Polestar Stock News and Forecast: Post-GGPI merger, PSNY gyrates amid price discovery

PSNY stock rebounded 8.2% to close at $9.53 on Friday in a sign that this SPAC (special purpose acquisition company) is not going down on one punch. The Swedish-cum-Chinese electric vehicle brand debuted a week prior on June 24 after completing its yearlong merger with the Gores Guggenheim (GGPI) SPAC. The EV maker, co-owned by Volvo and Volvo-parent Geely Automotive, traded up 16% on its debut to as high as $16.41 and then dropped to an all-time low of $8.64 on July 1. That constitutes a nearly 50% drop in just one week and demonstrates how uncertain the market is about the value of Polestar.

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Polestar History: From Volvo to Geely to GGPI

Polestar originated in the 1990s as Flash/Polestar Racing in Sweden before fellow Swedish carmaker Volvo acquired it in 2015. Originally, the company was modifying Volvos for racing purposes. By 2009 Polestar had become an official modification partner building high-end, performance Volvos. Volvo itself was purchased during the Great Financial Crisis by Geely Automotive, a major vehicle manufacturer in China. This makes Polestar an automatic multinational brand despite only building 30,000 vehicles in 2021.

Polestar raised billions of dollars by agreeing to merge with Gores Guggenheim (GGPI), a special purpose acquisition company, in late 2021. The merger had been bandied about for half a year or more, but the final vote went through only in late June. The merger gives Polestar at least $1.25 billion in cash to increase manufacturing bring new models to market. The merger gives PSNY stock an enterprise value of $20 billion.

The GGPI SPAC was itself a partnership between The Gores Group, a private equity company run by 1980s computer entrepreneur Alec Gores, and investment bank Guggenheim Partners. Polestar is managed by CEO Thomas Ingenlath.

Polestar models

Its first model, the plug-in hybrid Polestar 1, arrived in 2017. With the Polestar 2 in 2019, the manufacturer moved to fully electric vehicles. Polestar will launch an SUV, the Polestar 3, sometime in late 2023. This is exciting for shareholders because SUVs tend to make higher margins for car companies.

“We didn’t start asking how we could be the disruptor; we asked how a modern car company could work beyond technical innovation," says CEO Thomas Ingenlath. "If what we are doing means disrupting the industry, then fair enough, but it was never our intention.”

Polestar aims to increase production to nearly 300,000 units by 2025. It plans to achieve this 10x expansion by utilizing Volvo and Geely's manufacturing hubs in South Carolina and China. Polestar has also begun delivering EVs to Hertz (HTZ) as part of a deal for up to 65,000 cars, which Hertz and Polestar agreed to in April.

Less is known about rumored Polestar 4 and Polestar 5 models. The latest estimate is that the Polestar 3 will be ready for orders starting in October 2022.

Polestar 3 SUV

Polestar Competitors: Building a niche among Tesla, Volkswagen, Ford, GM and Hyundai

Like the leader in the EV space, Tesla, Polestar also has a direct-to-consumer business model. The company operates showrooms in major metropolises worldwide that are not dealerships, per se, but allow prospective buyers to test drive a model before ordering it. These showrooms exist in many major cities including Oslo, Shanghai and London. Like Tesla, Polestar is also seen as a lifestyle brand.

Tesla pretty much invented the current EV market and has dominated it for more than a decade, but some analysts now predict that legacy automakers like Ford and GM might sell more units than Tesla by as soon as 2025. It is also uncertain how competitive Polestar will be in the future autonomous driving space, where Tesla claims to have a lead (this is now less certain due to Tesla giving up on radar, a technology still used by most others in the autonomous space).

Polestar made waves during the most recent SuperBowl when it used a commercial to poke fun at Tesla and Volkswagen (VWAGY), but the automotive industry is a manufacturing industry. Though Polestar will utilize its parent companies' manufacturing prowess and factories, it remains to be seen how fast Polestar can grow into a major marque. Hyundai also has quitely become a major seller of EVs without making a major marketing push. Hyundai is likely the closest thing to a role model for Polestar.

Polestar stock news

Polestar stock was much less volatile than its other SPAC brethren like Lucid (LCID) when it traded under the GGPI symbol. Shares only traded as high as $16.41, and that was all the way back in November 2020. Since giving up GGPI for the PSNY symbol on June 24, however, volatility has been Polestar's middle name. 

Since June 24, PSNY has featured sessions with more than 10% gyrations in share price on at least nine occasions. This is typical when stocks are entering price discovery mode. Expect this period of volatility to cool off by the end of July. Soon enough, the market will discover a better range for PSNY to trade within. News flow will not likely lead to any major rallies until the Polestar 3 is released in or after October.

Polestar stock forecast

PSNY remains in a negative light under $10. On Friday, PSNY stock bounced fiercely off of $8.64. This price level now seems to be a double bottom and a source of strong support as it also served this function on June 16 and 17. As can be seen from the spike highs on April 4 and June 24, $13 appears to be serving as resistance. Watch closely to see if these corresponding price levels hold up. Closes above or below are signals to buy or sell, respectively.

For now, the 9-day moving average is leading its 21-day counterpart, so we see this as somewhat positive for bulls.

PSNY 1-day stock chart

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