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SPACs are great, as long as not being abused: Alec Gores

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Founder of The Gores Group Alec Gores and CEO of Polestar Thomas Ingenlath join Yahoo Finance to discuss their latest $20 billion SPAC deal, what differentiates Polestar from other EVs makers, and the company's focus on investing in EV technology

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: The public markets will soon have another electric vehicle maker to bet on. Swedish electric carmaker Polestar said this week it will go public by merging with a SPAC created by investing pioneer Alec Gores and investment bank Guggenheim. The merger with the Gores Guggenheim SPAC assigns Polestar a $20 billion enterprise value. Once the deal closes in the first half of next year, Polestar will trade on the NASDAQ under the ticker symbol PSNY.

Joining us for more on the deal is the Chairman and CEO of the Gores Group Alec Gores and Polestar CEO Thomas Ingenlath. Good morning to both of you. Thanks for taking the time, and congrats on this deal.

Thomas, let me start with you here. In the investor presentation, you really are-- you talk a lot about being a design-led company. And you were a designer for many years. How does that impact how you run the company?

THOMAS INGENLATH: Well, definitely it has a strong impact on how much we put value on the product, on the quality of the product, of course, on its design. Scandinavian minimalism is what our customers get and what they cherish. And I think the attention to detail and the attention to the customer and what the customer wants is definitely one of the things of a design-led company.

BRIAN SOZZI: Alec, you had tremendous success with Luminar, and now you're placing a bet here on Polestar. What is attracting you to this space? Is it just the opportunity of the sector, or is it also a bet on people?

ALEC GORES: You know, at the end of the day for us is we start with the company that has a great leadership and a great team that we have a lot of convictions around them executing to the plan and have proven track record to execute on the plan. And then two, where are they in the sector?

And do they have a chance to be one of the leaders? And we bet on that as well. And then three, do they have great product, real product, real revenues, revenues that we're going to put our finger on that we could actually project and be able to tell what the revenues going forward are?

JULIE HYMAN: Thomas, it's Julie here. I wanted to ask you a little bit about the models that are out there already and what the plan is. It's interesting to me that a lot of the entrants into the electric vehicle market have been at the higher end, whether it's a Tesla, certainly at first, although it came down market a little bit, or a Lucid, for example.

You guys are also sitting at a relatively high price point. Even your second model is still at a relatively high price point. What is it about that part of the market that is so attractive for electric vehicle makers?

THOMAS INGENLATH: Julie, the premium electric market is definitely the one which has that power of developing now really quickly. The premium customer is more and more convinced about changing from combustion engine to electric cars. And of course, it's the perfect marketplace to display the technology and this greatness of the technology. I think that is where you can very easily convince with these incredible performing cars.

And what we add, of course, is this element of quality, that you get this interior that can really compete in this luxury premium market. Having said that, it was exactly the success of that you could see that the Tesla Model 3 could attract that much demographic group that we came out as the second car with the Polestar 2 The, [? yeah, ?] it's in the premium segment. But now with single motor, you really have a $40,000 entry ticket into the premium electric market. I think that's a very attractive offer.

BRIAN SOZZI: Also attractive too, Thomas, you are projecting to be break-even by 2023. That is a lot earlier than many other of the EV makers that we have talked to. How do you get to break-even?

THOMAS INGENLATH: Well, it's a secret that we don't hide much that our big advantage is that we can leverage on a lot of infrastructure technology that we find in the group that we are operating in. And that is, of course, a big advantage. We don't have to [INAUDIBLE] waste our money on things that in the end of the day don't matter to the customer.

Factories where our cars are produced exist. Knowledge how to launch a car, all that exists. We concentrate our investment on technology that makes Polestar special on our great design. And that is very efficient. And that shows, of course, as well in how much money you have to spend and invest in order to achieve all that.

JULIE HYMAN: I wanted to broaden this out a little bit and talk more generally about SPAC deals, because this has become such a popular method for companies to go public. As Brian Sozzi mentioned in the beginning of this conversation, Alec, you're a pioneer in this. You guys were talking during the break about you bringing Hostess public. Where are we in this trajectory, because it has been such a hot year so far, things seem to be quieting down a little bit? Are there still a lot of opportunities and a lot of runway out there?

ALEC GORES: Yeah, you know, I believe the SPAC product is a great product as long as it's not being abused. So as a sponsor, you have to be very, very responsible. You have to know what you're doing. You also have to bring in great companies. So a great sponsor meet great companies makes a good SPAC and a great SPAC.

So unless you have the track record-- this is our ninth SPAC. We've done almost $60 billion in transactions. But I've been doing this for 40 years, investing in companies and understanding management teams and sectors, et cetera, and operation. So if you really know what you're doing and you really vet things out, and, most important, you have to be totally aligned.

If you don't have alignment and you don't have skin in the game or you're not writing a big check that you're not being real about this whole SPAC stuff. So I'm very excited about the SPAC market. Frankly, today, I think we're in a better place than we were two years ago or a year ago where things got a little bit too crazy.

JULIE HYMAN: I mean, that said, Alec, you said you have to know what you're doing. You can't abuse the model. Do you think there is some abuse out there, or do you think there's a lot of abuse out there of the model right now?

ALEC GORES: Honest, that's not for me to judge or say. I can only tell you what we do. We do a lot of work. We do a lot of due diligence. We vet these things out. As Thomas will tell you, we get to know him very well and the management team. We dig very deep. And we regulate ourself more than anybody could regulate us.

BRIAN CHEUNG: Hey, I want to address this question over to Thomas. When it comes to just the broad funding approach that you had here, you know, what exactly were you hoping to gain from this partnership here that you weren't already getting from what is, I think, a core competitive advantage that you have, which is your ability to have Volvo and Geely behind you as well? When it comes to just kind of expanding and your overall projection for where you want to take the company over the next few years, why do you go down this route for financing?

THOMAS INGENLATH: Look, Brian, indeed our acceleration that we have now in the growth, three models in three years, really ramping up as well the volume, ending up with 290,000 cars in the year '25 as a projection, yes, we wanted to have, for that period, the access to capital market. Different options we looked at, and clearly for our company with the speed that we are going ahead, needing the flexibility. And then finding the right partner that convinced us.

Yeah, you mentioned the SPAC market. And for us, it was really important to make that a story that we, as well, trust in that it will be successful. And it can be only successful, like Alec described, because the trust between the partners, being convinced about the same goals, and the goal being long-term success, long-term profitability for everybody, the investors as well.

That is, of course, this is a serious business. We are in a company who actually is delivering. We actually deliver cars. We have 29,000 deliveries about this year. And I think that proven track record gave us, well, Alec and his team, the belief that we will deliver on our projections.

BRIAN SOZZI: Thomas, you teased in the investor presentation you all have a climate-neutral car, if I'm correct, by 2030. What does that car look like?

THOMAS INGENLATH: That is a moonshot goal that we deliberately put out to give internally that drive to us designing towards zero and to show as well how important it is to not stop just having an electric car, but really driving for a CO2 free car leaving the factory gate without that burden. And it's absolutely unknown today how to achieve it. But we felt like it's so important to describe that goal in order to really go for it and not just say, ah, you never can reach it.

That car definitely will not be a mass market cheap car. It's clear it will be 2030 when we achieve it for the first time. It will be a car that obviously has a big, big effort to achieve it, and it will be a very premium luxury car.

That's exactly the interpretation of the new luxury. What was, you know, the rich gold in the past, it's now really proving that you care, that you care about the environment and you can, as a first one, live that life for CO2 free burden life. And I think that will be really a very pinnacle product for us.

BRIAN SOZZI: Alec, you know, as I mentioned in the break, I remember covering the Hostess deal as a food reporter at the time. It feels like yesterday. I'm really curious on how you go upon picking-- or just picking good deals and staying away from bad deals. I imagine you get a ton of pitches. What is your-- what is your process like?

ALEC GORES: Well, we literally actually do. We see so many deals every week. So the first thing is we vet these things out very quickly. And they have to be-- then we have to have a lot of convictions around things that we find. But we do see a lot of deals.

And the art of it is to make sure, again, you start with a great company that has the potential to be the leader in the space. Then you go to management, great management team. Then you go to product, great product. And you have to-- and then revenues and projections, all these things have to meet. And more support, we have to be aligned with the management team.

In this case, Thomas and his team are incredible team. We believe in them executing to the plan. And also having the Volvo relationship really helps here. So, you know, we look at these things. We'll look at them seriously. We take our time. And we also like to be a great partner. In other words, we want to be value-add to our partners. Somehow, some way, we want to be value-add and not just deliver a SPAC and take them public.

That's also super important to us. So we engage on many levels. We partner on many levels. And it's a partnership. This is not a transaction for us. This is not just a deal transaction SPAC. This is a true partnership that we put together with every one of the companies that we've taken public and partnered with.

And you know, we have to be excited. Like, we're super excited about this. We believe in this. Thomas and the team will be one of the leaders in this space. Because we could-- look, we have a lot of convictions on our revenues. It's a real car. It's not a concept.

So we're super excited. So we have to be super excited to do this. And the last check the box for us is to make sure that we're writing a big check into this. We're not just delivering words. We're really actually writing a big check. That kind of checks the box that we're real about it and aligned with the investors and our partners as well.

JULIE HYMAN: Alec, and then lastly, I mean, you talk about the opportunities there. But what are the unique challenges to helping a large company that's in this EV space get funding here? I imagine it's a very different type of approach than you may have had with Hostess, for example, as Brian pointed out.

What's unique about the EV space and why does it appear-- because it's not just Polestar. There are other EV companies that went down the SPAC route as well, when it comes to ultimately choosing that avenue for financing?

ALEC GORES: Look, I mean, we like the space. Obviously, it's a hot space. But again, it goes back to finding the right company to do it. A lot of EV companies-- this out of all the ones we've looked at, this EV company, Luminar is kind of the same, we had to look at a lot of LiDAR companies. And we ended up with Luminar for a lot of reasons, same similar reasons. In this case, we are very excited about this and this space as well.