Polestar, the Swedish designer of sporty EVs, staved off impending bankruptcy after a dozen lenders tossed it a lifeline that plugs the bulk of its “big black hole” in funding.
A consortium of European and Asian banks led by France’s BNP Paribas and Standard Chartered clubbed together to provide a $950 million loan after Chinese carmaker Geely pledged to keep supporting its cash-burning subsidiary.
Polestar CEO Thomas Ingenlath expressed relief that the Damocles sword hanging over his head was gone and stockholders now had certainty the company could begin executing on the main phase of its growth plan going forward.
“The very big thing was always … the question mark behind our funding,” Ingenlath said in an investor call on Thursday, acknowledging it was a lead weight on the stock price. “That big question mark is gone.”
Likely as a result of not knowing what it could or should disclose to the market, the Nasdaq-listed company was forced to postpone to an unspecified later date Thursday’s scheduled publishing of its results for the fourth quarter.
Had the loan not come through at the final moment, it’s conceivable Polestar would have had little choice but to cast doubt on its ability to continue as a going concern.
Volvo causes panic after it cuts Polestar loose
In November, the company said it needed to plug a roughly $1.3 billion cash flow gap until 2025, when the business should be able to internally finance its needs in full. Already the latter half of this year is forecast to see a marked improvement in volumes and margins thanks to the rollout of two new high-margin crossover models, the Polestar 3 and 4, that would flank its existing sedan.
Last week, however, fears started to come to a head when Volvo Cars announced it would no longer prop up its former performance line, spun off as a stand-alone brand and floated in 2022 via a SPAC during the peak of investor interest in EV companies.
Volvo’s holding is now expected to shrink to just 18% in the end, according to Ingenlath, from 48% previously. By Friday, Polestar was worth less than $3 billion after commanding a market cap north of $20 billion when it first listed, as investors questioned whether it could survive the ongoing shakeout in the EV industry.
Fortunately, Chinese automotive holding group Geely, the majority owner in Polestar both directly and—through its control of Volvo—indirectly, came to its rescue by pledging this Wednesday to continue pouring money into the latter should the need arise.
“As a strategic partner and direct shareholder in Polestar, Geely will continue to provide full operational and financial support to the iconic performance car brand going forward,” Geely Holding Group CEO Daniel Li said in a statement. “We will retain our shares in Polestar and intend to participate in future financing activities when required.”
Polestar still looking at issuing new shares
That will prove crucial as Polestar’s new finance chief, Per Ansgar, made it crystal clear on Thursday that he would prefer tapping his shareholders for fresh loss-absorbing equity sooner rather than later.
The company is still about $350 million short, after all. While much of that might yet be drummed up by saving money otherwise slated to be spent, the CFO said the balance sheet was too top-heavy with liabilities and needed proper restructuring.
“[When] we see the opportunity, we will take that and try to do some equity raising here,” Ansgar told investors on the call.
Shareholders at least appear relieved the worst is behind it. The stock jumped 15% to $2.10 following yesterday’s similar double-digit gains after closing last week at $1.30 per share.
