Polestar, an electric car maker spun off from Volvo and owned by the Swedish company’s Chinese parent company Geely, has agreed a merger with a blank cheque company that values it at $20 billion (£14.6 billion). The Spac (special purpose acquisition company) that Polestar will reverse into, Gores Guggenheim, is paying Polestar $1 billion for an equity share of the company that will take over its listing Nasdaq exchange.
Polestar, which counts the actor Leonardo DiCaprio among its existing investors, is positioned as a manufacturer of upmarket electric car models with a starting price of £39,000 in the UK. The company actually started life in the 1990s as a Volvo-owned racing company before then manufacturing electric vehicles with the Swedish company. Parent company Geely chose to spin it out as an independent business in 2017.
Polestar hopes to appeal to the most environmentally conscious share of the quickly growing market for electric cars and vehicles by committing to making its entire supply and production line carbon-neutral by 2030. Polestar vehicles are currently only manufactured in China but the company has said its soon to be released new Polestar 3 model will instead be made at its South Carolina plant.
The current flagship model, the Polestar 2, claims a range of at least 258 miles and is a direct competitor to the Tesla Model 3. The vehicle’s launch in the UK last year got off to a bad start when thousands of cars had to be recalled globally after a problem with faulty inverters was uncovered.
In total Polestar sold around 10,000 cars in 2020 and is targeting that rising to 290,000 by 2025. The $20 billion valuation agreed to by the Gores Guggenheim Spac represents three times the 2023 revenues that would be expected if those numbers are to be achieved. The company raised $550 million from external investors earlier this year.
Spac listings at hefty valuations have been popular with electric vehicle companies over the past couple of years. However, many have since struggled to live up to the expectation attached to their price tags and have attracted the attention of the SEC for potentially misrepresenting the extent of their technology.
The regulator is currently looking at electric pickup company Lordstown Motors and Trevor Milton the founder and former CEO of Nikola, another EV start-up to list via a Spac, has been charged with fraud. The SEC has filed charges and federal prosecutors in New York said Milton “brazenly lied” to investors about the company’s green vehicles to inflate market value and drive up his earnings.