Polestar Stock Forecast: PSNY sheds another 3% on Tuesday

UPDATE: PSNY is down 3.1% at $10.77 on Tuesday morning. The newest entrant to the US stock market from the EV space came at a poor time, it would seem. Shares plunged 14.5% on Monday after Friday, its first day of trading after its merger with Gores Guggenheim (GGPI), saw a 14% rally. It may take some time before there is any agreement over the share price. $12 calls expiring July 8 have seen their price drop 41% to $0.44 per share this morning. Though the Dow is up ever so slightly, the Nasdaq has shed 0.7% an hour into Tuesday's session.

Polestar (PSNY) stock began trading last Friday on the Nasdaq as it completed its SPAC merger deal with Gores Guggenheim (GGPI) to take it public. The deal is one of few SPACs (Special Purpose Acquisition  Companies) this year as the once surging SPAC space comes crashing back to earth in a tightening monetary environment. Polestar joined Lucid Group (LCID) as a fellow SPAC deal in the electric vehicle space and Rivian (RIVN) as a highly anticipated EV IPO. Polestar will be hoping it does not follow a similar performance as both are markedly lower than their IPO price debuts.

Also read: Tesla Stock Deep Dive: Price target at $400 on China headwinds, margin compression, lower deliveries

Polestar Stock News: The story so far

Polestar is an electric vehicle spin-off from Volvo. The Swedish auto manufacturer is itself backed by the Chinese conglomerate Geely, and both companies Geely and Volvo are the main backers of Polestar. Polestar (PSNY) is a relative newcomer but does already have models in production. The company has a larger presence in Europe than in the US, but this SPAC deal is set to change all that, and visibility has already increased due to Polestar's Super Bowl ad. 

Polestar delivered just under 30,000 cars in 2021 and aims to ramp production up to nearly 300,000 by 2025. To do this, it will leverage Volvo and Geely's manufacturing bases in South Carolina and China. Polestar currently has its electric sedan the Polestar 2 available for sale and is due to launch the Polestar 3 later this year, possibly in the fall. The Polestar 3 will be an SUV model, which is the most profitable model type for auto manufacturers. Polestar has also begun delivering electric cars to Hertz (HTZ) as part of a deal for up to 65,000 cars which Hertz and Polestar agreed in April. 

Gores Guggenheim stock news

The merger to take Polestar public via the SPAC deal with Gores Guggenheim (GGPI) was taken on June 22 and with a positive result, Polestar debuted on Friday under the ticker PSNY. That meant the old GGPI ticker is not working anymore, and shareholders in GGPI have now switched to owning PSNY. In anticipation of the event, GGPI stock had risen. This move continued on Friday with PSNY rising to $13 and closing nearly 30% higher. It should be noted most of the move took place in the old GGPI ticker as PSNY opened on Friday at $12.98 and closed at $13. The SPAC deal raised approximately $850 million directly and a potential $250 million via the PIPE deal and values Polestar (PSNY) at over a $1 billion market cap and over $20 billion enterprise value. 

Polestar competitors

Currently, the EV space is dominated by Tesla (TSLA). Polestar took a cheeky swipe at Tesla and its CEO Elon Musk in the Superbowl ad above with the "no conquering Mars" punchline. Polestar also took a swipe at Volkswagen with the diesel gate tag. The EV space is certainly expanding and consolidating and will likely transform into the auto space by 2030 as most cars will presumably be fully electric by that date. So Polestar is entering a crowded space. It remains to be seen how it will fit into Volvo's overall strategy once Volvo itself switches to fully electric vehicle production. Will it remain standalone, revert to a performance division as it was previously, or be subsumed into Volvo? 

Polestar stock forecast

For now, the catalyst has been the completion of the SPAC deal, which has seen a decent uplift in the share price. This can last the remainder of the week as equity risk appetites improve. With the end of the first half, we expect more equity inflows. PSNY stock will then likely be quite down as news flow dries up. Delivery data and outlook will be key as Polestar recently lowered its delivery guidance due to lockdown and supply issues in China.

PSNY stock chart, daily

The author is short Tesla and Twitter.

UPDATE 10:30AM EST June 27, 2022: Polestar stock is reeling in its second day of trading in the US. PSNY shares are off a surprsing 11.3% on Monday about 90 minutes into trading, trading for $11.53. This is surprising, because PSNY shares rallied 14% on Friday, its first day of trading since merging with GGPI, to close at $13. Now Polestar has given up most of that rally. GGPI closed at $11.23 on its final day of trading, Thursday, June 23.  The Nasdaq is off about 0.6%, which may be some the reason for the crash in share price. Rival Tesla (TSLA) is up 1.3%, and Nio (NIO) is down 2.8% at the time of writing.