GOTHENBURG - Swedish electric performance car brand Polestar (NASDAQ:PSNY), traded as Nasdaq: PSNY, has successfully secured USD 950 million in external funding, according to a recent press release. This financial boost comes from a syndicate of 12 international banks, including BNP Paribas (OTC:BNPQY), Natixis, Standard Chartered (OTC:SCBFF), BBVA (BME:BBVA), HSBC, and SPDB, and is structured as a three-year loan facility.
The funding is a significant step towards financing the company's development and aligns with its goal to achieve cash flow break-even by 2025. The company's cash balance as of December 31, 2023, stood at approximately USD 770 million.
Polestar CEO Thomas Ingenlath stated that the financing reflects the confidence of global banks in Polestar's growth trajectory. Alongside the financial support from Geely Holding Group, the company aims to bolster its path to profitability by 2025. Daniel Li, CEO of Geely Holding Group and a member of Polestar's board, reaffirmed Geely's commitment to providing operational and financial support to Polestar.
In addition to the funding, Polestar has implemented an efficiency program, which has reduced its workforce by 10 percent since mid-2023, with plans to cut an additional 15 percent in 2024. These measures are part of a strengthened business plan that targets a significant increase in annual vehicle volume and improved gross margins.
The company has expanded its product lineup with the introduction of two high-margin SUVs, the Polestar 3 and Polestar 4. The Polestar 3 has commenced production in China and completed test runs in South Carolina, USA, while the Polestar 4 is seeing accelerating sales globally. Additionally, prototype production of the Polestar 5, a performance GT, is set to ramp up in 2024.
Geely Sweden Holdings is set to become the second-largest shareholder in Polestar, with Volvo (OTC:VLVLY) Cars maintaining an 18% stake. This new shareholder structure is intended to solidify Polestar's business development foundation.
Polestar anticipates volume growth by the end of 2024, which will support its 2025 targets, including a double-digit gross profit margin. The company expects this growth to be more pronounced in the second half of the year as the new SUVs achieve full production and distribution.
This article is based on a press release statement and aims to present the facts without endorsement of claims.
InvestingPro Insights
Polestar's recent announcement of securing USD 950 million in external funding is a pivotal moment for the company as it aims to reach cash flow break-even by 2025. The loan facility underscores the faith international banks have in Polestar's potential, despite some operational challenges reflected in the company's financial metrics.
InvestingPro Data shows that Polestar's market capitalization stands at $3.14 billion, highlighting the significant size of the company within the electric vehicle industry. However, the company's P/E ratio is currently negative at -6.18, and further adjusted to -9.12 for the last twelve months as of Q3 2023, indicating that investors are not seeing current profitability but may be banking on future growth. This is further evidenced by the revenue growth of 36.94% during the same period, suggesting that while the company is expanding its sales, it has yet to translate this into net income.
The gross profit margin for Polestar is relatively low at 2.94%, which is a concern as the company scales up production of its new high-margin SUVs, the Polestar 3 and Polestar 4. This figure will be crucial to monitor as the company strives for a double-digit gross profit margin by 2025.
InvestingPro Tips reveal several areas of concern for investors. Polestar is quickly burning through cash and may have trouble making interest payments on its debt, which could be a risk factor considering the size of the recent loan. Additionally, the stock has experienced high price volatility and has fared poorly over the last month, with a notable price total return of -32.27% for the last month and -71.99% over the last year.
Despite these challenges, Polestar's aggressive efficiency program and the introduction of new high-margin SUVs demonstrate the company's commitment to improving its financial health and market position. As these new models ramp up production, the company's financials may start to reflect the strategic changes being implemented.
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