Final month, shares of electrical automobile producer Polestar (NASDAQ: PSNY) have been publicly listed on the Nasdaq exchange under the ticker “PSNY.” Based in 2017 and headquartered in Sweden, Polestar manufactures and sells premium electrical automobiles or EVs.
Polestar raised $890 million within the course of and went public by way of a SPAC or particular goal acquisition firm merger. The corporate disclosed it could make the most of the proceeds of the capital raised to broaden its portfolio of automobiles and enhance revenue margins by growing manufacturing capabilities and benefiting from economies of scale.
What’s a SPAC?
Also referred to as a “blank-check firm,” a SPAC is created with no industrial operations in thoughts. It raises capital by way of an IPO, which is then used to amass an already present firm by way of a reverse merger.
Whereas SPAC mergers have been round for a number of years, they’ve gained reputation since 2020. In 2021, 613 SPAC listings raised $145 billion, a rise of 91% year-over-year. As soon as the SPAC is shaped, the founders might goal a number of corporations for acquisition. However these goal corporations should not disclosed through the IPO, so traders is not going to achieve visibility into the corporate that will probably be acquired.
The capital raised throughout a SPAC IPO is secured in a belief account. It may be used to fund an acquisition, or it should return the proceeds to traders, indicating a liquidation of your entire course of. Typically, there’s a outlined interval — round two years — for a SPAC to finish the acquisition.
Gores Guggenheim is the blank-check company that announced a reverse merger with Polestar last year, and the SPAC merger was accomplished in June.
Auto big Volvo owns 48% of Polestar, and the latter is seeking to scale operations in a number of international locations. Previous to the SPAC merger, Polestar delivered over 55,000 automobiles within the U.S., Europe, and China, to this point.
Polestar emphasised that it goals so as to add three automobiles to its product portfolio, together with an SUV, a sedan, and a midsize crossover. The EV producer expects to ship 290,000 automobiles yearly by the tip of 2025.
Because the begin of 2021, different electrical automobile producers, together with Lucid Motors, Nikola, and Fisker, went public by way of SPAC mergers.
A reverse merger or a SPAC could also be faster and cheaper than conventional IPOs. It additionally insulates the corporate from timing dangers which are sometimes essential to the efficiency of an organization that goes public by way of an IPO course of. Along with quicker value discovery and decrease prices, SPACs should not as closely scrutinized as IPOs offering the previous with extra flexibility to checklist publicly.