicle surge 290% year-over-year. And with an SUV model set to launch this fall, it’s understandable why investors are intrigued by this company’s potential growth.
However, it’s the word “potential” that has investors concerned. In this rather unforgiving market, many are choosing safety. For that reason, I’m on the sidelines when it comes to PSNY stock.
On the date of publication, Chris MacDonald 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.
