It was recently announced that Swedish electric car maker Polestar Performance AB will be going public via a merger with special purpose acquisition company Gores Guggenheim (NASDAQ:GGPI). The new company will be renamed Polestar Automotive Holding UK and is to be listed on Nasdaq under the ticker symbol “PSNY”. Right now, GGPI stock is pretty close to its original SPAC price, opening at $11.31 on Nov. 12.
The deal, which has an enterprise value of about $20 billion, might leave some investors indifferent. After all, EV makers going public via SPACs is nothing new. However, GGPI stock is worth monitoring due to some important factors. In the past I’ve made it clear that I do not like SPACs. They’re risky fueled by excitement rather than intrinsic value.
This SPAC has a lot of potential, though. And the stock price isn’t too far off from its listing price.
A Long History of Success
The Gores Group is an investment company with more than 30 years of experience, more than $4 billion invested and more than 120 acquisitions.
Polestar is a Swedish electric car maker that was founded in 1996. It got its start developing performance hardware and software for racing vehicles with Volvo.
Volvo Cars is a Swedish automotive manufacturer of luxury vehicles founded in 1927. It is an automaker synonymous with safety.
The combination of an experienced investment firm with a racing company backed by the know-how of a top reputable premium automaker makes GGPI stock an investment opportunity worth monitoring.
Why I’m Excited About GGPI Stock
Alec Gores, the founder of The Gores Group, has stated that “SPACs are great, as long not being abused.” He has this to say:
“I believe the SPAC product is a great product as long as it’s not being abused. So as a sponsor, you have to be very, very responsible. You have to know what you’re doing. You also have to bring in great companies. So a great sponsor meet great companies makes a good SPAC and a great SPAC.”
He also discussed why he sees Polestar as a great opportunity:
“We literally see so many deals. The first thing is we vet things out quickly. Then we have a lot of conversations around things we find. The art is to start with a great company with the potential to be the leader in the space. Then you go to the management team, then to the product, a great product, and revenues, projections all of these things have to meet. Most important we have to be aligned with the management team. In this case Thomas [Ingenlath, Polestar CEO] and their team is incredible. Also having the Volvo relationship helps here.”
Polestar is designing premium, high-performance electric vehicles, and that’s exciting. But what I like most are the backing of The Gores Group. I also like these key highlights from Polestar’s Investor Presentation:
- Polestar has two models now in production, Polestar 1 and Polestar 2, with plans to launch 3 new cars by the year 2024
- Polestar considers itself to be the only global EV pure-play alongside Tesla (NASDAQ:TSLA)
- Premium/luxury EVs are the fastest-growing segments of the global car market
- Sales are expected to rise from 29,000 cars in 2021 to 290,000 cars in 2025
- Expected revenue for 2021 is $1.6 billion and is forecasted to increase to $17.8 billion by the year 2025
- By the year 2025, EBIT margin is expected to be 9%
- EBIT break-even is expected in 2023
If this EBIT break-even occurs in 2023, that will be very good for Polestar. I’m optimistic, because — in contrast with other SPACs that have brought EV automakers public based on plans alone — Polestar has already two models under production.
Polestar also has a well-established geographical presence in North America, Europe and Asia/Pacific. By not focusing on just market such as the U.S., Polestar opens up more potential sales globally.
Bottom Line on GGPI Stock
With a strong business heritage, continuous innovation and strong growth, GGPI stock is close to its SPAC listing price, eliminating the worrisome nature of most SPACs. Is Polestar risk-free? No, but it has high potential to achieve better than expected financial performance.
I would still advise you to wait, though. Polestar should provide us with positive economic data over the next quarters as a public company to make its story of success more plausible.
I like Polestar and its products a lot, maybe because I love performance cars. The mix of business heritage sounds great, and the values such as design and quality are exciting. Wait to see strong real financial results, though. Polestar I’m waiting to by electrified by your financial performance.
On the date of publication, Stavros Georgiadis, CFA 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.
Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.