On September 27, Polestar Performance AB, a premium electric vehicle manufacturer headquartered in Sweden, agreed to merge with SPAC sponsor Gores Guggenheim, Inc. (NASDAQ: GGPI). The company stated that, upon closing, Polestar will have an enterprise value of US$20 billion. Polestar expects to have US$1.25 billion of cash at the time of merger close.
As was the case with virtually all recent EV SPAC transactions, Polestar expects “hockey stick”-type growth in vehicle sales, revenue and EBITDA over the next handful of years. This forecast comes despite significant uncertainty that recent EV SPAC start-ups like Lordstown Motors Corp. (NASDAQ: RIDE) and Canoo Inc. (NASDAQ: GOEV) will ever post results that approach the initial projections laid out in their SPAC announcement investor slides.
Presumably, Polestar and Gores Guggenheim are taking this approach because fellow premium EV manufacturer Lucid Group, Inc. (NASDAQ: LCID) has been able to maintain an enterprise value of around US$35 billion post-SPAC merger closing — despite still not having booked one dollar of revenue. Limited sales of Lucid’s flagship Air model however are expected to begin this fall, a standout in a space that has a track record of over promising and under delivering.
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Polestar was founded in 2017 by Volvo and China’s Zhejiang Geely Holding. It currently makes two models — Polestar 1 which is a premium performance hybrid vehicle with a price of around US$155,000, and Polestar 2, an EV sedan with a US$50,000-US$60,000 price tag. The company sold a combined total of 10,000 of these vehicles in 2020. Polestar plans to sell 29,000 aggregate units in 2021; a figure which soars to 290,000 in 2025.
By 2023, Polestar hopes to sell its vehicles in more than 30 countries in North America, Europe, the Middle East, and in the Asia Pacific regions. Currently, Polestar is selling its vehicles in ten countries throughout North America and Europe.
In 2025, Polestar projects to record US$17.8 billion of revenue and US$2.14 billion of EBITDA. This implies the company could trade at an enterprise value-to-2025E revenue ratio of 1.1x (US$20 billion divided by US$17.8 billion) and enterprise value-to-2025E EBITDA ratio of 9.3x.
These ratios compare favorably with Lucid’s valuation. Lucid currently trades at enterprise value/revenue and enterprise value/EBITDA ratios of around 2.5x and 20x, respectively, based on Lucid’s 2025E projections.
We note that Polestar’s contemplated US$20 billion valuation is substantially less than the US$80 billion valuation that Rivian, another private start-up EV maker, is reportedly seeking via a traditional IPO process. Rivian, which plans to produce two all-electric models, a pickup truck and an SUV, submitted a confidential draft registration on Form-1 to the SEC in late August.
Polestar’s announcement of going public via a SPAC merger seems somewhat surprising given the disappointing resultant stock valuations of many other EV SPACs. However, it may carry a cheaper valuation than Lucid, a similarly positioned EV start-up. Also, Polestar has already sold more than 20,000 of its flagship vehicles, whereas Lucid plans to deliver its first vehicles to customers later this year.
Gores Guggenheim, Inc. last traded at US$10.24 on the NASDAQ.
Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
