What happened
Shares of Gores Guggenheim (GGPI) tumbled another 11.2% in January, according to data from S&P Global Market Intelligence, following a 13% decline in December.
The special purpose acquisition company (SPAC) plans to take electric vehicle (EV) maker Polestar public in a reverse merger. Its stock spiked to well over $16 per share in November on the public debut by rival EV maker Rivian, which caused the whole sector to rally. But since then, the stocks have all cooled off considerably.
A Polestar EV. Image source: Polestar.
So what
Polestar is a luxury EV maker based in Sweden (its cars are built in China) whose Polestar 1 starts at $155,000. But it is trying to make its vehicles more accessible by building the Polestar 2 that will have a base price of just under $46,000.
Like much of the rest of the auto industry, Polestar's business has been hit hard by the semiconductor shortage. CEO Thomas Ingenlath doesn't expect the supply chain issues to resolve themselves anytime soon, meaning the delays could drag further out into the year.
Now what
Although Gores Guggenheim's stock continued to fall as investor enthusiasm for the EV space cooled again, Polestar did report encouraging developments in January.
The carmaker said it delivered on its global sales target of 29,000 vehicles last year, which amounted to 185% growth from the year-ago period, and it ended the month with news that it had received 4,000 reservations for its Polestar 2 in just one week in South Korea. Polestar had gotten half of those reservations in just the first two hours after opening up the website to take orders.
It proves there is continuing demand for electric cars generally and for premium quality ones at an affordable price. But the market is getting crowded, and investors might soon find it saturated. Beyond Rivian, other EV start-ups that have gone public include Lucid Group and Sono Group, while Canoo Holdings went public in December 2020.
Bank of America forecasts there could be as much as $100 billion worth of EV initial public offerings hitting the market by 2023. Gores Guggenheim's merger with Polestar is expected to be completed in the first half of this year.