In September 2021, Polestar, a Swedish electric vehicle (EV) maker controlled by Volvo (VLVLY) and Chinese manufacturer Geely (GELYY) said it would list as a public company. It is set to do so sometime this quarter in a business combination agreement with a SPAC (special purpose acquisition company) called Gores Guggenheim, Inc. (GGPI). Right now GGPI stock ( looks very undervalued, and I suspect it could take a nice ride up once the long-awaited SPAC reverse merger closes.

In fact, recently the CEO of Polestar, Thomas Ingenlath, told Bloomberg that he thinks the stock could get a spike once it goes public. He said that he thinks the company will be “well above” a $20 billion valuation. Based on my calculations Polestar could end up with a significantly higher valuation than this. 

One reason is that the company is now in full production of its EVs. In fact, Hertz just announced that it would buy 65,000 of the company's EVs over the next five years. In 2021 Polestar made 29,000 electric vehicles and this year they are slated to make up to 65,000.

Where Things Stand With Polestar

Right now Polestar has a “see-through” market capitalization of almost $25.4 billion. That is because page 37 of its slide deck shows there will be 2.1253 billion shares at the close of the reverse merger. Since GGPI stock trades at $11.85, the result of multiplying this by 2.1253b is $25.4 billion.

So far the company has not yet set the date for a shareholder vote on the merger, but it is forecast to happen sometime during Q2.

Compare this valuation to Tesla (TSLA) which has a market cap of about $1 trillion ($1.03 trillion). Tesla made 930,000 EVs last year and this year it could reach over 1.4 million or higher. Polestar made 29,000 and could make 65,000 this year. We can use these numbers to value GGPI stock (Polestar, when it closes the merger).

For example, if we divide Tesla’s market cap by its production rate for this year we get an estimated market cap of $767.9K per EV (i.e., $1,103b/1.4m EVs). As a result, if we multiply $767.9K by Polestar's forecast 65K EV production, its market cap will be $49.9 billion - almost $50 billion.

Valuing Polestar

This market value is almost double the present market value for Polestar. For example, $49.9b is 96.5% higher than the Polstar market cap now of $25.4 billion on a “see-through” basis. It implies that GGPI stock is now worth at least $23.28, i.e., 96.5% higher than the GGPI stock price of $11.85.

Moreover, Polestar just announced this week that Hertz Global (HTZ) will buy 65,000 Polestar EVs over the next five years. That could act as a serious catalyst for Polestar (GGPI stock now) to reach this higher valuation when it goes public.

That is why the CEO said he thinks Polestar stock will be well above its present price when it goes public. So investors in GGPI stock could be in for a potential gain when the deal closes. In fact, even if it takes 2 years for the stock to rise 96.5% from today, the average annual return will be 40.18% each of the next 2 years. That is a great ROI for most investors.