EV carmaker, Polestar is going for a $20 bn merger with a blank-check company. The automaker is backed by the Volvo Car Group and Hollywood superstar and environmentalist Leonardo DiCaprio.
The company has agreed to merge with Gores Guggenheim Inc., a special purpose acquisition company, to help bring its new car models into the market. The merger will ensure a revenue of $1.05 billion for Polestar, who is expecting to use it for its recent car model sales in the coming 3 years.
A Coup To Draw Investors?
This merger is viewed as a coup by Eric Li, the Volvo and Geely Chairman, who envisioned this when we set up the brand. Polestar had been established with a view of enticing external investors, and it paved off as the company has an accessible carmaker’s production network, unlike other SPAC deal companies. They can sustain a better valuation than Tesla. Eric saw this reality when he founded the company. He had an idea that EVs would become the new normal one day.
Thomas IngenIath, Polestar CEO, reiterated this when he underlined that the USP of the company was their accessibility to Volvo group’s manufacturing footprint. It’s not just a lone ranger EV carmaker startup out in the automobile market.
Meanwhile, Volvo has supported Polestar by pumping in $600 million as part of the Gores Guggenheim merger. This will increase its holding in the company to 50%. Polestar hasn’t revealed how much stake Geely and DiCaprio holds in the company.
New Car & Sales Strategy
The company has set a target of 29000 EV sales for 2021, which they plan to enhance to 290,000 EVs by 2025. They expect a 9% margin on earnings before interest and taxes by the time they get to 2025. At present, the brand operates in 14 markets which will increase to 30 by the 2023 year-end.
In March this year, the company started producing the Polestar 2 model, their first all-electric car. It’s being made in Geely’s China-based factory. Meanwhile, the Polestar 3 SUV was announced by the company in June. It will be built in Volvo’s assembly plant in Charleston, South Carolina, their only plant in the US. Polestar 3 would be priced at $75k, and the coupe version would have a similar price range.
A third car model, a sedan named Precept, is under development at a UK R&D centre.
As announced at their initial public meeting, Gores Chairman Alec Gores and CEO Mark Stone raised $800 million in March. The company plans to close the deal with Polestar by Q1 2022. Affiliates from Gores Group and Guggenheim Capital are sponsoring them.
As the news of the merger broke out, SPAC shares went up by 3.7% to reach $10.35 on Monday morning. Last year, Gores forged a similar SPAC deal with Luminar, an automotive lidar maker.