Stock in the newly listed EV brand Polestar rose 5% in the first half hour of trading on the US Nasdaq index on Friday, giving the company hope of success in a very rocky market for start-up EV firms.
The car company, controlled by Volvo Cars and Volvo-owner Geely Holding, raised approximately $890 million after merging with special purpose acquisition company (SPAC) Gores Guggenheim, which had already been listed on the stock market in advance.
The stock listing values the company at around $1.1 billion (£890m), compared with $22bn for Volvo.
The listing floats only 6% of Polestar’s stock, with the remainder being held by Volvo, Volvo parent Geely Holding, and Hollywood star Leonardo di Caprio, an early investor. The listing allows Geely to sell more stock if it thinks the share prices are strong enough.
Polestar has an ambitious plan to expand its current single-model range. The Polestar 3 “sports SUV”, dubbed a rival to the Porsche Cayenne, launches in October, followed by the Polestar 4, a coupé-styled version said to be a competitor for the Porsche Macan.
The Polestar 5 performance saloon will follow in 2024, after its appearance in prototype form at this weekend’s Goodwood Festival of Speed. In total, Polestar targets sales of 290,000 units by 2025 with four models, up from 29,000 sales in 2021.
The company brands itself as the only other global “pure play” EV brand after Tesla.
Shares of EV start-ups that took off when listed 2020 and 2021 have since plummeted from their peak. Examples include Rivian, which has fallen 82% from its peak value of $127.3bn, UK van start-up Arrival, down 93%, and electric people carrier hopeful Canoo, down 82%.
Polestar is betting that investors will back it for being a company with established sales, revenue and production, the last of those provided by Geely’s network of plants. Many SPAC (special purpose aquisition company) EV firms have limited or no revenue and are now struggling for cash as investment streams dried up.
The SPAC method avoids the tougher scrutiny of the traditional IPO although the US regulator, the Securities and Exchange Commission, has started to clamp down on the wilder claims of future growth made by companies that list as a SPAC.