Wall Street investors began trading shares of EV startup Polestar Friday, the stock listed on the Nasdaq exchange under the ticker “PSNY.”
The automaker went public after a SPAC merger with Gores Guggenheim, the move raising $850 million the Volvo spinoff will use to accelerate its product rollout and add new production capacity, according to Polestar CEO Thomas Ingenlath.
Polestar joins an expansive list of nascent EV companies that have, during the last several years, found a way to raise capital by going public, whether through SPAC, or special purpose acquisition company, deals or by staging more conventional IPOs. But there are signs that investors are growing more reluctant to embrace such new entrants, shares of wannabe EV companies such as Rivian, Nikola, Lucid and Fisker currently trading substantially below their initial highs.
“This is a hugely proud moment for the entire team at Polestar,” Ingenlath said in a statement marking the start of trading on June 24. “We will now open a new chapter in our story that can be summarized in one word — growth. By 2025 we aim to be selling 290,000 cars per year, 10 times as many as we sold in 2021. We already have a real and successful business; this listing gives us the funds and platform to help deliver our ambitious future plans and drive industry-leading sustainability goals forward.”
A complicated history
Polestar has a complicated history, the name originally being used by a small Swedish motorsports company later acquired by Volvo. It initially served as a performance sub-brand, similar to BMW’s M division. In 2017, Polestar was spun off as an all-electric joint venture between Volvo and its Swedish parent, Zhejiang Geely.
The new brand debuted with the Polestar 1, a high-performance plug-in hybrid. With the launch of the Polestar 2 SUV it has migrated to an all-electric strategy. It has since confirmed a series of new products, including the 884-horsepower Polestar 5 — a prototype version this week making its debut at the Goodwood Festival of Speed in the UK.
Until now, Polestar products have been assembled in China but the automaker will start producing the Polestar 3 at the Volvo plant in Charleston, South Carolina next year.
“They need the cash”
Funds from the SPAC deal will be used both to bring its new products to market and to fund its share of the expansion at the Volvo plant, according to Polestar.
“They need the cash they’re raising now and they’ll need more cash … from capital markets” to keep things moving, said Joe Phillippi, chief analyst with AutoTrends Consulting.
But despite the rapid growth plan outlined by Ingenlath, investors may be having second thoughts. After hitting $12.98 a share early Friday, Polestar shares quickly tumbled by 17% before the lunch hour.
Investors push back
There seems little doubt that battery-electric vehicles are gaining traction with consumers, but there are growing concerns that the door is closing on new entrants to the market, notably including some high-profile startups that have used the SPAC process to raise cash.
Lucid and Fisker have both seen shares tumble by more than two-thirds since their post-merger peaks. Nikola is off by 92 percent. And it’s not just those who used the SPAC process. As of midday Friday, Rivian shares were trading at around $29. The company went the traditional IPO route, this past year seeing a high of $179.47 a share.
There are numerous reasons why investors are worrying, according to analysts. There are the macro-economic issues, including rising interest rates and fears of a recession. The auto industry, in general, is struggling with weak sales resulting from semiconductor shortages. And several new companies gone bust, including Last Mile. Canoo has warned investors it may not have the cash to launch production.
For its part, Polestar insists it’s a different breed of EV manufacturer. Unlike Fisker, Canoo, Lordstown and other competitors, it’s actually in production. And it claims to have received 32,000 retail orders for just the current Polestar 2 model since January, according to Ingenlath. It’s now operating in 25 countries and expects to be in 30 by sometime in 2023. Polestar also has an order for 65,000 vehicles from Hertz through mid-decade.
Some “unique advantages”
“They have a couple unique advantages,” said analyst Phillippi, adding the support of both Volvo and Geely to the list. And that has helped the company actually get vehicles to consumers, unlikely so many other startups that have discovered that “the process of screwing these things together is exceedingly complex to execute at volume.”
Ingenlath has set out a goal of generating a profit by 2025. In the meantime, he has indicated Polestar likely will still need more cash. But the carmaker could use bonds, rather than issuing new shares.
What Polestar ultimately does is likely to depend on the response its new products get from consumers — as well as the way Wall Street responds to its stock.