The last thing any public company wants to see is that it has a “going concern” warning, which acknowledges it may have little time to survive. The term means a company may need to restructure or liquidate part of its business. Electric vehicle (EV) company Polestar Automotive Holding UK PLC (NASDAQ: PSNY | PSNY Price Prediction) disclosed the problem yesterday.
The announcement caused a collapse in the EV firm’s shares. They have dropped to $1.04. A little more than four years ago, the stock traded at $16.
The disclosures came with Polestar’s earnings. “Uncertainty related to the execution of management’s liquidity and funding plan indicates the existence of a material uncertainty that may cast significant doubt upon Polestar’s ability to continue as a going concern,” it said.
For the six months ending June 30, it reported that revenue rose to $1.4 billion from $909 million last year. Yet, Polestar lost $1.13 billion, compared to $554 million in the year-ago period. The company withdrew its guidance last April.
For the three months ending June 30, unit sales reached 18,049, up from 13,072 in the same quarter last year.
As a result of the figures, CFRA analyst Garrett Nelson downgraded shares to Sell from Hold. He lowered his $1 price target to $0.50. He worried whether Polestar can reach a size where it is even modestly competitive. “We see Polestar’s struggles continuing as EV incentives are discontinued in the U.S. and as consumers increasingly turn toward hybrids,” he said.
Polestar has made a mistake that several tiny EV makers have also made. Its vehicles sell for over $70,000, while most buyers in the market want EVs priced below $30,000. Several Chinese companies have already hit that range.
Polestar finds itself stuck between wounded EV giant Tesla and legacy car companies like Ford and GM that are spending billions for a sliver of market share.
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