Electric vehicle manufacturer Polestar Automotive (NASDAQ:PSNY) produces cars that are stylish and powerful. Yet, this doesn’t ensure that Polestar’s shareholders will succeed in the long run. Sure, there’s some positive news to report, but there’s also a major issue that should make anyone think twice about buying Polestar stock.
Don’t get the wrong idea. I’ve expressed optimism about Polestar and, under the right circumstances, I could be bullish about the stock. For now, however, it’s wise to learn all the relevant facts and circumstances about Polestar and to choose caution over ambition.
Good News: Polestar Isn’t Broke
Before getting to the cautionary notes, I’d like to relay some good news about Polestar. For one thing, the automaker recently debuted its power/performance vehicle, the Polestar Concept BST. It’s a customized sports EV which looks awesome.
Polestar delivered “approximately 13,000 cars” in 2024’s second quarter. This represents 80% quarter-over-quarter growth, which is nothing to sneeze at.
In addition, Polestar has a capital position that’s surprisingly large for a relatively small EV startup. As of Dec. 31, 2023, the company had cash and cash equivalents totaling $768.927 million.
Then, as of March 31, 2024, Polestar’s position of cash and cash equivalents grew to $784.021 million. Thus, there’s no need to worry about Polestar being broke. The automaker appears to have a capital runway to fund its operations in the near term, at least.
Polestar’s Delisting Threat Can’t Be Ignored
Now, I must convey some distressing news that investors can’t afford to ignore. Not long ago, the Nasdaq exchange notified Polestar that the EV maker is out of compliance with the exchange’s $1 minimum-bid-price requirement.
Polestar has until Jan. 2, 2025, to get its share price at or above $1 for at least 10 consecutive business days. After that, the Nasdaq exchange might or might not give Polestar an additional 180 days to regain compliance with the $1 minimum-bid-price rule.
Let’s be completely frank here. It would be viewed as a devastating demotion if Polestar gets booted from the Nasdaq exchange and relegated to an over-the-counter exchange.
So, Polestar’s investors should hope that the share price rises above $1 and stays there. Alternatively, Polestar could enact a reverse stock split. That would be an artificial solution, but at least it might avert the delisting threat. So, keep an eye out for potential announcements from Polestar.
Polestar Stock: Temper Your Optimism With Realism
I wish I could be 100% optimistic about Polestar today. The company produces impressive-looking vehicles, recently reported excellent EV-delivery growth and has a surprisingly solid capital position.
At the same time, the delisting threat is bothersome. Consequently, while it’s fine to like Polestar as a company, investors need to be realistic. Unless/until Polestar stock rises above $1 and stays there for a while or Polestar announces a reverse share split, it’s prudent to stay on the sidelines.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.