Polestar IPO Valuation: Leo DiCaprio’s Titanic Electric Vehicle Aspirations
Gores Guggenheim (NASDAQ:GGPI) is the latest SPAC (Special Purpose Acquisition Company) stock to start revving its carbon-free engine. The blank check company completed its initial public offering (IPO) in March and announced its reverse merger with Electric Vehicle (EV) maker Polestar in September. GGPI shares are now trading at a roughly 7% premium to trust value.
With shares of Tesla (NASDAQ:TSLA) and Lucid Group (NASDAQ:LCID) up an astronomical 35% and 66% respectively since October, investors are clearly looking to capitalize on the next big electric vehicle-related thing.
For its part, Polestar brings a combination of good looking (and shipping) cars and established automotive backers. The company also brings celebrity cache, with Oscar winner Leonardo DiCaprio a key spokesperson. Like Leo’s own noteworthy film Titanic, Polestar embodies the best of technology, promising a carbon-free future. And with Polestar expected to come to market at a “discounted” valuation relative to its EV competitors, now’s the time to do your diligence on GGPI stock. Here’s a closer look.
GGPI Stock: An EV Maker With Titanic Aspirations
Volvo Cars (VOLCAR-B.ST), which just went public on October 29th, founded Polestar in 2017. Now before we talk solely about GGPI stock, I should say Volvo Cars isn’t the same as Volvo AB (OTCMKTS:VLVLY). Volvo sold its car-making division to Ford (NYSE:F) in 1999. Ford sold the business to Chinese automotive group Zhejiang Geely Holding (OTCMKTS:GELYF) in 2010. Volvo Cars owns roughly 50% of Polestar.
In addition to Volvo, as I mentioned earlier, Polestar has name-brand backer actor and environmental activist Leonardo DiCaprio (although the actor hasn’t publicly disclosed the size of his stake). It’s debatable whether The Wolf of Wall Street knows much about electric vehicles or growth stocks (maybe The Revenant is less about a bear and more an allegory for options trading in a bear market). But one thing’s clear: there’s a lot more to Polestar’s story than big dreams and celebrity backers.
Polestar is effectively a spin-off of an established global carmaker, Volvo. So, while technically a startup, the company is able to leverage its parent’s already-established factories, partners and distribution channels. Meanwhile, Polestar’s competitors — Lucid, Rivian Automotive (NASDAQ:RIVN) and Faraday Future (NASDAQ:FFIE) literally started from scratch. Lucid and Rivian are only a few weeks into customer deliveries and full-scale manufacturing; Faraday expects to start shipping in the summer of 2022.
In contrast, Polestar has been operating in 14 markets and already has two cars on roads in Europe, North America and Asia: Polestar 1, a hybrid coupe and Polestar 2, an all-electric premium sedan that targets the Tesla Model 3. The EV maker plans to use its $1.05 billion in SPAC merger proceeds to launch three new models by 2024 and deliver 290,000 cars by 2025.
A premium and Luxury Focus
You may be the type of investor who questions the steep pre-revenue valuations that characterize most EV stocks. If so, you’ll enjoy Polestar’s revenue-generating status. The company, which generated $636 million in sales last year, expects to generate $1.6 billion this year. Polestar sees revenue growing at a compounded annual growth rate of 83% to $17.8 billion in fiscal 2025, generating roughly 9% margin on earnings before interest and taxes.
EV upstarts Rivian and Lucid have targeted specific niches (e.g. SUVs and luxury vehicles) while Polestar is more an everyman’s vehicle. A single-motor Polestar 2 MSRP starts at $38,400 (after tax credits). A dual-motor Polestar 2 starts at $42,400 (after tax credits). In contrast, a Lucid Air Dream starts at $77,400 and Rivian’s R1T electric pickup starts at around $67,500.
The carmaker’s designs are also getting attention: Check out the Polestar 1 Special Edition (only 25 are being made for the Chinese market) in distinctive matte gold finish. In June, the company announced that the Polestar 3 SUV, a two-row crossover with a sloping roofline, will be built in Volvo’s U.S. assembly plant near Charleston, South Carolina (the same plant building the Volvo S60 and the next-gen XC9) with shipments expected next year.
Next-Level Sustainability
In today’s market, hockey stick growth forecasts are par for the course among EV makers. So, Polestar aims to stand apart from the crowd with a focus on sustainable materials and manufacturing. That’s probably the reason the carmaker got Leo’s attention. In fact, the company wants to build the world’s first zero-emission electric vehicle.
Of course, the company already has a good jump start. Its electric cars lack combustion engines, so they don’t produce any toxic emissions.
But Polestar is taking the definition of “carbon and cruelty free” to the next level: the Polestar 2 is vegan. Leather and wool produce toxic bi-products and land degradation. Instead, Polestar’s car interiors are made from WeaveTech, a material inspired by the “sporty look and feel” of wetsuits.
The company even wants to be carbon-free in its entire production process. That’s no easy feat given that the most important component of an electric car, the lithium-ion battery, is produced by a very carbon-intensive mining process. Polestar also plans to make sustainability declarations, common in industries like food and fashion, standard practice for all its future models.
Discounted Relative Valuation
GGPI’s merger with Polestar pegs the company at a roughly $20 billion enterprise valuation. That’s a fraction of LCID and Rivian, which command market capitalizations of approximately $70 billion. Notably, Rivian upsized its recent IPO valuation, reflecting bullish investor sentiment.
Put another way, Polestar’s implied valuation represents a price-to-sales multiple of 3x estimated 2023 sales and 1.5x estimated 2024 sales. In contrast, rivals Tesla, Lucid, Nio (NYSE:NIO) and Xpeng (NYSE:XPEV) trade at multiples of between 4x and 11x 2023 sales. Unlike the Titanic, GGPI stock looks more likely to go up than down.
Upon closing of the reverse merger, expected in the first half of 2022, the new public company, Polestar Automotive Holding UK Limited, will be listed on the NASDAQ market under the ticker symbol PSNY.
Your comments and feedback are always welcome. Let’s continue the discussion. Email me at jmakris@investorplace.com.
On the date of publication, Joanna Makris 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.
Joanna Makris is a Market Analyst at InvestorPlace.com. A strategic thinker and fundamental public equity investor, Joanna leverages over 20 years of experience on Wall Street covering various segments of the Technology, Media, and Telecom sectors at several global investment banks, including Mizuho Securities and Canaccord Genuity.
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