An electric vehicle manufacturer is battling for its survival on the Nasdaq exchange as investor patience with the struggling EV sector wears dangerously thin. Swedish automaker Polestar has announced a drastic measure to prevent its stock from being delisted, highlighting the severe pressures facing the electric car industry.
A Desperate Bid to Stay Listed
On Wednesday, Polestar revealed its plan for a reverse stock split, a last-ditch effort to boost its share price above the Nasdaq's minimum listing requirement of $1. This financial manoeuvre drastically reduces the number of shares in circulation while increasing their individual value. For instance, a one-for-ten split would convert ten shares valued at $1 each into a single share worth $10.
Companies typically resort to such reverse splits when their stock price has fallen so low that they face expulsion from the exchange. It is largely seen as a cosmetic fix that can buy a company precious time but does little to address the fundamental business problems causing the stock's decline. The market's reaction was swift and brutal: Polestar's stock plunged nearly 12 percent following the announcement, settling at a meagre $0.22 per share.
Underlying Troubles for the EV Maker
This sharp drop extends a punishing slide for the company, which was once touted as a serious rival to Tesla. The stock has been trading below the critical $1 threshold for weeks, battered by a perfect storm of mounting debt, production delays, and crippling tariffs on its Chinese-made vehicles.
The company's turmoil coincides with a difficult period for the entire electric vehicle market. In a significant blow, the industry lost a government-funded $7,500 consumer tax credit in September, a key incentive that had been propping up consumer demand.
Polestar, a company spun off from Volvo and majority-owned by China's Geely Holding, is now pinning its hopes on the upcoming US launch of its Polestar 4 model in December. The company previously informed the Daily Mail that this vehicle, which notably comes without a rear window, is intended to be their new volume seller. This is crucial since the company had to discontinue its previous best-seller, the China-made Polestar 2, in the US market in April due to significant tariffs.
Currently, US sales rely on the high-end Polestar 3 SUV, which carries a price tag of $68,000. While the company reported a 36 percent revenue increase last quarter, this was overshadowed by a larger cash crunch caused by rising costs from quickly depreciating vehicles. The automaker reported a third-quarter loss of $365 million, worse than the $323 million loss it sustained during the same period last year.
Leadership's Controversial Strategy
Polestar's CEO, Michael Lohscheller, stated that the reverse stock split is part of a broader initiative to make the organisation 'more efficient' as market conditions deteriorate. However, this is not his first time employing such a tactic. Lohscheller attempted a similar split when he was at the helm of Nikola, the electric truck startup that has since gone bankrupt. While Polestar has so far avoided that fate, the parallel has undoubtedly unsettled investors.
The stock split announcement comes after weeks of significant internal changes. Polestar has been aggressively slashing costs, changing leadership, and shifting to a dealer-focused sales model in a bid to revitalise its finances. The company has also confirmed receiving a fresh investment from its owner, though the amount remains undisclosed.
In a strategic pivot, Polestar is now doubling down on the European market as US demand wanes. The company will skip launches in America and China for its upcoming Polestar 5 GT sport sedan, focusing its efforts elsewhere. This marks a dramatic turn for a company whose stock first entered the public market in 2022 at $13 per share via a SPAC merger.
