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Energy & Critical Metals

Polestar SPAC Merger Makes Gores Guggenheim Stock a Hot Item

Ready to add an intriguing special purpose acquisition company (SPAC) to your watch list? This one’s called Gores Guggenheim (NASDAQ:GGPI), and GGPI…

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This article was originally published by Investor Place

Ready to add an intriguing special purpose acquisition company (SPAC) to your watch list? This one’s called Gores Guggenheim (NASDAQ:GGPI), and GGPI stock may have big upside potential.

Source: Nick Starichenko/InvestorPlace.com

Gores Guggenheim is reverse-merging in the near future with a Swedish electric vehicle manufacturer. My research didn’t come up with an exact date for the upcoming transaction, but the wait shouldn’t be very long.

It’s a deal of epic proportions with an enterprise value of $20 billion. It includes a private investment in public equity (PIPE) of $250 million from top-tier institutional investors and could potentially provide the target business with $800 million in cash proceeds from Gores Guggenheim.

Could this stock yield life-changing returns like Tesla (NASDAQ:TSLA) did? Let’s not get ahead of ourselves. Instead, let’s look a little deeper to see if there’s a worthy investment here.

A Closer Look at GGPI Stock

Gores Guggenheim went public with its initial public offering (IPO) in March. Prior to merger deal announcements, SPAC stocks tend to stay close to $10 a share. However, GGPI stock drifted down to $9.70 by July 1. But the next week, there was an announcement of a potential merger target, Swedish electric vehicle maker Polestar.

Electric vehicle SPACs were piquing Wall Street’s interest in early 2021. However, by the summer, that excitement had waned. Thus, the merger talk only gave GGPI stock a temporary boost to $10.69 per share.

Fast-forward to late September, and we saw a similar bump to $10.55, as it appeared the SPAC deal was drawing near. That little boost appears to be fading as well, though, with GGPI stock currently trading around $10.15.

To help you decide whether this $10 stock could someday turn into a $20 or $30 stock, let’s delve into the details of the target company.

A Deal Is Struck, Finally

On July 8, Wall Street learned that Gores Guggenheim was in talks with Polestar to possibly take that company public. Polestar is owned by Chinese automaker Geely Automobile (OTCMKTS:GELYY) and Volvo Cars. (Fun fact: It also counts Leonardo DiCaprio among its investors.)

The company offers a hybrid performance car called Polestar 1 and a fully electric Polestar 2. These are currently on roads across Europe, Asia and North America.

As InvestorPlace contributor Chris MacDonald reported, Polestar raised $550 million in external funding last year, which it plans to use to fund production of the Polestar 3 electric SUV beginning in the latter half of next year.

A lengthy wait, with not much besides radio silence, followed the July announcement. Finally, on Sept. 27, Polestar struck a SPAC merger deal with Gores Guggenheim. Post-merger, the combined company will be named Polestar Automotive Holding UK Limited, and it will trade under the ticker symbol PSNY on the Nasdaq.

Wall Street’s excitement over this event was short-lived, though. GGPI stock popped as much as 5.7% on the day before giving back much of those gains. But it’s certainly possible Wall Street will regain its appetite for EV SPACs.

Polestar expects to sell around 290,000 vehicles a year by 2025, up from 10,000 vehicles globally last year. Management predicts revenue of $1.6 billion this year and thinks it can double that in 2022. It also plans to launch three new vehicle models by 2024.

Yet, despite Polestar’s ambitious vision for growth, CEO Thomas Ingenlath has clarified that Polestar doesn’t intend to be a “Tesla killer.”

The Bottom Line on GGPI Stock

So, now you have a clearer picture of the electric vehicle startup that Gores Guggenheim targeted for a merger deal. Polestar already has vehicles on the roadways, so that’s a plus. Yet, Wall Street’s enthusiasm over the SPAC merger seems to have waned.

Therefore, any investment in GGPI stock should be small. The share price could double at some point, sure, but heed Ingenlath’s words and don’t look for a “Tesla killer” here.

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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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Energy & Critical Metals

Despite Market Uncertainties, Nio Stock Is Set to Climb

Macroeconomic uncertainties in China are hurting electric vehicle-companies in the region. Case in point, instead of breaking out to new highs on strong…

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Macroeconomic uncertainties in China are hurting electric vehicle-companies in the region. Case in point, instead of breaking out to new highs on strong sales, Nio (NYSE:NIO) is underperforming. NIO stock peaked in July at $55 but is currently trading around $36.

The 20-day and 50-day simple moving averages for NIO are now technical resistance levels. This suggests that the stock needs a strong positive catalyst to push it above its moving average.

Source: Sundry Photography / Shutterstock.com

So what’s holding Nio shares back?

China Worries Weigh on NIO Stock

China’s crackdown on e-commerce firms spooked Nio investors. The government introduced punitive regulations protecting consumer privacy. This is one of the main reasons that regulators frowned upon DiDi’s (NYSE:DIDI) public listing.

Meanwhile, in the property sector, Evergrande Group’s imminent default will harm millions of suppliers, contractors, and especially homeowners. The property management firm owes over $300 billion in debt and does not look like it will pay the funds back. Millions of investors who bought Evergrande property are waiting for construction to resume.

These macro headlines matter to the EV market because consumers have limited disposable income. As a high-end brand in China, the average Nio vehicle is 437,700 yuan (USD 68,000). Nio competes with premium brands like BMW, Tesla (NASDAQ:TSLA), and Audi. Plus, Nio EVs cost more than competitor vehicles on average.

Strong September Deliveries

In September, Nio delivered 10,628 vehicles globally, up 125.7% year-over-year. For the third quarter, deliveries grew by 100.2% Y/Y to 24,439 vehicles. Despite a chip shortage, the EV giant reported an all-time high in monthly deliveries. It delivered 5,260 ES6s, its premium 5-seat smart electric SUV. 1,978 deliveries were ES8s—Nio’s six or seven seater.The five-seater EV coupe SUV came in at 3,390 units delivered.

The Oct. 1 press release announcing these deliveries should have sent NIO stock higher. Instead, NIO shares traded in the low $30s before ending last week barely at break-even. At less than one-tenth of Tesla’s market capitalization, bullish investors cannot understand why Nio is down but Tesla is up. Nio trades at an unfavorable price-to-sales compared to that of Tesla. But Tesla has a better debt-to-equity ratio. That may matter more in the quarters ahead.

The Federal Reserve is set “taper.” But by lessening the financial support it provided during the pandemic, raising rates and purchasing fewer open market bonds, the Fed could hurt firms  with debt.

Quarterly Losses

Higher costs on loans are not Nio’s primary risk, however. Its quarterly losses are still a concern. In Q2, the company lost US$102.1 million. This is a decrease of 45.4% from last year. But even with share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value excluded, Nio still lost US$52 million.

Growth Opportunity

Nio has US$7.5 billion in cash and cash equivalents. It will not need to sell shares to fund its global expansion and research and development efforts.

Additionally, Nio has a battery swap program that earns steady subscription revenue. It also lowers the price of the vehicle and increases its affordability. Furthermore, customers do not need to wait at an EV pump to charge the battery. The battery swap saves time and increases customer satisfaction. Increasing EV affordability will matter in the months ahead. If China’s economy weakens because of the government’s deliberate deleveraging of real estate debt, EV sales may fall.

Investors who want to diversify from Nio may consider holding XPeng (NYSE:XPEV), too. XPeng trades at almost half of Nio’s market capitalization and has negligible debt levels. Tesla is also worth considering.TSLA trades at a premium but it’s worth it since Tesla benefits as the early adaptor in the EV space worldwide.

Price Target

Seven analysts who rate Nio as a stock to buy have an average price target of around $62.00. The price target range is $47 – $72, according to Tipranks. Nio’s current growth score of 55/100 is a good start. And its quality score will improve as operating margins expand.

The Nasdaq is wavering while Nio is holding a steady price level at around $35.00. And October is typically a weak month for technology investors. Next month and early next year, continued growth in EV demand will lift Nio stock.

Now that Nio is done with selling shares to raise cash, it may focus on operating at break-even levels. As it posts profits after that, investors who appreciate the positive cash flow will build a bigger position in Nio. China will ease its regulatory crackdown next. This is another positive macro tailwind. The negative cloud around Chinese stocks will end, giving markets another reason to buy Nio stock.

On the date of publication, Chris Lau 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.

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Precious Metals

Portofino Resources Offers an Exciting Lithium Bet With Multiple Canadian Gold Projects Up Its Sleeve

Source: Peter Epstein for Streetwise Reports   01/21/2021

Peter Epstein of Epstein Research profiles a company that controls five options to acquire "promising gold properties" in Canada.It would be easy to point at the latest news on Portofino.

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Source: Peter Epstein for Streetwise Reports   01/21/2021

Peter Epstein of Epstein Research profiles a company that controls five options to acquire "promising gold properties" in Canada.

It would be easy to point at the latest news on Portofino Resources Inc. (POR:TSX.V; PFFOF:OTCQB) and say, "look, a gold junior moving into the red hot lithium space!" But, of course Portofino never left lithium, it expanded into precious metals just before the gold price soared from $1,500 to over $2,000/oz (more about that later).

Portofino knows lithium and management knows Argentina

While Portofino is not new to lithium, what I said about lithium being hot is perfectly clear. The top-10 performing lithium companies (all but one pre-production) are up an average of +1,320% from their 52-week lows. These players span hard rock, brine and sedimentary (including clay-hosted lithium projects).

Portofino controls a 2,932 hectare brine project in Catamarca province, Argentina, 15 km southeast of Neo Lithium's very high-grade/very low-impurities project. Admittedly, 2,932 ha is not a giant footprint, but it's not tiny either.

Portofino's property is about the same size, or larger, than land packages held by Argosy Minerals and Lithium South Development Corp., who have market caps of $180 million and $30 million, respectively.

Not only is the lithium sector extremely strong, shares of companies with projects in Argentina are among the leaders of the pack, {Neo Lithium, Lithium Americas, Millennial Lithium, Argosy Minerals and Lake Resources are among the top-12 performers}.

Make no mistake, Yergo is not that valuable today, but it could be after it's drilled later this year. Lithium Americas is up 870% (even after announcing and closing a $350 million private placement) from its March 2020 COVID-19 low. It has a $3.7 billion market cap, Neo Lithium is up 818%.

Most investors are familiar with mining juniors touting nearby mines as examples of possible outcomes of their exploration activities. Sometimes analog mines are past producers, sometimes they're 50-150 km away, and sometimes they're mediocre assets.

By contrast, Portofino's Yergo project is 15 km from Neo Lithium's PFS-stage 3Q project, possibly the single best lithium brine project in the world.

In the chart above I show most of the lithium players with all, or substantially all, of their lithium properties in Argentina, (POSCO, Lithium Americas and Galaxy Resources also have projects in other countries). By no means do I mean to suggest that any of the larger companies would care about the Yergo project.

However, there are a handful of names that might benefit from acquiring a new brine project, especially one with demonstrated low Mg levels and one that does not share its salar with others.

If drilling hits Li concentrations anywhere near that of Neo Lithium's project, Yergo could become something fairly significant. Could it be worth $100 million? Probably not! But, $5–$10 million? Perhaps, especially in the hands of a larger lithium player. Remember, the company's market cap is just $8 million.

Although Portofino's lithium assets (including a ~650k share position in lithium junior Galan Resources) hold significant promise, the company's primary objectives in 2021 remain in the gold sector.

Readers are reminded that management has boots on the ground in Argentina, valuable business relationships dating back nearly a decade, with people in Catamarca province. These relationships are being leveraged not just for lithium, but now for precious metal opportunities as well.

2 gold properties, Gold Creek and South of Otter, to be drilled this year

Near Red Lake, Portofino has the South of Otter ("SOT") and Bruce Lake properties. In Atikokan, Portofino has three more, Gold Creek, Sapawe West and Melema West. All five properties, totaling 12,843 hectares, are in northwestern Ontario and are controlled via very low-cost, multi-year options to acquire 100% interests. Gold Creek and SOT are the two flagship projects.

Gold Creek comprises 15 mining claims containing ~4,036 contiguous hectares in the Atikokan area, near Red Lake. Gold Creek is Portofino's most advanced gold project. Management is planning for a 1,000 m (5–6 hole) drill program in the spring.

Historical data, mostly from the eastern portion of the property, includes multi-ounce gold grab samples and drill intercepts of 4.3 g/t gold over 41 m and 4.36 g/t gold over 20.4 m completed in 1995, and a 1 tonne bulk sample in 2008 that returned an average grade of 9.9 g/t gold.

Although there's been limited drilling, substantial exploration over the decades at Gold Creek included prospecting, mechanical stripping and trenching, geological mapping, airborne magnetic and electromagnetic survey, ground magnetic and electromagnetic surveys, selective radiometric and gravity surveys, and geochemical sampling.

Management negotiated the Gold Creek property option at the height of the global pandemic in March–April 2020. I believe it got a very good deal. How many pre-maiden resource properties have had a 1 tonne bulk sample taken?

A tonne at 9.9 g/t gold—that's US$600/tonne rock! Significant gold mineralization has been traced along a 1.5 km strike length with grab samples as high as 759 g/t (~24.4 troy oz/ ton).

In the summer and fall, two prospecting programs were carried out which included 211 grab samples. Historical zones of mineralization were sampled, confirming anomalous and high-grade gold in multiple zones—samples returned up to 45.6 g/t gold.

A Mag Survey was flown over the entire property in late summer, followed by a property-wide compilation and structural interpretation. This critical work greatly enhanced the geological and structural understanding of the property.

Prospecting and mapping in the fall led to the discovery of the New Road Zone. Fourteen grab samples were collected, the two best showed 4.1 g/t gold and 720 ppm copper.

Management believes its understanding of the mineralization has significantly improved. For example, locations of historical work are much better known. Gold zones confirmed in 2020 will be drill-ready—following a detailed review of previous drilling and ongoing structural interpretations.

South of Otter is Portofino's premier Red Lake project

The 5,363 hectare South of Otter ("SOT") property is in the same greenstone belt hosting the world-class Red Lake District ("RLD"), including Great Bear Resources' high-grade Dixie project in northwestern Ontario. SOT is ~8 km east of Great Bear's prolific, ongoing gold discoveries.

The RLD is one of the highest-grade gold mining camps on the planet, and has produced >30 million ounces of gold. The regional geology has been compared to top-tier districts such as the Timmins and Kirkland Lake Camps in northeastern Ontario.

In August, 2020, management reported assays from grab samples that identified two gold-bearing quartz veins sampling 18.0 g/t and 8.19 g/t gold. Historical exploration at SOT includes prospecting, sampling, geophysical surveys and limited diamond drilling.

A few months ago, a ground VLF/EM survey was done to refine gold mineralization targets of merit and to identify areas for prospecting, trenching and drilling. Three substantial conductors were found over a 1.6 km strike length.

Three earlier-stage gold properties….

Portofino has an option on 100% of the 1,428 ha Bruce Lake property, also in the RLD, ~1.5 km northeast of Great Bear's Pakwash property, and ~11 km southeast of the above mentioned Dixie project. Bruce Lake hosts gold-in-soil anomalies discovered in 2010. Management believes regional magnetic highs coincident with the gold-in-soil anomalies are significant.

Melema West is a smaller (869 ha), early stage property ~28 km northeast of the town of Atikokan. There are some gold showings in the area and the property is on a structure that's parallel to Agnico Eagle's 32,070 ha, 4.5M oz., near-surface Hammond Reef deposit. Lately, Agnico has been staking ground around Melema West and Sapawe West.

CEO David Tafel recently commented,

"Gold-bearing northeast trending structures in this area are extensive, well documented and traceable for over 30 km. Recent claim staking by Agnico in the area, contiguous to Melema West, and around Sapawe West, supports our belief that these properties are strategically well located."

The Sapawe West property is quite close to Melema West, just north of the Quetico Fault and 2.5 km west and along strike of the past producing Sapawe Gold Mine. Sapawe West is ~13 km south of the Hammond Reef deposit.

Conclusion

Portofino Resources controls not two or three, but five options to acquire 100% interests in promising gold properties in and around the Red Lake district and the Atikokan area of northwestern Ontario. Two of the five, Gold Creek and South of Otter, are flagship projects near very prominent projects. Both will see drilling this year.

Ongoing, exciting drill results and exploration/development activities advanced by Great Bear Resources and Agnico Eagle will provide positive investment catalysts for Portofino.

In addition, management wisely held on to a 2,932 hectare lithium brine project in Catamarca province, Argentina that (could become, after drilling) fairly significant relative to Portofino Resources' (TSX-V: POR) / (OTCQB: PFFOF) tiny C$8M market cap. The Yergo lithium brine project is a long-dated call-option on continued strength in battery metals.

The company's projects are all early-stage, but in a bull market for gold, (and potentially for lithium), early-stage offers the most upside potential, albeit with commensurate risk. Having five gold properties spreads the risk and increases the odds that drilling will lead to one or more noteworthy discoveries. I continue to like the compelling risk/reward proposition here.

 

Peter Epstein is the founder of Epstein Research. His background is in company and financial analysis. He holds an MBA degree in financial analysis from New York University's Stern School of Business.

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Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research[ER], (together, [ER]) about Portofino Resources, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Portofino Resources are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this article was posted, Portofino Resources was an advertiser on [ER] and Peter Epstein owned shares and warrants in the Company.

Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he's diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

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( Companies Mentioned: POR:TSX.V; PFFOF:OTCQB, )

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Energy & Critical Metals

AVZ Minerals signs important deal with CATH

 
AVZ Minerals (AVZ.AX) can look forward to an US$240M cheque from CATH, a private investment entity owned by Pei Zhenhua and CATL, a large lithium conversion…

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AVZ Minerals (AVZ.AX) can look forward to an US$240M cheque from CATH, a private investment entity owned by Pei Zhenhua and CATL, a large lithium conversion company. CATCH is acquiring a 24% stake in the holding company owning AVZ’s flagship Manono Lithium and Tin project in the DRC and will be required to make pro rata contributions towards the development and construction of the Manono project. The DRC government retains a 10% free carried interest in the project, so we are assuming CATH is acquiring a 24% interest in the subsidiary that has the right to own 90% of the project, for an effective economic interest of 21.6% in the project.

The cash injection will also make it easier to investigate the potential expansion of the throughput at Manono. The original plan called for a throughput of 4.5 million tonnes per year which would result in the production of 0.7 million tonnes of SC6 (spodumene, a lithium concentrate with an average grade of 6% Lithium) but the company is now investigating the potential to construct a plant with a throughput of 10 million tonnes per year for a total production of 1.6 million tonnes of spodumene per year. The increased throughput would mean both CATH and the existing offtake partner could be accommodated.

Manono is a very large project as the total resource contains 401 million tonnes at an average grade of 1.65% Li2O and just over 1.5 pounds of tin per tonne of rock. Under the updated 10 million tonnes per annum throughput scenario, the mine life would still be a few decades and even based on the 132 million tonnes in the reserve category, the initial mine life based on the reserves would be around 13 years.

While the DRC still is a risky jurisdiction, having Chinese capital entering the picture will likely help AVZ. The price paid by CATH seems to be very fair and perhaps this is a first step towards full ownership as CATL, a partial owner of CATH, recently announced the acquisition of Millennial Lithium (ML.V) to secure its lithium supply chain.


Disclosure: The author has no position in AVZ Minerals. Please read our disclaimer.

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