Swedish electric-car maker Polestar said on Monday it will go public by merging with a U.S.-listed blank-check firm backed by billionaire Alec Gores and investment bank Guggenheim Partners at an enterprise value of $20 billion.
The deal comes at a time when large SPAC mergers have become rare, as the business of blank-check dealmaking deteriorated rapidly over the summer after investors were spooked by the poor financial performance of many SPACs and a regulatory crackdown led by the U.S. Securities and Exchange Commission over their disclosures.
The latest deal will provide a key test of investor appetite for SPAC deals after other such transactions in the electric vehicle sector soured over the past few months.
It is the biggest blank-check merger in the EV sector since Lucid Motors struck a $24-billion deal with Michael Klein's Churchill Capital IV Corp. in February.
The Polestar deal will be supported by cash proceeds of around $800 million from Gores Guggenheim, assuming no share redemptions by public stockholders of the blank-check firm. The deal also includes a PIPE, or private investment in public equity, of $250 million from top-tier institutional investors.
SPACs are publicly listed companies that are raised with the intention of merging with a private company at a later date. For the company going public, a SPAC merger serves as an alternative to a traditional IPO.
Shares of the blank-check firm pared earlier gains and were up around 3% before the bell.
Riding on EV boom
Polestar's listing plan comes as automakers shift their focus to environment-friendly vehicles, amid rising pressure from lawmakers and investors concerned about climate change.
Polestar, backed by Volvo Car Group and affiliates of Geely Chairman Eric Li, also counts Hollywood actor Leonardo DiCaprio among its investors.
The premium EV maker's offering includes two models – a hybrid performance car known as Polestar 1 and a fully electric Polestar 2 – which are currently on roads across Europe, North America and Asia.
The company, which delivered about 10,000 vehicles last year, said it expects to sell about 290,000 vehicles per year by 2025 and plans to launch three new models by 2024.
Polestar said at the Beijing Motor Show last year that it has another model in development called the Precept, which is a larger sedan.
The company raised $550 million in external funding in April and announced plans in June to build Polestar 3 electric sport utility vehicles at Volvo's U.S. plant in South Carolina from next year.
Current equity holders of Polestar, who will roll their entire interest in the combined company, will retain about 94% ownership, it said.
Post merger, the combined company will be named Polestar Automotive Holding UK Ltd. and will trade under the symbol "PSNY" on the Nasdaq.