As filed with the Securities and Exchange Commission on May 9, 2022
Registration Statement No. 333-260992
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 6
to
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POLESTAR AUTOMOTIVE HOLDING UK PLC
(Exact Name of Registrant as Specified in Its Charter)
England and Wales | 3711 | Not Applicable | ||
(Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
Thomas Ingenlath
Assar Gabrielssons Väg 9
405 31 Göteborg, Sweden
(Address, including zip code, and telephone number, including area code, of Registrants principal executive offices)
Polestar Automotive USA Inc.
777 MacArthur Blvd
Mahwah, NJ 07430
Tel: (949) 735-1834
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Christian O. Nagler Timothy Cruickshank Kirkland & Ellis LLP 601 Lexington Avenue New York, NY 10022 Tel: (212) 446-4800 Fax: (212) 446-4900 |
Alex Lloyd Kirkland & Ellis LLP 200 Clarendon Street Boston, MA 02116 Tel: (617) 385-7500 |
James R. Griffin Weil, Gotshal & Manges LLP 200 Crescent Court, Suite 300 Dallas, TX 75201 Tel: (214) 746-7779 |
Kyle C. Krpata Weil, Gotshal & Manges LLP 201 Redwood Shores Parkway Redwood Shores, CA 94065 Tel: (650) 802-3093 |
Approximate date of commencement of proposed sale to the public: Pursuant to Rule 162 under the Securities Act, the offer described herein will commence as soon as practicable after the date of this Registration Statement. The offer cannot, however, be completed prior to the time this Registration Statement becomes effective. Accordingly, any actual exchange of securities pursuant to the offer will occur only after this Registration Statement is effective, subject to the conditions set forth in this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the registration statement shall become effective on such date as the U.S. Securities and Exchange Commission, pursuant to said Section 8(a), may determine.
The information contained in this document is subject to completion or amendment. A registration statement relating to these securities has been filed with the United States Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This document is not an offer to sell these securities and it is not soliciting an offer to buy these securities, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
PRELIMINARYSUBJECT TO COMPLETION, DATED MAY 9, 2022
This proxy statement/prospectus relates to a Business Combination Agreement, dated September 27, 2021 (as amended by that certain amendment dated December 17, 2021 (Amendment No. 1 to the Business Combination Agreement), that certain amendment dated March 24, 2022 (Amendment No. 2 to the Business Combination Agreement), and that certain amendment dated April 21, 2022 (Amendment No. 3 to the Business Combination Agreement), and as it may be further amended from time to time, the Business Combination Agreement), by and among Gores Guggenheim, Inc., a Delaware corporation (GGI), Polestar Automotive Holding Limited, a Hong Kong incorporated company (Parent), Polestar Automotive (Singapore) Pte. Ltd., a private company limited by shares in Singapore (Polestar Singapore), Polestar Holding AB, a private limited liability company incorporated under the laws of Sweden (Polestar Sweden), Polestar Automotive Holding UK Limited, a limited company incorporated under the laws of England and Wales and a direct wholly owned subsidiary of Parent (ListCo, and, following the Closing (as defined below), the Post-Combination Company), and PAH UK Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of ListCo (Merger Sub), a copy of which is attached to this proxy statement/prospectus as Annexes A-1, A-2, A-3 and A-4.
Pursuant to the Business Combination Agreement and in connection therewith, among other things and subject to the terms and conditions contained therein:
| in connection with the Merger (as defined below), prior to the closing of the transactions contemplated by the Business Combination Agreement and the other transaction documents contemplated thereby (the Closing), Parent will, and will cause ListCo, Polestar Singapore, Polestar Sweden and their respective subsidiaries to, complete a reorganization, pursuant to which, among other things, Polestar Singapore, Polestar Sweden and their respective subsidiaries will become, directly or indirectly, wholly owned subsidiaries of ListCo (the Pre-Closing Reorganization); |
| as consideration for the Pre-Closing Reorganization, ListCo will issue to Parent a number of class A ordinary shares in the share capital of ListCo (Post-Combination Company Class A Shares), which class A ordinary shares will entitle the holder to one vote per share and a number of class B ordinary shares in the share capital of ListCo (Post-Combination Company Class B Shares, and, together with the Post-Combination Company Class A Shares, the Post-Combination Company Shares), which class B ordinary shares will entitle the holder to ten votes per share, such that, following the Pre-Closing Reorganization, Parent will hold an aggregate number of Post-Combination Company Shares equal to approximately (a) $20,003,000,000 divided by $10.00, less (b) (i) the aggregate principal amount due in respect of certain convertible notes of Parent outstanding as of immediately prior to the Closing, divided by (ii) the applicable conversion price of such notes, less (c) 58,882,610, which represents the aggregate number of Post-Combination Company Preference Shares (as defined below) issued pursuant to the Volvo Cars Preference Subscription Agreement (as defined below); |
| as additional consideration for Parents contribution to ListCo of all the issued and outstanding equity securities of Polestar Sweden, Parent will be entitled to receive, during the period beginning 180 days following the Closing and for five years thereafter, subject to the terms provided in the Business Combination Agreement, earn out shares from ListCo (the Earn Out Shares) issuable in Post-Combination Company Class A Shares and Post-Combination Company Class B Shares up to an aggregate number equal to approximately (a) 0.075 multiplied by (b) the number of issued and outstanding Post-Combination Company Shares as of immediately after the Effective Time (as defined below) (including Post-Combination Company Shares issued pursuant to the Subscription Agreements (as defined below)), rounded down to the nearest whole number; |
| following the Pre-Closing Reorganization and pursuant to the Business Combination Agreement, at the Closing, Merger Sub will merge with and into GGI (the Merger), pursuant to which the separate corporate existence of Merger Sub will cease and GGI will be the surviving corporation and will become a wholly owned subsidiary of ListCo (the Merger, together with the other |
transactions contemplated by the Business Combination Agreement, and the transactions contemplated by the other transaction documents contemplated by the Business Combination Agreement, the Business Combination); |
| at the effective time of the Merger (the Effective Time) and by virtue of the Merger: |
| any units of GGI that are outstanding immediately prior to the Effective Time held by GGI stockholders will be automatically separated and the holder thereof will be deemed to hold one share of GGI Class A Common Stock and one-fifth of a public warrant of GGI (GGI Public Warrant), which underlying securities will be converted as described below; |
| each share of Class A common stock of GGI, par value $0.0001 per share (GGI Class A Common Stock) issued and outstanding immediately prior to the Effective Time, other than those held in treasury, will be exchanged for one newly issued American depositary share of ListCo (Class A ADS) duly and validly issued against the deposit of an underlying Post-Combination Company Class A Share with ListCos depositary bank (the depositary) with which ListCo has established and sponsored American depositary receipt facilities (each, an ADR Facility); |
| each share of Class F common stock of GGI, par value $0.0001 per share (GGI Class F Common Stock, and together with the GGI Class A Common Stock, the GGI Common Stock) issued and outstanding immediately prior to the Effective Time, other than those held in treasury, will be exchanged for one newly issued Class A ADS; |
| all GGI Common Stock held in treasury will be canceled and extinguished without consideration; and |
| in the event the Warrant Amendment Proposal (as defined below) is approved prior to the Effective Time, pursuant to the Class C Warrant Amendment, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one American depositary share of ListCo (Class C-1 ADS) duly and validly issued against the deposit with the depositary of an underlying class C-1 preferred share in the share capital of ListCo (Post-Combination Company Class C-1 Share). Each Post-Combination Company Class C-1 Share will be exercisable to acquire a Post-Combination Company Class A Share at an exercise price of $11.50 per share. In addition, each private placement warrant of GGI (GGI Private Placement Warrant) will be automatically cancelled and extinguished and converted into the right to receive one American depositary share of ListCo (Class C-2 ADS, and together with the Class C-1 ADSs, the Class C ADSs) duly and validly issued against the deposit with the depositary of an underlying class C-2 preferred share in the share capital of ListCo (Post-Combination Company Class C-2 Share, and together with the Post-Combination Company Class C-1 Shares, the Post-Combination Company Class C Shares). Each Post-Combination Company Class C-2 Share will be exercisable to acquire a Post-Combination Company Class A Share at an exercise price of $11.50 per share; |
| in the event that the Warrant Amendment Proposal is not approved prior to the Effective Time, pursuant to the Warrant Amendment Agreement, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one American depositary warrant of ListCo (Public ADW) duly and validly issued against the deposit with the depositary of an underlying warrant of ListCo (a Post-Combination Company Warrant) representing the right to acquire one Class A ADS (or one Post-Combination Company Class A Share if at the time of exercise ListCo no longer uses the ADR Facility) at an exercise price of $11.50 per Class A ADS on substantially the same terms applicable to the GGI Public Warrant. In addition, each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one American depositary warrant of ListCo (a PP ADW and, together with the Public ADWs, the ADWs) duly and validly issued against the deposit with the depositary of an underlying warrant of ListCo (a Post-Combination Company PP Warrant, and together with the Post-Combination Company Public Warrants, the Post-Combination Company Warrants) representing the right to acquire one Class A ADS (or one Post-Combination Company Class A Share if at the time of exercise ListCo no longer uses the ADR Facility) at an exercise price of $11.50 per Class A ADS on substantially the same terms applicable to the GGI Private Placement Warrant; |
| in connection with the Business Combination, ListCo re-registered as a public limited company under the laws of England and Wales with the name Polestar Automotive Holding UK PLC and adopted the proposed Articles of Association of the Post-Combination Company. (the Post-Combination Articles), which are attached to this proxy statement/prospectus as Annex B, to provide for, among other things, that (i) the initial ListCo Board will include nine directors, each serving staggered three-year terms, (ii) for a period of three years following the Closing, a majority of the ListCo Board will be (a) independent under applicable stock exchange rules and (b) unaffiliated with Volvo Cars (as defined below)/Zhejiang Geely Holding Group Co., Ltd., and (iii) for a period of three years following the Closing, except as required by applicable law, the ListCo Board may not convene a general meeting which proposes a resolution to remove an independent director unless a majority of the directors (including at least two independent directors) approve of such resolution and following any such removal, a majority of the directors (including at least two independent directors) must approve the appointment of any new independent director to fill the vacancy; |
| Parent, Parent Shareholders and ListCo have entered into an acknowledgement agreement (as amended by that certain Amendment to Acknowledgement Agreement to the Shareholders Agreement, dated as of March 24, 2022, and as may be further amended from time to time, the Shareholder Acknowledgement Agreement), a copy of which is attached to this proxy statement/prospectus as Annexes M-1 and M-2, which provides, among other things, that Parent and the Parent shareholders undertake that (i) the initial ListCo Board will include nine directors, a majority of whom will be independent directors, (ii) for a period of three years following the Closing, Parent and the Parent shareholders will not vote in favor of the removal any independent directors of ListCo unless at least two independent directors vote in favor of such removal, (iii) for a period of three years following the Closing, Parent and the Parent shareholders will not require ListCo to convene a general meeting for the purpose of removing an independent director, and (iv) for three years following the Closing, Parent and the Parent shareholders will not vote in favor of any amendment to the Post-Combination Articles relating to the composition of the ListCo Board or the appointment or removal of ListCo directors. The GGI Sponsor will have third party beneficiary rights to enforce the aforementioned undertakings; |
| Parent, Parent Shareholders, ListCo, the GGI Sponsor and the independent directors of GGI entered into a registration rights agreement (as amended by that certain Amendment No. 1 to the Registration Rights Agreement, dated December 17, 2021 (the Registration Rights Agreement Amendment No. 1) and that certain Amendment No. 2 to the Registration Rights Agreement, dated March 24, 2022 (the Registration Rights Agreement Amendment No. 2), and as may be further amended from time to time, the Registration Rights Agreement), a copy of which is attached to this proxy statement/prospectus as Annexes G-1, G-2 and G-3; and |
| prior to the Closing (but after the completion of the Pre-Closing Reorganization), ListCo and Parent will approve and adopt an equity plan, a copy of which is attached to this proxy statement/prospectus as Annex I, and an employee stock purchase plan, a copy of which is attached to this proxy statement/prospectus as Annex J. |
In addition and in connection with the foregoing, GGI, Parent, ListCo, the GGI Sponsor and GGIs independent directors (the GGI Initial Stockholders) have entered into a lock-up agreement (as amended by that certain Amendment No. 1 to the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement, dated December 17, 2021 (the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement Amendment No. 1) and that certain Amendment No. 2 to the Sponsor and Supporting Stockholders Lock-Up Agreement, dated March 24, 2022 (the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement Amendment No. 2), and as may be further amended from time to time, the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement) concurrently with the execution of the Business Combination Agreement, pursuant to which each GGI Initial Stockholder has, among other things, agreed to (i) vote their GGI Class F Common Stock in favor of the Business Combination Proposal and any other proposals for the Stockholder Special Meeting (as defined below) included in this proxy statement/prospectus, and against any alternative business combination, (ii) waive all adjustments to the conversion ratio set forth in the Amended and Restated Certificate of Incorporation of GGI, dated March 22, 2021 (the Current GGI Certificate) with respect to the
GGI Class F Common Stock, (iii) be bound by certain transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants, and (iv) not transfer any Class A ADSs issued pursuant to the Business Combination Agreement during the period beginning on the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein. In addition, the GGI Sponsor has agreed to the forfeiture of up to 1,540,835 shares of GGI Class F Common Stock. A copy of the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement is attached to this proxy statement/prospectus as Annexes K-1, K-2 and K-3.
In addition and in connection with the foregoing, Parent, ListCo and the other Parent shareholders party thereto (the Parent Shareholders) have entered into that Parent Lock-Up Agreement (the Parent Lock-Up Agreement), pursuant to which each Parent Shareholder has, subject to certain exceptions, among other things, agreed not to transfer any equity security of ListCo issued to them pursuant to the Business Combination Agreement or other transaction documents contemplated by the Business Combination Agreement during the period commencing the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein.
In addition, and in connection with the foregoing and concurrently with the execution of the Business Combination Agreement, GGI and ListCo have entered into subscription agreements (the Initial PIPE Subscription Agreements) with certain investors (the Initial PIPE Investors), pursuant to which the Initial PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of approximately 7.43 million Post-Combination Company Class A Shares in the form of Class A ADSs (the Initial PIPE Shares) for a purchase price of $9.09 per share in a private placement, for an aggregate amount of approximately $67.5 million (the Initial PIPE Investment Amount). The issuance of the Initial PIPE Shares pursuant to the Initial PIPE Subscription Agreements is contingent upon, among other customary closing conditions, the substantially concurrent consummation of the Business Combination. Pursuant to the Initial PIPE Subscription Agreements, ListCo agreed to file with the SEC (at ListCos sole cost and expense), within 30 calendar days after the date of Closing, a registration statement registering the resale of the Initial PIPE Shares, and to use its commercially reasonable efforts to have the registration statement declared effective as soon as practicable after the filing thereof.
In addition, and in connection with the foregoing and concurrently with the execution of the Business Combination Agreement, GGI and ListCo entered into a subscription agreement (as amended and restated on December 17, 2021 and amended on March 24, 2022 and as may further be amended from time to time, the Sponsor Subscription Agreement) with the GGI Sponsor, pursuant to which the GGI Sponsor initially agreed to purchase an additional 9.08 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.09 per share on the date of Closing, for an aggregate investment of approximately $82.5 million. Pursuant to the Sponsor Subscription Agreement, the Sponsor has the right to assign its commitment to purchase the Class A ADSs under the Sponsor Subscription Agreement in advance of the Closing. On December 17, 2021, (i) the GGI Sponsor assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $63.0 million of its initial commitment (the December Sponsor Assignment), to certain investors and (ii) GGI, ListCo and the GGI Sponsor amended and restated the Sponsor Subscription Agreement to reflect the December Sponsor Assignment. Additionally, on March 24, 2022, (i) the GGI Sponsor further assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $11.4 million (the March Sponsor Assignment), to certain investors and (ii) GGI, ListCo and the GGI Sponsor further amended the Sponsor Subscription Agreement to reflect the March Sponsor Assignment. As a result, pursuant to the Sponsor Subscription Agreement, Sponsor has agreed to purchase approximately 891,000 million Class A ADSs for a purchase price of $9.09 per Class A ADS on the date of Closing, for an aggregate investment of approximately $8.1 million (the Sponsor Investment Amount). The Sponsor Subscription Agreement is substantially similar to the Initial PIPE Subscription Agreements, except that the GGI Sponsor has the right to syndicate its commitment to acquire the Class A ADSs to be purchased under the Sponsor Subscription Agreement in advance of the Closing.
In addition, and in connection with the foregoing and concurrently with the execution of the Business Combination Agreement, GGI and ListCo entered into a subscription agreement (as amended and restated on December 17, 2021 and amended on March 24, 2022 and as may further be amended from time to time, the Volvo Cars PIPE Subscription Agreement) with Snita Holding B.V., a corporation organized under the laws of
Netherlands (Snita) and a wholly owned indirect subsidiary of Volvo Car AB (publ) (together with its subsidiaries, Volvo Cars), pursuant to which Snita initially agreed to purchase an additional 10 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $10.00 per share on the date of Closing, for an aggregate investment amount equal to approximately $100,000,000. Pursuant to the Volvo Cars Subscription Agreement, Snita has the right to assign its commitment to purchase the Class A ADSs under the Volvo Cars Subscription Agreement in advance of the Closing. On December 17, 2021 (i) Snita assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $73.0 million (the December Volvo Assignment, and together with the December Sponsor Assignment, the December PIPE Assignment) to purchase the Class A ADSs to certain investors (the investors who collectively were assigned commitments in the December PIPE Assignment, the December PIPE Investors) and (ii) GGI, ListCo and Snita amended and restated the Volvo Car Subscription Agreement to reflect the December Volvo Assignment. On March 24, 2022, (i) Snita further assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $15.8 million (the March Volvo Assignment, and together with the March Sponsor Assignment, the March PIPE Assignment), to certain investors (the investors who collectively were assigned commitments in the March PIPE Assignment, the March PIPE Investors) and (ii) GGI, ListCo and Snita further amended the Volvo Cars Subscription Agreement to reflect the March Volvo Assignment. As a result, pursuant to the Volvo Cars Subscription Agreement, Snita has agreed to purchase approximately 1.1 million Class A ADSs for a purchase price of $10 per Class A ADS on the date of Closing, for an aggregate investment of approximately $11.2 million (the Volvo Cars PIPE Investment Amount). The Volvo Cars PIPE Subscription Agreement is substantially similar to the Initial PIPE Subscription Agreements, except with regard to purchase price. Snita may, in accordance with the terms of the Volvo Cars PIPE Subscription Agreement, syndicate its commitment to acquire the Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement in advance of the Closing.
In connection with the December PIPE Assignment, on December 17, 2021, GGI and ListCo entered into subscription agreements (including, as applicable, amended and restated subscription agreements, the December PIPE Subscription Agreements) with certain investors (the December PIPE Investors), which include certain affiliates and employees of the GGI Sponsor. Pursuant to the December PIPE Subscription Agreements, the December PIPE Investors agreed to purchase, substantially concurrently with the Closing, approximately 14.3 million Post-Combination Company Class A Shares in the form of Class A ADSs (the December PIPE Shares) for an average price of approximately $9.54 per Class A ADS, reflecting an aggregate investment amount of approximately $136.0 million (the December PIPE Investment Amount). In connection with the March PIPE Assignment, on March 24, 2022, GGI and ListCo entered into subscription agreements (including, as applicable, amended and restated Subscription Agreements, the March PIPE Subscription Agreements, and together with the December PIPE Subscription Agreements, and the Initial PIPE Subscription Agreements, the PIPE Subscription Agreements, and the PIPE Subscription Agreements, together with the Sponsor Subscription Agreement and the Volvo Cars PIPE Subscription Agreement, the Subscription Agreements) with the March PIPE Investors, which include certain affiliates and employees of the GGI Sponsor. Pursuant to the March PIPE Subscription Agreements, the March PIPE Investors have agreed to subscribe for approximately 2.8 million Class A ADSs (the March PIPE Shares) for an average price of approximately $9.57 per Class A ADSs, reflecting an aggregate investment of approximately $27.2 million. The December PIPE Subscription Agreements and March PIPE Subscription Agreements are substantially similar to the Initial PIPE Subscription Agreements, except with regard to purchase price.
As a result of the December PIPE Assignment and the March PIPE Assignments, the aggregate investment amount and number of Class A ADSs to be purchased pursuant to the Subscription Agreements remains unchanged.
In addition, and in connection with the foregoing and concurrently with the execution of the Business Combination Agreement, ListCo has entered into a subscription agreement as amended by that certain amendment thereto, dated March 24, 2022 and as may be further amended from time to time, (the Volvo Cars Preference Subscription Agreement) with Snita, pursuant to which Snita has agreed to purchase, substantially concurrently with the Closing, upon and subject to the Closing, for mandatory convertible preference shares of ListCo (the Post-Combination Company Preference Shares) for an aggregate subscription price of $10.00 per share, for an aggregate investment amount equal to $498,039,000 (the Volvo Cars Preference Amount). On March 24, 2022, ListCo and Snita entered into an amendment to the Volvo Cars Preference Subscription
Agreement to increase the aggregate Volvo Cars Preference Amount to $588,826,100. The proceeds of such subscription will be used to satisfy certain accounts payable that are or will be due and payable by certain subsidiaries of Parent to Volvo Cars. As of the date hereof, it is currently anticipated that all of the Post-Combination Company Preference Shares will convert into Post-Combination Company Class A Shares at Closing, in accordance with, and subject to, the terms of the Post-Combination Company Preference Shares.
This proxy statement/prospectus serves as:
| a proxy statement for the special meeting of stockholders of GGI being held on [●], 2022 (including any adjournment or postponement thereof, the Stockholder Special Meeting), where GGI stockholders will vote on, among other things, proposals to (i) adopt the Business Combination Agreement and approve the Business Combination, (ii) approve, on a non-binding advisory basis, certain provisions in the Post-Combination Articles and (iii) approve the adjournment of the Stockholder Special Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI stockholders to adopt the Business Combination Agreement and approve the Business Combination or to ensure that any supplement or amendment to the accompanying proxy statement/prospectus is timely provided to GGI stockholders; |
| a proxy statement for the meeting of holders of GGI Public Warrants being held on [●], 2022 (including any adjournment or postponement thereof, the Warrant Holder Meeting), where GGI warrant holders will vote on, among other things, proposals to (i) approve an amendment to the warrant agreement that governs all of GGIs outstanding warrants to permit the conversion of GGI Public Warrants to Post-Combination Company Class C-1 Shares in the form of Class C-1 ADSs and the GGI Private Placement Warrants to Class C-2 Shares in the form of Class C-2 ADSs, a form of which is attached to this proxy statement/prospectus as Annex D (such amendment, the Class C Warrant Amendment and such proposal, the Warrant Amendment Proposal) and (ii) approve the adjournment of the Warrant Holder Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI warrant holders to approve the Warrant Amendment Proposal or to ensure that any supplement or amendment to the accompanying proxy statement/prospectus is timely provided to GGI warrant holders (the Warrant Holder Adjournment Proposal, and together with the Warrant Amendment Proposal, the Warrant Holder Proposals); |
| a prospectus for the Post-Combination Company Shares underlying the ADSs that will be received by GGI stockholders in connection with the Business Combination; |
| a prospectus for the Post-Combination Company Warrants underlying the ADWs, or Post-Combination Company Class C Shares underlying the Class C ADSs, that will be received by GGI warrant holders in connection with the Business Combination; and |
| a prospectus for the Post-Combination Company Class A Shares underlying the Class A ADSs issuable upon exercise of the Post-Combination Company Warrants or Class C ADSs. |
This proxy statement/prospectus does not serve as a prospectus for the Post-Combination Company Shares that are or will be held by the PIPE Investors, Parent or its equityholders in connection with the Business Combination.
With the Post-Business Combination Company being a limited company incorporated under the laws of England and Wales, headquartered in Sweden and having global operations, including manufacturing, distribution and sales operations through Chinese subsidiaries, investors are exposed to unique risks linked to the structure of the Business Combination. In light of recent statements and regulatory actions taken by Chinas government, the Post-Combination Companys operations and the value of the Post-Combination Companys securities could materially change. See Risk FactorsRisks Related to Polestars Business and IndustryPolestar relies heavily on manufacturing facilities based in China and its growth strategy will depend on growing its business in China. This subjects Polestar to economic, operational, regulatory and legal risk specific to China.
Cash flows through the Polestar organization are principally comprised of:
| payments by local sales units outside of China to Polestar Sweden for purchases by customers outside of China of Polestar vehicles. Sales of Polestar vehicles outside of China are recorded and made through Polestar Sweden and its local sales units in different countries. Polestar Sweden makes payments to Chinese manufacturing entities outside the Polestar organization affiliated with Volvo Cars and Geely, to purchase such Polestar vehicles. |
| payments by local sales units in China to Polestar Automotive China Distribution Co., Ltd. for purchases by customers in China of Polestar vehicles. Sales of Polestar products to customers in China are recorded by and made through Polestar Automotive China Distribution Co., Ltd., Polestars main distribution entity in China. Polestar Automotive China Distribution Co., Ltd. makes payments to Chinese manufacturing entities outside the Polestar organization affiliated with Volvo Cars and Geely, to purchase such Polestar vehicles. |
| payments of technology and trademark license fees by Polestar Automotive China Distribution Co., Ltd. to Polestar Sweden in connection with Polestar vehicles sold in China. |
To date, Polestars subsidiaries, including Polestar Sweden and Polestars subsidiaries in China, have not made any transfers, dividends or distributions to Parent. Further, Parent has not made any transfers, dividends or distributions to its shareholders to date. There currently is no intention to make distributions to Parents shareholders, which after the Business Combination and the liquidation of the Parent entity, will become direct shareholders of ListCo. Following the Closing, distributions of distributable reserves from Polestar subsidiaries are expected to be made to ListCo, upon approval by the ListCo Board.
Historically, shareholders of Parent have made capital contributions into the Polestar group via Parent. As of December 31, 2021, the total share capital in Parent was $1,868,752,000. As of December 31, 2021, the total share capital in Polestar Singapore was $1,866,552,000. Further, as of December 31, a total of $621,258,300 was transferred from Polestar Singapore to Polestar Automotive Shanghai Co. Ltd., a Polestar subsidiary located in China.
Following the consummation of the Business Combination, it is expected that, without giving effect to any issuance of Earn Out Shares and assuming (i) no redemptions of GGI Class A Common Stock, (ii) the conversion of the Post-Combination Company Preference Shares and Polestars convertible notes and (iii) no conversion or redemption of any of the Class C ADSs or ADWs, Parent (of which 42.7% is owned by PSD Investment Limited and 48.8% is owned by Volvo Cars as of March 4, 2022) and its affiliates will beneficially hold approximately 99.3% of the outstanding voting power of ListCo. As of March 4, 2022, Mr. Li Shufu controls PSD Investment Limited and owns approximately 91.1% of equity interests in Geely, which owns approximately 82.0% of equity interests in Volvo Cars. Therefore, Mr. Li Shufu, as a controlling equity interest holder in Geely, effectively controls Parent, and is expected to beneficially hold approximately 99.3% of the outstanding voting power of ListCo. In addition, under the terms of the Volvo Cars Preference Subscription Agreement, Snita, a wholly-owned subsidiary of Volvo Cars, will purchase, substantially concurrently with the Closing, Post-Combination Company Preference Shares. The Post-Combination Company Preference Shares will automatically convert into Post-Combination Company Class A Shares immediately following the Closing and on any date when Post-Combination Company Shares may be issued to Snita or any of Volvo Carss wholly-owned subsidiaries, in each case, only if Volvo Cars, alone or taken together with all other legal entities that are controlled by Geely, after the conversion of the Post-Combination Company Preference Shares into Post-Combination Company Class A Shares, holds less than 50% of the outstanding voting power of Post-Combination Company. As of the date hereof, it is currently anticipated that all of the Post-Combination Company Preference Shares will convert into Post-Combination Company Class A Shares at Closing, in accordance with, and subject to, the terms of the Post-Combination Company Preference Shares. As a result, following the consummation of the Business Combination, ListCo will be a controlled company within the meaning of Nasdaq rules, which permit a controlled company to elect not to comply with certain corporate governance requirements (however, pursuant to the Post-Combination Articles and Shareholder Acknowledgment Agreement, for the three years following the Closing, the Post-Combination Company Board must be comprised of a majority of independent directors).
PRELIMINARYSUBJECT TO COMPLETION, DATED MAY 9, 2022
LETTER TO STOCKHOLDERS AND WARRANT HOLDERS OF GORES GUGGENHEIM, INC.
GORES GUGGENHEIM, INC.
6260 Lookout Rd.
Boulder, CO 80301
Dear Gores Guggenheim, Inc. Stockholders and Public Warrant Holders:
Gores Guggenheim, Inc. a Delaware corporation (GGI) cordially invites you to attend a special meeting of the stockholders of GGI (the Stockholder Special Meeting) and/or a meeting of public warrant holders (the Warrant Holder Meeting), which, in light of public health concerns regarding the COVID-19 pandemic, will be held via live webcast at www.meetnow.global/MYGAWFM, on [●], 2022, at [●] and www.meetnow.global/MYVPLYT, on [●], 2022, at [●], respectively. The Stockholder Special Meeting and the Warrant Holder Meeting can be accessed by visiting www.meetnow.global/MYGAWFM and www.meetnow.global/MYVPLYT, respectively, where you will be able to listen to the meeting live and vote during the meeting. Please note that you will only be able to access the meetings by means of remote communication.
On September 27, 2021, GGI, Polestar Automotive Holding Limited, a Hong Kong incorporated company (Parent), Polestar Automotive (Singapore) Pte. Ltd., a private company limited by shares in Singapore (Polestar Singapore), Polestar Holding AB, a private limited liability company incorporated under the laws of Sweden (Polestar Sweden), Polestar Automotive Holding UK Limited, a limited company incorporated under the laws of England and Wales and a direct wholly owned subsidiary of Parent (ListCo), and PAH UK Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of ListCo (Merger Sub), entered into a Business Combination Agreement (as amended by that certain amendment dated December 17, 2021 (Amendment No. 1 to the Business Combination Agreement) and that certain amendment dated March 24, 2022 (Amendment No. 2 to the Business Combination Agreement), and as it may be further amended from time to time, the Business Combination Agreement), which provides for, among other things, (i) prior to the closing of the transactions contemplated by the Business Combination Agreement and the other transaction documents contemplated thereby (the Closing), Parent will, and will cause ListCo, Polestar Singapore, Polestar Sweden and their respective subsidiaries to, complete a reorganization, pursuant to which, among other things, Polestar Singapore, Polestar Sweden and their respective subsidiaries will become, directly or indirectly, wholly owned subsidiaries of ListCo (the Pre-Closing Reorganization), (ii) at the Closing, (a) certain investors will purchase, substantially concurrently with the Closing, approximately 7.43 million class A ordinary shares in the share capital of ListCo (Post-Combination Company Class A Shares) in the form of American depositary shares of ListCo (Class A ADSs) for an aggregate purchase price payable to ListCo of approximately $67.5 million (the Initial PIPE Investment Amount), (b) Gores Guggenheim Sponsor LLC (the GGI Sponsor) will purchase, substantially concurrently with the Closing, approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs for an aggregate purchase price payable to ListCo of approximately $8.1 million (the Sponsor Investment Amount), (c) Snita Holding B.V., a corporation organized under the laws of Netherlands (Snita) and a wholly owned indirect subsidiary of Volvo Car AB (publ) (together with its subsidiaries, Volvo Cars), will purchase, substantially concurrently with the Closing, approximately 1.1 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $10.00 per share, for an aggregate investment amount equal to approximately $11.2 million (the Volvo Cars PIPE Investment Amount), (d) certain investors (which include certain affiliates and employees of the GGI Sponsor) will purchase, substantially concurrently with the Closing, approximately 14.3 million Post-Combination Company Class A Shares in the form of Class A ADSs for an aggregate purchase price payable to ListCo of approximately $136.0 million (the December PIPE Investment Amount), (e) certain investors (which include certain affiliates and employees of the GGI Sponsor) will purchase, substantially concurrently with the Closing, approximately 2.8 million Post-Combination Company Class A Shares in the form of Class A ADSs for an aggregate purchase price payable to ListCo of approximately $27.2 million (the March PIPE Investment Amount) and (f) Snita will purchase, substantially concurrently with the Closing, mandatory convertible preference shares of ListCo (the Post-Combination Company Preference Shares) for an aggregate subscription
price of $10.00 per share, for an aggregate investment amount equal to $588,826,100 (the Volvo Cars Preference Amount), (iii) at the Closing, Merger Sub will merge with and into GGI (the Merger), pursuant to which the separate corporate existence of Merger Sub will cease and GGI will become a wholly owned subsidiary of ListCo, and all Class A Common Stock of GGI, par value $0.0001 per share (GGI Class A Common Stock), and all Class F Common Stock of GGI, par value $0.0001 per share (GGI Class F Common Stock, and together with the GGI Class A Common Stock, the GGI Common Stock), issued and outstanding immediately prior to the effective time of the Merger (the Effective Time), will be exchanged for Class A ADSs duly and validly issued against the deposit of an underlying Post-Combination Company Class A Share with ListCos depositary (the depositary) with which ListCo has established and sponsored American depositary receipt facilities (each, an ADR Facility), and (iv) at the Closing (A) in the event the Warrant Amendment Proposal (as defined below) is approved prior to the Effective Time, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one American depositary share of ListCo (Class C-1 ADS) duly and validly issued against the deposit with the depositary of an underlying class C-1 preferred share in the share capital of ListCo (Post-Combination Company Class C-1 Share)and each private placement warrant of GGI (GGI Private Placement Warrant) will be automatically cancelled and extinguished and converted into the right to receive one American depositary share of ListCo (Class C-2 ADS) duly and validly issued against the deposit with the depositary of an underlying class C-2 preferred share in the share capital of ListCo (Post-Combination Company Class C-2 Share) or (B) in the event that the Warrant Amendment Proposal is not approved prior to the Effective Time, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one American depositary warrant of ListCo (Public ADW) duly and validly issued against the deposit with the depositary of an underlying warrant of ListCo representing the right to acquire one Class A ADS (a Post-Combination Company Public Warrant) at an exercise price of $11.50 per Class A ADS on substantially the same terms applicable to the GGI Public Warrants and each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one American depositary warrant of ListCo (PP ADW) duly and validly issued against the deposit with the depositary of an underlying warrant of ListCo (a Post-Combination Company PP Warrant, and together with the Post-Combination Company Public Warrants, the Post-Combination Company Warrants) representing the right to acquire one Class A ADS (or one Post-Combination Company Class A Share if at the time of exercise ListCo no longer uses the ADR Facility) at an exercise price of $11.50 per Class A ADS on substantially the same terms applicable to the GGI Private Placement Warrants (the foregoing clauses (i), (ii), (iii) and (iv), together with the other transactions contemplated by the Business Combination Agreement and the other transaction documents contemplated thereby, the Business Combination). You are being asked to vote to approve the Business Combination Proposal.
At the Stockholder Special Meeting, GGI stockholders will be asked to consider and vote upon (i) a proposal (the Business Combination Proposal or Stockholder Proposal No. 1) to adopt the Business Combination Agreement, a copy of which is attached to the accompanying proxy statement/prospectus as Annexes A-1, A-2, A-3 and A-4, and approve the Business Combination (ii) separate proposals with respect to certain governance provisions in the proposed Articles of Association of the Post-Combination Company, a form of which is attached hereto as Annex B, which will become the Post-Combination Companys articles of association following the Closing, and which are being separately presented in accordance with SEC requirements and which will be voted on a non-binding advisory basis (the Governance Proposals or Stockholder Proposal No. 2) and (iii) a proposal to allow the chairman of the Stockholder Special Meeting to adjourn the Stockholder Special Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI stockholders to approve the Business Combination Proposal or to ensure that any supplement or amendment to the accompanying proxy statement/prospectus is timely provided to GGI stockholders (the Adjournment Proposal or Stockholder Proposal No. 3).
At the Warrant Holder Meeting, holders of GGI Public Warrants will be asked to consider and vote upon (i) a proposal to approve an amendment to the existing warrant agreement that governs all of GGIs outstanding warrants to permit the conversion of GGI Public Warrants to Post-Combination Company Class C-1 Shares in the form of Class C-1 ADSs and the GGI Private Placement Warrants to Post-Combination Company Class C-2 Shares in the form of Class C-2 ADSs, a form of which is attached to this proxy statement/prospectus as Annex D (such amendment, the Class C Warrant Amendment and such proposal, the Warrant Amendment
Proposal or Warrant Holder Proposal No. 1) and (ii) a proposal to approve the adjournment of the Warrant Holder Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI warrant holders to approve the Warrant Holder Proposal or to ensure that any supplement or amendment to the accompanying proxy statement/prospectus is timely provided to GGI warrant holders l (the Warrant Holder Adjournment Proposal or Warrant Holder Proposal No. 2, and together with the Warrant Amendment Proposal, the Warrant Holder Proposals).
Each of these proposals is more fully described in this proxy statement/prospectus, which each stockholder and/or warrant holder is encouraged to read carefully.
GGI Public Shares, GGI Public Units and GGI Public Warrants are currently listed on Nasdaq under the symbols GGPI, GGPIU and GGPIW, respectively. ListCo intends to apply to list the Class A ADSs and the Public ADWs or Class C-1 ADSs on Nasdaq under the symbols PSNY and PSNYW, respectively, upon the Closing. ListCo cannot assure you that the Class A ADSs and the Public ADWs or Class C-1 ADSs will be approved for listing or remain listed on Nasdaq.
Pursuant to the Amended and Restated Certificate of Incorporation of GGI, dated March 22, 2021 (the Current GGI Certificate), GGI is providing its public stockholders with the opportunity to redeem, upon the Closing, shares of GGI Class A Common Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the Trust Account that holds the proceeds of the GGI IPO (including interest not previously released to GGI to fund regulatory compliance requirements and other costs related thereto, subject to an annual limit of $900,000, for a maximum of 24 months, using funds released to GGI from the Trust Account (Regulatory Withdrawals) and/or to pay its franchise and income taxes). The per-share amount GGI will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commission totaling $28,000,000 that GGI will pay to the underwriters of GGI IPO or transaction expenses incurred in connection with the Business Combination. For illustrative purposes, based on the balance of the Trust Account of $800,056,447 as of December 31, 2021, the estimated per share redemption price would have been approximately $10.00. GGI Public Stockholders may elect to redeem their shares even if they vote for the Business Combination. A GGI Public Stockholder, together with any of its affiliates or any other person with whom it is acting in concert or as a group (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the groups shares, in excess of 15% of the shares of GGI Class A Common Stock included in the Public Units sold in GGI IPO. This is referred to as the 15% threshold. In addition, in no event will GGI redeem shares of GGI Class A Common Stock in an amount that would result in GGIs failure to have net tangible assets equaling or exceeding $5,000,001. Other than the foregoing, GGI has no additional specified maximum redemption thresholds under the Current GGI Certificate. Each redemption of shares of GGI Class A Common Stock by GGI Public Stockholders will reduce the amount in the Trust Account.
The Business Combination Agreement provides that the obligations of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub to consummate the Business Combination is conditioned on the total of the amount in the Trust Account and all other funds immediately available to GGI equaling or exceeding $950,000,000 (after giving effect to any redemptions by GGI Public stockholders, the Sponsor Investment Amount, the PIPE Investment Amount and the Volvo Cars PIPE Investment Amount), prior to the payment of any unpaid or contingent liabilities and fees and expenses of GGI. This condition to Closing in the Business Combination Agreement is for the benefit of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub and may be waived by such parties. If, as a result of redemptions of GGI Class A Common Stock by GGI Public Stockholders, this condition is not met (or waived), then Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub may elect not to consummate the Business Combination. Holders of outstanding GGI Public Warrants do not have redemption rights in connection with the Business Combination. Unless otherwise specified, the information in the accompanying proxy statement/prospectus assumes that none of the GGI Public Stockholders exercise their redemption rights with respect to their shares of GGI Class A Common Stock.
The GGI Sponsor and GGIs current independent directors (collectively, the GGI Initial Stockholders), as well as GGIs officers and other current directors, have agreed to waive their redemption rights with respect to their
shares of GGI Class A Common Stock in connection with the consummation of the Business Combination, and GGI Class F Common Stock held by the GGI Initial Stockholders will be excluded from the pro rata calculation used to determine the per-share redemption price. The GGI Initial Stockholders have also agreed to waive their right to a conversion price adjustment with respect to any shares of GGI Common Stock they may hold in connection with the consummation of the Business Combination. Currently, the GGI Initial Stockholders own 20% of the issued and outstanding shares of GGI Common Stock, including all outstanding shares of GGI Class F Common Stock. The GGI Initial Stockholders have agreed to vote any shares of GGI Common Stock owned by them in favor of the Business Combination Proposal. In addition, the GGI Initial Stockholders have agreed to vote their GGI Class F Common Stock in favor of any other proposals for the Stockholder Special Meeting included in this proxy statement/prospectus. The GGI Class F Common Stock held by the GGI Initial Stockholders is subject to transfer restrictions.
GGI is providing the accompanying proxy statement/prospectus and accompanying GGI stockholder proxy card to its stockholders, and GGI warrant holder proxy card to its holders of GGI Public Warrants, in connection with the solicitation of proxies to be voted at the Stockholder Special Meeting and the Warrant Holder Meeting (including following any adjournments or postponements thereof, respectively). Information about the Stockholder Special Meeting, the Warrant Holder Meeting, the Business Combination and other related business to be considered by GGI stockholders and warrant holders at the Stockholder Special Meeting and the Warrant Holder Meeting, respectively, is included in this proxy statement/prospectus. Whether or not you plan to attend the Stockholder Special Meeting and/or the Warrant Holder Meeting via the virtual meeting websites, GGI urges all GGI stockholders and warrant holders to read this proxy statement/prospectus, including the Annexes and the accompanying financial statements of GGI and Polestar Automotive Holding Limited carefully and in their entirety. In particular, GGI urges you to read carefully the section titled Risk Factors beginning on page 74 of this proxy statement/prospectus.
After careful consideration, the GGI Board has unanimously approved the Business Combination Agreement and the transactions contemplated therein, and unanimously recommends that the GGI stockholders vote FOR the approval of the Business Combination Proposal and FOR all other proposals presented to GGI stockholders in the accompanying proxy statement/prospectus. Further, the GGI Board has unanimously approved the Class C Warrant Amendment and the transactions contemplated therein, and unanimously recommends that the GGI Public Warrant holders vote FOR the approval of the Warrant Amendment Proposal and FOR all other proposals present to GGI Public Warrant holders in the accompanying proxy statement/prospectus. When you consider the GGI Boards recommendation of these proposals, you should keep in mind that GGIs directors and officers have interests in the Business Combination that may conflict with your interests as a stockholder. Please see the section titled The Business CombinationInterests of Certain Persons in the Business CombinationInterests of GGI Initial Stockholders and GGIs Directors and Officers for additional information.
Approval of the Business Combination Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of GGI Common Stock entitled to vote thereon at the Stockholder Special Meeting. Approval of each of the Governance Proposals and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of outstanding shares of GGI Common Stock represented in person via the virtual meeting platform or by proxy and entitled to vote thereon at the Stockholder Special Meeting.
Approval of the Warrant Amendment Proposal requires the affirmative vote of the holders of at least 50% of outstanding GGI Public Warrants. Approval of the Warrant Holder Adjournment Proposal requires the affirmative vote of a majority of the votes cast by GGI Public Warrant holders present or represented by proxy and entitled to vote at the Warrant Holder Meeting.
Your vote is very important. Whether or not you plan to attend the Stockholder Special Meeting and/or the Warrant Holder Meeting, please vote as soon as possible by following the instructions in this proxy statement/prospectus to make sure that your GGI Common Stock and/or GGI Public Warrants are represented at the Stockholder Special Meeting and Warrant Holder Meeting. If you hold your GGI Common Stock and/or GGI Public Warrants in street name through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your GGI Common Stock
and/or GGI Public Warrants are represented and voted at the Stockholder Special Meeting and/or Warrant Holder Meeting. The Business Combination will be consummated only if, and the Closing is conditioned upon, the approval of the Business Combination Proposal. If GGI fails to obtain the requisite stockholder approval for the Business Combination Proposal, GGI will not satisfy the conditions to Closing and may be prevented from consummating the Business Combination. The Warrant Amendment Proposal is conditioned on the approval of the Business Combination Proposal, but the Business Combination Proposal is not conditioned on the Warrant Amendment Proposal. Accordingly, the Business Combination can be consummated even if the Warrant Amendment Proposal is not approved. The Governance Proposals, the Adjournment Proposal and the Warrant Holder Adjournment Proposal are not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.
If you sign, date and return your GGI stockholder proxy card without indicating how you wish to vote, your proxy will be voted FOR each of the proposals presented at the Stockholder Special Meeting. If you fail to return your GGI stockholder proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the Stockholder Special Meeting in person via the virtual meeting platform, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the Stockholder Special Meeting. If you are a stockholder of record and you attend the Stockholder Special Meeting and wish to vote in person via the virtual meeting platform, you may withdraw your proxy and vote in person via the virtual meeting platform.
If you sign, date and return your GGI warrant holder proxy card without indicating how you wish to vote, your proxy will be voted FOR each of the proposals presented at the Warrant Holder Meeting. If you fail to return your GGI warrant holder proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the Warrant Holder Meeting in person via the virtual meeting platform, the effect will be that your warrants will not be counted for purposes of determining whether a quorum is present at the Warrant Holder Meeting. If you are a warrant holder of record and you attend the Warrant Holder Meeting and wish to vote in person via the virtual meeting platform, you may withdraw your proxy and vote in person via the virtual meeting platform.
TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND THAT GGI REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT, IDENTIFY TO GGI THE BENEFICIAL HOLDER OF THE SHARES BEING REDEEMED AND TENDER YOUR SHARES TO GGIS TRANSFER AGENT AT LEAST TWO BUSINESS DAYS PRIOR TO THE VOTE AT SUCH MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANYS ATOP (AUTOMATED TENDER OFFER PROGRAM) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.
On behalf of the GGI Board, I would like to thank you for your support of Gores Guggenheim, Inc. and look forward to a successful consummation of the Business Combination.
Sincerely,
Alec E. Gores
Chairman of the Board of Directors
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.
This is not a prospectus made under the Prospectus Regulation (EU) 2019/1127 or Part VI of the United Kingdom Financial Services and Markets Act 2000 (as amended).
Investing in ListCos securities involves a high degree of risk. See Risk Factors beginning on page 74 of the accompanying proxy statement/prospectus for a discussion of information that should be considered in connection with an investment in ListCos securities.
This proxy statement/prospectus is dated [●], 2022, and is expected to be first mailed or otherwise delivered to GGI stockholders and warrant holders on or about [●], 2022.
GORES GUGGENHEIM, INC.
NOTICE OF STOCKHOLDER SPECIAL MEETING
TO BE HELD ON [●], 2022
TO THE STOCKHOLDERS OF GORES GUGGENHEIM, INC.:
NOTICE IS HEREBY GIVEN that a special meeting (the Stockholder Special Meeting) of the stockholders of Gores Guggenheim, Inc., a Delaware corporation (GGI), which, in light of public health concerns regarding the COVID-19 pandemic, will be held via live webcast at www.meetnow.global/MYGAWFM, on [●], 2022 at [●]. The Stockholder Special Meeting can be accessed by visiting www.meetnow.global/MYGAWFM, where you will be able to listen to the meeting live and vote during the meeting. Please note that you will only be able to access the Stockholder Special Meeting by means of remote communication. You are cordially invited to attend the Stockholder Special Meeting to conduct the following items of business:
1) | Business Combination ProposalTo consider and vote upon a proposal to adopt the Business Combination Agreement, dated as of September 27, 2021 (as amended by that certain amendment dated December 17, 2021 (Amendment No. 1 to the Business Combination Agreement) and that certain amendment dated March 24, 2022 (Amendment No. 2 to the Business Combination Agreement), and as it may be further amended from time to time, the Business Combination Agreement), by and among GGI, Polestar Automotive Holding Limited, a Hong Kong incorporated company (Parent), Polestar Automotive (Singapore) Pte. Ltd., a private company limited by shares in Singapore (Polestar Singapore), Polestar Holding AB, a private limited liability company incorporated under the laws of Sweden (Polestar Sweden), Polestar Automotive Holding UK Limited, a limited company incorporated under the laws of England and Wales (ListCo), and PAH UK Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of ListCo (Merger Sub), a copy of which is attached to this proxy statement/prospectus as Annexes A-1, A-2, A-3 and A-4, and approve, among other things, the merger of Merger Sub with and into GGI (the Merger), pursuant to which the separate corporate existence of Merger Sub will cease, with GGI being the surviving corporation and becoming a wholly owned subsidiary of ListCo, and approve the transactions contemplated by the Business Combination Agreement and the other transaction documents contemplated thereby (the Business Combination) (Stockholder Proposal No. 1); |
2) | Governance ProposalsTo consider and act upon, on a non-binding advisory basis, separate proposals with respect to certain governance provisions in the proposed Articles of Association of the Post-Combination Company, a form of which is attached hereto as Annex B, which will become the Post-Combination Companys articles of association following the consummation of the Business Combination, in accordance with the United States Securities and Exchange Commission requirements (Stockholder Proposal No. 2); and |
3) | Adjournment ProposalTo consider and vote upon a proposal to allow the chairman of the Stockholder Special Meeting to adjourn the Stockholder Special Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI stockholders to approve the Business Combination Proposal or to ensure that any supplement or amendment to the accompanying proxy statement/prospectus is timely provided to GGI stockholders (Stockholder Proposal No. 3). |
The above matters are more fully described in this proxy statement/prospectus, which also includes, as Annexes A-1, A-2, A-3 and A-4, a copy of the Business Combination Agreement. GGI urges you to read carefully this proxy statement/prospectus in its entirety, including the Annexes and accompanying financial statements of GGI and Polestar Automotive Holding Limited.
The record date for the Stockholder Special Meeting is April 20, 2022. Only stockholders of record at the close of business on that date may vote at the Stockholder Special Meeting or any adjournment thereof. A complete list of GGI stockholders of record entitled to vote at the Stockholder Special Meeting will be available for ten days before the Stockholder Special Meeting at GGIs principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the Stockholder Special Meeting.
Gores Guggenheim Sponsor LLC, a Delaware limited liability company (the GGI Sponsor), and Mr. Randall Bort, Ms. Elizabeth Marcellino and Ms. Nancy Tellem, GGIs independent directors (collectively, together with GGI Sponsor, the GGI Initial Stockholders), and GGIs officers and other current directors have agreed to vote any of the shares of GGI Class F Common Stock that are currently owned by the GGI Initial Stockholders (the Founder Shares) and any GGI Public Shares purchased during or after the GGI initial public offering (the GGI IPO) in favor of the Business Combination Proposal. In addition, the GGI Initial Stockholders have agreed to vote their GGI Class F Common Stock in favor of any other proposals for the Stockholder Special Meeting included in this proxy statement/prospectus. Currently, GGI Initial Stockholders own 20% of the issued and outstanding shares of GGI Common Stock, including all of the GGI Class F Common Stock.
Pursuant to the Amended and Restated Certificate of Incorporation of GGI, dated March 22, 2021 (the Current GGI Certificate), GGI will provide GGI Public Stockholders with the opportunity to redeem, upon the Closing, GGI Public Shares then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in GGIs trust account (the Trust Account) that holds the proceeds of GGI IPO (including interest not previously released to GGI to fund regulatory compliance requirements and other costs related thereto, subject to an annual limit of $900,000, for a maximum of 24 months, using funds released to GGI from the Trust Account (Regulatory Withdrawals) and/or to pay its franchise and income taxes). The per-share amount GGI will distribute to GGI stockholders who properly redeem their shares will not be reduced by the deferred underwriting commission totaling $28,000,000 that GGI will pay to the underwriters of GGI IPO, as well as other transaction expenses incurred in connection with the Business Combination. For illustrative purposes, based on the balance of the Trust Account of $800,056,447 as of December 31, 2021, the estimated per share redemption price would have been approximately $10.00. GGI Public Stockholders may elect to redeem their shares even if they vote FOR the Business Combination Proposal.
A GGI Public Stockholder, together with any of its affiliates or any other person with whom it is acting in concert or as a group (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the groups shares, in excess of 15% of the GGI Public Shares. In addition, in no event will GGI redeem GGI Public Shares in an amount that would result in GGIs failure to have net tangible assets equaling or exceeding $5,000,001. Other than the foregoing, there are no additional specified maximum redemption thresholds under the Current GGI Certificate. Each redemption of GGI Public Shares will reduce the amount in the Trust Account.
The Business Combination Agreement provides that the obligations of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub to consummate the Business Combination is conditioned on the aggregate of (i) cash held in the Trust Account and all other funds immediately available to GGI (after giving effect to any stockholder redemptions and prior to the payment of any unpaid or contingent liabilities and fees and expenses of GGI (including, as applicable, any GGI transaction expenses)), (ii) the Sponsor Investment Amount, (iii) the PIPE Investment Amount and (iv) the Volvo Cars PIPE Investment Amount being no less than $950,000,000 as of the Closing (the Minimum Cash Condition). The Minimum Cash Condition is for the benefit of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub and may be waived by such parties. If, as a result of redemptions of GGI Class A Common Stock by GGIs Public Stockholders, the Minimum Cash Condition is not met (or waived), then Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub may elect not to consummate the Business Combination.
Holders of outstanding GGI Public Warrants do not have redemption rights in connection with the Business Combination.
The GGI Sponsor and GGIs current independent directors (collectively, the GGI Initial Stockholders), as well as GGIs officers and other current directors, have agreed to waive their redemption rights with respect to their shares of GGI Common Stock in connection with the consummation of the Business Combination, and GGI Class F Common Stock held by the GGI Initial Stockholders will be excluded from the pro rata calculation used to determine the per-share redemption price. GGIs Initial Stockholders have also agreed to waive their right to a conversion price adjustment with respect to any shares of GGI Common Stock they may hold in connection with the consummation of the Business Combination. Currently, the GGI Initial Stockholders own 20% of the issued
and outstanding shares of GGI Common Stock, including all of the GGI Class F Common Stock. The GGI Initial Stockholders have agreed to vote any shares of GGI Common Stock owned by them in favor of the Business Combination Proposal. In addition, the GGI Initial Stockholders have agreed to vote their GGI Class F Common Stock in favor of any other proposals for the Stockholder Special Meeting included in this proxy statement/prospectus. The GGI Class F Common Stock held by the GGI Initial Stockholders is subject to transfer restrictions.
The Business Combination is conditioned on the approval of the Business Combination Proposal. If GGI fails to obtain sufficient votes for the Business Combination Proposal, GGI will not satisfy the conditions to consummate the Business Combination Agreement and GGI may be prevented from closing the Business Combination. The Governance Proposals and the Adjournment Proposal are not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.
Approval of the Business Combination Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of GGI Common Stock entitled to vote thereon at the Stockholder Special Meeting. Approval of each of the Governance Proposals and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of outstanding shares of GGI Common Stock represented in person via the virtual meeting platform or by proxy and entitled to vote thereon at the Stockholder Special Meeting. The GGI Board unanimously recommends that you vote FOR each of these proposals.
By Order of the Board of Directors
Alec E. Gores
Chairman of the Board of Directors
Boulder, Colorado
[●], 2022
GORES GUGGENHEIM, INC.
NOTICE OF WARRANT HOLDER MEETING
TO BE HELD ON [●], 2022
TO THE PUBLIC WARRANT HOLDERS OF GORES GUGGENHEIM, INC.:
NOTICE IS HEREBY GIVEN that a meeting (the Warrant Holder Meeting) of the public warrant holders of Gores Guggenheim, Inc., a Delaware corporation (GGI), which, in light of public health concerns regarding the COVID-19 pandemic, will be held via live webcast at www.meetnow.global/MYVPLYT, on [●], 2022 at [●]. The Warrant Holder Meeting can be accessed by visiting www.meetnow.global/MYVPLYT, where you will be able to listen to the meeting live and vote during the meeting. Please note that you will only be able to access the Warrant Holder Meeting by means of remote communication. You are cordially invited to attend the Warrant Holder Meeting to conduct the following items of business:
1) | Warrant Amendment ProposalTo consider and vote upon a proposal to amend the warrant agreement that governs all of GGIs outstanding warrants to permit the conversion of GGI Public Warrants to Post-Combination Company Class C-1 Shares in the form of Class C-1 ADSs and the GGI Private Placement Warrants to Post-Combination Company Class C-2 Shares in the form of Class C-2 ADSs (such amendment, the Class C Warrant Amendment) (Warrant Holder Proposal No. 1); and |
2) | Warrant Holder Adjournment ProposalTo consider and act upon a proposal to approve the adjournment of the Warrant Holder Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI warrant holders to approve the Warrant Holder Proposal or to ensure that any supplement or amendment to the accompanying proxy statement/prospectus is timely provided to GGI warrant holders (Warrant Holder Proposal No. 2). |
The above matters are more fully described in this proxy statement/prospectus, which also includes, as Annexes A-1, A-2, A-3 and A-4, a copy of the Business Combination Agreement and as Annex D, a form of the Class C Warrant Amendment. GGI urges you to read carefully this proxy statement/prospectus in its entirety, including the Annexes and accompanying financial statements of GGI and Polestar Automotive Holding Limited.
The record date for the Warrant Holder Meeting is April 20, 2022. Only holders of GGI Public Warrants of record at the close of business on that date may vote at the Warrant Holder Meeting or any adjournment thereof.
Approval of the Warrant Amendment Proposal requires the affirmative vote of the holders of at least 50% of outstanding GGI Public Warrants. The Warrant Amendment will only become effective if the Business Combination is completed. If the Business Combination is not completed, the Class C Warrant Amendment will not become effective, even if the GGI Public Warrant Holders have approved the Warrant Amendment Proposal. Approval of the Warrant Holder Adjournment Proposal requires the affirmative vote of a majority of the votes cast by GGI Public Warrant holders present or represented by proxy and entitled to vote at the Warrant Holder Meeting. The GGI Board unanimously recommends that you vote FOR each of these proposals.
By Order of the Board of Directors
Alec E. Gores
Chairman of the Board of Directors
Boulder, Colorado
[●], 2022
ABOUT THIS PROXY STATEMENT/PROSPECTUS
This document, which forms part of a registration statement on Form F-4 filed with the U.S. Securities and Exchange Commission (the SEC) by ListCo, constitutes a prospectus of ListCo under Section 5 of the Securities Act, with respect to the Post-Combination Company Shares and Post-Combination Company Warrants underlying the ADSs and ADWs to be issued to the GGI stockholders if the Business Combination described herein is consummated. This document also constitutes a notice of meeting and a proxy statement/prospectus under Section 14(a) of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act) with respect to (i) the special meeting of GGI stockholders at which GGI stockholders will be asked to consider and vote upon the Business Combination Proposal, among other matters, and (ii) the meeting of GGI Public Warrant holders at which GGI Public Warrant holders will be asked to consider and vote upon the Warrant Amendment Proposal, among other matters.
This document does not constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction or to any person to whom it would be unlawful to make such offer.
The securities are not intended to be offered, sold or otherwise made available to, and should not be offered, sold or otherwise made available to, any persons in member states of the European Economic Area which apply Regulation (EU) 2017/1129 of the European Parliament and of the Council of June 14, 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (this Regulation together with any implementing measures in any member state, the Prospectus Regulation), unless they are qualified investors for the purposes of the Prospectus Regulation in such member state or in any other circumstances falling within Article 1(4) of the Prospectus Regulation, and no person in member states of the European Economic Area that is not a relevant person or qualified investor may act or rely on this document or any of its contents.
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Unless otherwise indicated, information contained in this proxy statement/prospectus concerning Polestars industry, including Polestars general expectations and market position, market opportunity and market share, is based on information obtained from various independent sources and reports, as well as management estimates. Polestar has not independently verified the accuracy or completeness of any third-party information. While Polestar believes that the market data, industry forecasts and similar information included in this proxy statement/prospectus are generally reliable, such information is inherently imprecise. Forecasts and other forward-looking information obtained from third parties are subject to the same qualifications and uncertainties as the other forward-looking statements in this proxy statement/prospectus. In addition, assumptions and estimates of Polestars future performance and growth objectives and the future performance of its industry and the markets in which it operates are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those discussed under the headings Risk Factors, Cautionary Note Regarding Forward-Looking Statements and Polestars Managements Discussion and Analysis of Financial Condition and Results of Operations in this proxy statement/prospectus.
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This proxy statement/prospectus includes trademarks, tradenames and service marks, certain of which belong to ListCo or ListCos affiliates and others that are the property of other organizations. The Polestar logo and other trademarks or service marks of Polestar appearing in this proxy statement/prospectus are the property of Polestar. Solely for convenience, trademarks, tradenames and service marks referred to in this proxy statement/prospectus appear without the ®, TM and SM symbols, but the absence of those symbols is not intended to indicate, in any way, that ListCo or its affiliates will not assert its or their rights or that the applicable owner will not assert its rights to these trademarks, tradenames and service marks to the fullest extent under applicable law. ListCo does not intend its use or display of other parties trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of ListCo by, these other parties.
FINANCIAL STATEMENT PRESENTATION
Gores Guggenheim, Inc.
The historical financial statements of GGI were prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and are denominated in U.S. Dollars.
ListCo/Polestar Automotive Holding Limited/Pro Forma Financial Statements presentation
The historical financial statements of Polestar Automotive Holding Limited and Polestar Automative Holding UK Limited have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and in its presentation currency of the U.S. dollar. The historical financial statements of Polestar Automotive Holding Limited reflects the legal structure as of the date of the financial statements and does not reflect the contemplated future structure of ListCo. The unaudited pro forma condensed combined financial information reflects IFRS the basis of accounting used by Polestar Group and ListCo.
We have made rounding adjustments to some of the figures included in this proxy statement/prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.
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Contents |
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LETTER TO STOCKHOLDERS AND WARRANT HOLDERS OF GORES GUGGENHEIM, INC. |
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GGIS MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION |
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288 | ||||
SELECTED HISTORICAL FINANCIAL INFORMATION OF POLESTAR AUTOMOTIVE HOLDING LIMITED |
311 | |||
POLESTARS MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
312 | |||
331 | ||||
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION |
332 | |||
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354 | ||||
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DESCRIPTION OF THE POST-COMBINATION COMPANYS AMERICAN DEPOSITARY SECURITIES |
414 | |||
442 | ||||
460 | ||||
463 | ||||
STOCKHOLDER PROPOSAL NO. 1THE BUSINESS COMBINATION PROPOSAL |
465 | |||
466 | ||||
473 | ||||
WARRANT HOLDER PROPOSAL NO. 1THE WARRANT AMENDMENT PROPOSAL |
474 | |||
WARRANT HOLDER PROPOSAL NO. 2THE WARRANT HOLDER ADJOURNMENT PROPOSAL |
476 | |||
477 | ||||
481 | ||||
F-1 | ||||
II-1 | ||||
II-12 | ||||
II-13 |
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ANNEXES
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Unless otherwise stated or unless the context otherwise requires in this document:
Key Business and Business Combination Related Terms
AD securities means Class A ADSs, Class C ADSs and ADWs.
Additional Dilution Sources means specified sources of potential dilution, including Earn Out Shares, GGI Public Warrants, GGI Private Placement Warrants, the Equity Plan and the Employee Stock Purchase Plan, which are described in the risk factor titled GGI Public Stockholders will experience dilution as a consequence of the issuance of Post-Combination Company securities, ADSs and ADWs as consideration in the Business Combination and may experience dilution from several additional sources in connection with and after the Business Combination. Having a minority share position may reduce the influence that GGI Public Stockholders have on the management of the Post-Combination Company.
ADS Deposit AgreementClass A ADSs means the ADS Deposit Agreement to be entered into, at or about the Closing Date, by and among ListCo, Citibank, N.A., as depositary, and all holders and beneficial owners from time to time of American Depositary Shares issued thereunder and representing deposited Post-Combination Company Class A Shares, a form of which is attached as exhibit (a)(i) to the Registration Statement on Form F-6 (Reg No.: 333-263479) filed with the SEC on March 11, 2022.
ADS Deposit AgreementClass C-1 ADSs means the ADS Deposit Agreement to be entered into, at or about the Closing Date in event the Warrant Amendment Proposal is approved, by and among ListCo, Citibank, N.A., as depositary, and all holders and beneficial owners from time to time of American Depositary Shares issued thereunder and representing deposited Post-Combination Company Class C-1 Shares, a form of which is attached as exhibit (a)(i) to the Registration Statement on Form F-6 (Reg No.: 333-263480) filed with the SEC on March 11, 2022.
ADS Deposit AgreementClass C-2 ADSs means the ADS Deposit Agreement to be entered into, at or about the Closing Date in event the Warrant Amendment Proposal is approved, by and among ListCo, Citibank, N.A., as depositary, and all holders and beneficial owners from time to time of American Depositary Shares issued thereunder and representing deposited Post-Combination Company Class C-2 Shares, a form of which is attached as exhibit (a)(i) to the Registration Statement on Form F-6 (Reg No.: 333-263481) filed with the SEC on March 11, 2022.
ADSs means Class A ADSs and Class C ADSs.
ADW Deposit Agreement means the ADW Deposit Agreement to be entered into, at or about the Closing Date in the event the Warrant Amendment Proposal is not approved, by and among ListCo, Citibank, N.A., as depositary, and all holders and beneficial owners from time to time of American Depositary Warrants issued thereunder and representing deposited Post-Combination Company Warrants, a form of which is attached as exhibit (a)(i) to the Registration Statement on Form F-6 (Reg No.: 333-263497) filed with the SEC on March 11, 2022.
ADWs means the PP ADWs and the Public ADWs.
Amendment No. 1 to the Business Combination Agreement means that certain amendment to the Business Combination Agreement, dated as of December 17, 2021, which is attached to this proxy statement/prospectus as Annex A-2.
Amendment No. 2 to the Business Combination Agreement means that certain amendment to the Business Combination Agreement, dated as of March 24, 2022, which is attached to this proxy statement/prospectus as Annex A-3.
Amendment No. 3 to the Business Combination Agreement means that certain amendment to the Business Combination Agreement, dated as of April 21, 2022, which is attached to this proxy statement/prospectus as Annex A-4.
Antitrust Division means the Antitrust Division of the U.S. Department of Justice.
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Business Combination means the transactions contemplated by the Business Combination Agreement, including the Merger, and the other transactions contemplated by the other transaction documents contemplated by the Business Combination Agreement.
Business Combination Agreement means that certain the Business Combination Agreement, dated as of September 27, 2021 (as amended by Amendment No. 1 to the Business Combination Agreement and Amendment No. 2 to the Business Combination Agreement and as may be further amended, supplemented, or otherwise modified from time to time), by and among GGI, ListCo, Parent, Polestar Singapore, Polestar Sweden and Merger Sub, which is attached hereto as Annexes A-1, A-2, A-3 and A-4.
Class A ADS means one American depositary share of the Post-Combination Company duly and validly issued against the deposit with the depositary of an underlying Post-Combination Company Class A Share.
Class A Share Merger Consideration means with respect to each share of GGI Common Stock (other than those held immediately prior to the Effective Time by GGI in treasury), the right to receive, by virtue of the Merger, one Class A ADS.
Class C ADSs means Class C-1 ADSs and Class C-2 ADSs.
Class C Warrant Amendment means the proposed amendment to the Existing Warrant Agreement to be entered into by and among GGI, ListCo and Computershare in event the Warrant Amendment Proposal is approved, a form of which is attached hereto as Annex D, and pursuant to which, among other things, each GGI Public Warrant will convert into a Class C-1 ADS and each GGI Private Placement Warrant will convert into a Class C-2 ADS, each of which will be exercisable for Class A ADSs and subject to substantially the same terms as were applicable to the GGI Warrants under the Existing Warrant Agreement.
Class C-1 ADS means, assuming the Warrant Amendment Proposal is approved, one American depositary share of ListCo into which each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class A ADS and each of which is duly and validly issued against the deposit with the depositary of an underlying Post-Combination Company Class C-1 Share.
Class C-2 ADS means, assuming the Warrant Amendment Proposal is approved, one American depositary share of ListCo into which each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class A ADS and each of which is duly and validly issued against the deposit with the depositary of an underlying Post-Combination Company Class C-2 Share.
Closing means the closing of the Business Combination.
Closing Date means the date of the Closing.
Code means the U.S. Internal Revenue Code of 1986, as amended.
Court of Chancery means the Court of Chancery in the State of Delaware.
Cumulative Dilution Sources means specified sources of potential dilution, including Post-Combination Company Shares issued as consideration in connection with the Closing and the Additional Dilution Sources, which are further described in the risk factor titled GGI Public Stockholders will experience dilution as a consequence of the issuance of Post-Combination Company securities, ADSs and ADWs as consideration in the Business Combination and may experience dilution from several additional sources in connection with and after the Business Combination. Having a minority share position may reduce the influence that GGI Public Stockholders have on the management of the Post-Combination Company.
Current GGI Certificate means the Amended and Restated Certificate of Incorporation of GGI, dated March 22, 2021.
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Deferred Discount means any deferred underwriting commissions, which amount will be payable upon consummation of an initial business combination.
Deloitte means Deloitte AB, an independent registered public accounting firm.
Deposit Agreements means the ADS Deposit AgreementClass A ADSs, the ADS Deposit AgreementClass C-1 ADSs, ADS Deposit AgreementClass C-2 ADSs and the ADW Deposit Agreement.
depositary means Citibank, N.A., acting as depositary under the Deposit Agreements.
DGCL means the General Corporation Law of the State of Delaware.
December PIPE Investment means the purchase of December PIPE Shares pursuant to the December PIPE Subscription Agreements.
December PIPE Investors means the purchasers of December PIPE Shares in the December PIPE Investment, which include certain affiliates and employees of the GGI Sponsor.
December PIPE Shares means the Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased by December PIPE Investors in the December PIPE Investment.
December PIPE Subscription Agreements means the share subscription agreements, dated December 17, 2021, by and among ListCo, GGI and the December PIPE Investors pursuant to which the December PIPE Investors have committed to purchase, substantially concurrently with the Closing, in the aggregate, 14.3 million December PIPE Shares for an average purchase price of $9.54 per share, or an aggregate purchase price equal to approximately $136.0 million.
Effective Time means the effective time of the Merger.
Exchange Act means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.
Existing Warrant Agreement means that certain Warrant Agreement, by and between GGI and Computershare Trust Company, N.A., as warrant agent, dated as of March 22, 2021 (as amended by the Existing Warrant Agreement Amendment and as may be further amended, supplemented or otherwise modified from time to time), which is attached hereto as Annexes C-1 and C-2.
Existing Warrant Agreement Amendment means that certain Amendment to Warrant Agreement, by and between GGI and Computershare Trust Company, N.A., as warrant agent, dated as of April 7, 2022, which is attached hereto as Annex C-2.
FINRA means the Financial Industry Regulatory Authority.
Founder Shares means the 20,000,000 shares of GGI Class F Common Stock that are currently owned by the GGI Initial Stockholders, of which 19,925,000 shares are held by the GGI Sponsor and 25,000 shares are held by each of Randall Bort, Nancy Tellem and Elizabeth Marcellino.
FTC means the U.S. Federal Trade Commission.
Geely means Zhejiang Geely Holding Group Co., Ltd.
GGI means Gores Guggenheim, Inc.
GGI Board means the board of directors of GGI.
GGI Class A Common Stock means the shares of Class A common stock, par value $0.0001 per share, of GGI.
GGI Class F Common Stock means the shares of Class F common stock, par value $0.0001 per share, of GGI.
GGI Common Stock means the GGI Class A Common Stock and the GGI Class F Common Stock.
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GGI Initial Stockholders means the GGI Sponsor and Randall Bort, Elizabeth Marcellino and Nancy Tellem, GGIs independent directors.
GGI IPO means GGIs initial public offering, consummated on March 25, 2021, through the sale of 80,000,000 GGI Public Units (including 5,000,000 Public Units sold pursuant to the underwriters partial exercise of their over-allotment option) at $10.00 per Public Unit.
GGI IPO Closing Date means March 25, 2021.
GGI IPO Letter Agreement means the form of letter agreement, dated March 25, 2021, by and between GGI and each of the GGI Sponsor, GGIs directors and GGIs officers.
GGI Preferred Stock means the preferred stock, par value of $0.0001 per share, of GGI.
GGI Private Placement Warrants means the warrants held by the GGI Sponsor, each of which is exercisable, at an exercise price of $11.50, for one share of GGI Class A Common Stock in accordance with its terms.
GGI Public Shares means the shares of GGI Class A Common Stock included in the GGI Public Units issued in the GGI IPO.
GGI Public Stockholders means holders of GGI Public Shares, including the GGI Initial Stockholders to the extent the GGI Initial Stockholders hold GGI Public Shares; provided, that the GGI Initial Stockholders are considered a GGI Public Stockholder only with respect to any GGI Public Shares held by them.
GGI Public Unit means one share of GGI Class A Common Stock and one-fifth of one GGI Public Warrant, whereby each whole GGI Public Warrant entitles the holder thereof to purchase one share of GGI Class A Common Stock at an exercise price of $11.50 per share of GGI Class A Common Stock, sold in the GGI IPO.
GGI Public Warrants means the warrants included in the GGI Public Units issued in the GGI IPO, each of which is exercisable, at an exercise price of $11.50, for one share of GGI Class A Common Stock in accordance with its terms.
GGI Sponsor means Gores Guggenheim Sponsor LLC, a Delaware limited liability company and an affiliate of The Gores Group, LLC.
GGI Warrants means, collectively, the GGI Private Placement Warrants and the GGI Public Warrants.
Guggenheim means Guggenheim Capital, LLC.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
initial business combination means a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving GGI and one or more businesses.
Initial PIPE Investment means the purchase of Initial PIPE Shares pursuant to the Initial PIPE Subscription Agreements.
Initial PIPE Investors means the purchasers of Initial PIPE Shares in the Initial PIPE Investment.
Initial PIPE Shares means the Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased by Initial PIPE Investors in the Initial PIPE Investment.
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Initial PIPE Subscription Agreements means the share subscription agreements, dated September 27, 2021, by and among ListCo, GGI and the Initial PIPE Investors pursuant to which the Initial PIPE Investors have committed to purchase, in the aggregate, approximately 7.43 million Initial PIPE Shares for a purchase price of $9.09 per share, or an aggregate purchase price equal to approximately $67.5 million.
Investment Company Act means the Investment Company Act of 1940, as amended.
IRS means the U.S. Internal Revenue Service.
JOBS Act means the Jumpstart Our Business Startups Act of 2012.
K&E means Kirkland & Ellis LLP.
KPMG means KPMG LLP, an independent registered public accounting firm.
ListCo Board means the board of directors of ListCo.
March Sponsor Investment means the purchase of March PIPE Shares pursuant to the March PIPE Subscription Agreements.
March PIPE Investors means the purchasers of March PIPE Shares in the March PIPE Investment, which include certain affiliates and employees of the GGI Sponsor.
March PIPE Shares means the Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased by March PIPE Investors in the March PIPE Investment.
March PIPE Subscription Agreements means the shares subscription agreements, dated March 24, 2022, by and among ListCo, GGI and the March PIPE Investors pursuant to which March PIPE Investors have committed to purchase, substantially concurrently with the Closing, in the aggregate, 2.8 million March PIPE Shares for an average purchase price of $9.57 per share, or an aggregate purchase price equal to approximately $27.2 million.
ListCo or Polestar Automotive Holding UK Limited means, prior to the re-registration as a public limited company under the laws of England and Wales, Polestar Automotive Holding UK Limited, a limited company incorporated under the laws of England and Wales, and, after the re-registration as a public limited company under the laws of England and Wales, Polestar Automotive Holding UK PLC.
Merger means the merger between Merger Sub and GGI, with GGI surviving and becoming a direct wholly owned subsidiary of ListCo.
Merger Sub means PAH UK Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of ListCo.
Minimum Cash Condition means the minimum cash condition set forth in the Business Combination Agreement, pursuant to which the obligations of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub to consummate the Business Combination are conditioned on the aggregate of (i) cash held in the Trust Account and all other funds immediately available to GGI (after giving effect to any stockholder redemptions and prior to the payment of any unpaid or contingent liabilities and fees and expenses of GGI (including, as applicable, any GGI transaction expenses)), (ii) the Sponsor Investment Amount, (iii) the PIPE Investment Amount and (iv) the Volvo Cars PIPE Investment Amount being no less than $950,000,000 as of the Closing.
Nasdaq means the National Association of Securities Dealers Automated Quotations Capital Market.
Parent means Polestar Automotive Holding Limited, a Hong Kong incorporated company.
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Parent Convertible Notes means the convertible notes of Parent outstanding as of immediately prior to the Closing.
Parent Lock-Up Agreement means the lock-up agreement, dated September 27, 2021, by and among Parent, ListCo and the other Parent Shareholders, a form of which is attached hereto as Annex L.
Parent Shareholders means Snita, PSINV AB, PSD Investment Limited, GLY New Mobility 1. LP, Northpole GLY 1 LP, Chongqing Liangjiang
, Zibo Financial Holding Group Co., Ltd. and Zibo High-Tech Industrial Investment Co., Ltd.
PIPE Investment means the purchase of PIPE Shares pursuant to the PIPE Subscription Agreements.
PIPE Investors means the purchasers of PIPE Shares in the PIPE Investment.
PIPE Shares means the Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased by PIPE Investors in the PIPE Investment.
PIPE Subscription Agreements means the Initial PIPE Subscription Agreements, the December PIPE Subscription Agreements and the March PIPE Subscription Agreements.
Polestar means, as the context requires, (a) in general the Polestar Group, or (b) in the context of the Business Combination, the Pre-Closing Reorganization and the Pre-Closing Sweden/Singapore Share Transfer, Polestar Sweden, or, both Polestar Singapore and Polestar Sweden if at any time (a) Polestar Sweden is not a wholly-owned subsidiary of Polestar Singapore or (b) Polestar Singapore is not a wholly-owned subsidiary of Polestar Sweden.
Polestar Board means the board of directors of Polestar prior to the Business Combination.
Polestar Destinations means permanent or pop up/temporary Polestar showrooms located in peri-urban areas where potential customers can experience Polestar vehicles, engage with Polestar specialists and test-drive Polestar vehicles.
Polestar Financial Statements means Polestar Automotive Holding Limiteds audited financial statements and related notes as of December 31, 2021 and 2020 and for each of the three years in the period ended December 31, 2021, 2020 and 2019.
Polestar Group means Parent, together with its subsidiaries.
Polestar Locations means Polestar Spaces and Polestar Destinations and Polestar Test Drive Center.
Polestar Singapore means Polestar Automotive (Singapore) Pte. Ltd., a private company limited by shares in Singapore.
Polestar Spaces means permanent or pop up/temporary Polestar showrooms located in urban areas where potential customers can experience Polestar vehicles and engage with Polestar specialists.
Polestar Stockholders means, collectively, the stockholders of Polestar.
Polestar Sweden means Polestar Holding AB, a private limited liability company incorporated under the laws of Sweden.
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Polestar Test Drive Centers means those Polestar facilities located in peri-urban areas where potential customers can experience Polestar vehicles, engage with Polestar specialists and test-drive Polestar vehicles.
Post-Combination Articles means the Articles of Association of the Post-Combination Company, attached hereto as Annex B.
Post-Combination Company means ListCo following the Closing.
Post-Combination Company Board means the board of directors of the Post-Combination Company.
Post-Combination Company Class A Shares means Class A ordinary shares of the Post-Combination Company, entitling the holder thereof of 1 vote per share.
Post-Combination Company Class B Shares means Class B ordinary shares of the Post-Combination Company, entitling the holder thereof of 10 votes per share.
Post-Combination Company Class C Shares means Post-Combination Company Class C-1 Shares and Post-Combination Company Class C-2 Shares.
Post-Combination Company Class C-1 Share means, assuming the Warrant Amendment Proposal is approved, a class C-1 preferred share in the share capital of ListCo, each of which underlies a Class C-1 ADS and will be exercisable for one Post-Combination Company Class A Share.
Post-Combination Company Class C-2 Share means, assuming the Warrant Amendment Proposal is approved, a class C-2 preferred share in the share capital of ListCo, each of which underlies a Class C-2 ADS and will be exercisable for one Post-Combination Company Class A Share.
Post-Combination Company Preference Shares means the mandatory convertible preference shares of the Post-Combination Company to be issued to Snita pursuant to the Volvo Cars Preference Subscription Agreement.
Post-Combination Company Shares means Post-Combination Company Class A Shares and Post-Combination Company Class B Shares.
Post-Combination Company securities means Post-Combination Company Shares, Post-Combination Company Warrants and Post-Combination Company Class C Shares.
Post-Combination Company Warrant means, assuming the Warrant Amendment Proposal is not approved, a warrant of the Post-Combination Company representing the right to acquire of Post-Combination Company Class A Share.
PP ADW means one American depositary warrant of ListCo, which will be exercisable for one Class A ADS (or one Post-Combination Company Class A Share if at the time of exercise ListCo no longer uses the ADR Facility) at $11.50 per Class A ADS on substantially the same terms applicable to the GGI Private Placement Warrant, and into which each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted in the event the Warrant Amendment Proposal is not approved.
Pre-Closing Reorganization means the reorganization to be effectuated by Parent, ListCo, Polestar Singapore, Polestar Sweden and their respective subsidiaries prior to Closing, pursuant to which, among other things, Polestar Singapore, Polestar Sweden and their respective subsidiaries will become, directly or indirectly, wholly owned subsidiaries of ListCo.
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Pre-Closing Sweden/Singapore Share Transfer means, collectively, the following transactions contemplated under the Business Combination Agreement: (i) the transfer by Polestar Singapore to Parent of all of the issued and outstanding equity securities of Polestar Sweden not later than 30 days prior to the Closing Date (the Pre-Closing Sweden Share Transfer) and (ii) after the Pre-Closing Sweden Share Transfer, the contribution by Parent to Polestar Sweden of all of the issued and outstanding equity securities of Polestar Singapore.
Public ADW means one American depositary warrant of ListCo, which will be exercisable for one Class A ADS (or one Post-Combination Company Class A Share if at the time of exercise ListCo no longer uses the ADR Facility) at $11.50 per Class A ADS on substantially the same terms applicable to the GGI Public Warrant, and into which each GGI Public Warrant will be automatically cancelled and extinguished and converted in the event the Warrant Amendment Proposal is not approved.
Registration Rights Agreement means the registration rights agreement, dated September 27, 2021, by and among ListCo, Parent, the Parent Shareholders, the GGI Sponsor and the independent directors of GGI (such persons, together with the GGI Sponsor and the Parent Holders, the Registration Rights Holders), as amended by the Registration Rights Agreement Amendment No. 1 and the Registration Rights Agreement Amendment No. 2. A copy of the Registration Rights Agreement is attached to this proxy statement/prospectus as Annexes G-1, G-2 and G-3.
Registration Rights Agreement Amendment No. 1 means that certain amendment to the Registration Rights Agreement, dated December 17, 2021, which is attached to this proxy statement/prospectus as Annex G-2.
Registration Rights Agreement Amendment No. 2 means that certain amendment to the Registration Rights Agreement, dated March 24, 2022, which is attached to this proxy statement/prospectus as Annex G-3.
Regulatory Withdrawals means funds released to GGI from the Trust Account to fund regulatory compliance requirements and other costs related thereto, subject to an annual limit of $900,000, for a maximum of 24 months.
Related Agreements means the Registration Rights Agreement, the Subscription Agreements, the Volvo Cars Preference Subscription Agreement, the Parent Lock-Up Agreement, the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, the Warrant Amendment Agreement, the Class C Warrant Amendment, the Shareholder Acknowledgement Agreement and the other agreements or documents contemplated under the Business Combination Agreement.
Rule 144 means Rule 144 under the Securities Act.
Sarbanes Oxley Act means the Sarbanes-Oxley Act of 2002.
SEC means the U.S. Securities and Exchange Commission.
Section 203 means Section 203 of the DGCL.
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Shareholder Acknowledgement Agreement means the shareholder acknowledgement, dated September 27, 2021, by and among Parent, the Parent Shareholders and ListCo, as amended by the Shareholder Acknowledgement Agreement Amendment (a copy of which is attached to this proxy statement/prospectus as Annexes M-1 and M-2).
Shareholder Acknowledgement Agreement Amendment means that certain amendment to the Shareholder Acknowledgement Agreement, dated March 24, 2022, which is attached to this proxy statement/prospectus as Annex M-2.
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Snita means Snita Holding B.V., a corporation organized under the laws of Netherlands and a wholly owned indirect subsidiary of Volvo Cars.
Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement means the lock-up agreement, dated September 27, 2021, by and among GGI, Parent, ListCo and the GGI Initial Stockholders, as amended by the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement Amendment No. 1 and the Sponsor and Supporting Sponsor Stockholder Lock-up Agreement Amendment No. 2. A copy of the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement is attached to this proxy statement/prospectus as Annexes K-1, K-2 and K-3.
Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement Amendment No. 1 means that certain amendment to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, dated December 17, 2021, which is attached to this proxy statement/prospectus as Annex K-2.
Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement Amendment No. 2 means that certain amendment to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, dated March 24, 2022, which is attached to this proxy statement/prospectus as Annex K-3.
Sponsor Subscription Agreement means the subscription agreement, dated September 27, 2021, as amended and restated on December 17, 2021 and amended on March 24, 2022, by and among GGI, ListCo and the GGI Sponsor, pursuant to which the GGI Sponsor agreed to purchase approximately 891,000 Sponsor Subscription Shares for a purchase price of $9.09 per share on the date of Closing.
Sponsor Subscription Investment means the purchase of the Sponsor Subscription Shares pursuant to the Sponsor Subscription Agreement.
Sponsor Subscription Shares means the Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased by the GGI Sponsor in the Sponsor Subscription Investment.
Stockholder Special Meeting means the special meeting of the stockholders of GGI that is the subject of this proxy statement/prospectus.
Subscription Agreements means the PIPE Subscription Agreements, the Sponsor Subscription Agreement and the Volvo Cars PIPE Subscription Agreement.
Subscription Investments means the purchase of the Subscription Shares pursuant to the Subscription Agreements.
Subscription Shares means the Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased by the GGI Sponsor, the PIPE Investors and Snita pursuant to the Sponsor Subscription Agreement, the PIPE Subscription Agreements and the Volvo Cars PIPE Subscription Agreement, respectively.
The Gores Group means The Gores Group, LLC, an affiliate of the GGI Sponsor.
Trust Account means the trust account of GGI that holds the proceeds from the GGI IPO.
Trustee means Computershare Trust Company, N.A., acting as trustee of GGI.
U.S. Dollars and $ means United States dollars, the legal currency of the United States.
Volvo Cars means Volvo Car AB (publ) and its subsidiaries.
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Volvo Cars PIPE Subscription Agreement means the subscription agreement, dated September 27, 2021, as amended and restated on December 17, 2021 and amended on March 24, 2022, by and among GGI, ListCo and Volvo Cars, pursuant to which Snita agreed to purchase approximately 1.1 million Volvo Cars PIPE Subscription Shares for a purchase price of $10.00 per share on the date of Closing.
Volvo Cars PIPE Subscription Investment means the purchase of Volvo Cars PIPE Subscription Shares pursuant to the Volvo Cars PIPE Subscription Agreement.
Volvo Cars PIPE Subscription Shares means the Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased by Snita in the Volvo Cars PIPE Subscription Investment.
Volvo Cars Preference Subscription Agreement means the subscription agreement, dated September 27, 2021, by and between ListCo and Snita as amended on March 24, 2022, pursuant to which Snita agreed to purchase, substantially concurrently with the Closing, mandatory convertible preference shares of the Post-Combination Company for an aggregate subscription price of $10.00 per share, for an aggregate investment amount equal to $588,826,100.
Volvo Cars Preference Subscription Investment means the purchase of the Volvo Cars Preference Subscription Shares pursuant to the Volvo Cars Preference Subscription Agreement.
Volvo Cars Preference Subscription Shares means the mandatory convertible preference shares of the Post-Combination Company to be purchased by Snita pursuant to the Volvo Cars Preference Subscription Agreement.
Warrant Agent means Computershare Inc., a Delaware corporation and Computershare Trust Company, N.A., a federally chartered trust company, collectively, acting as warrant agent.
Warrant Amendment Agreement means the proposed amendment to the Existing Warrant Agreement to be entered into by and among GGI, ListCo and Computershare in event the Warrant Amendment Proposal is not approved, pursuant to which, among other things, each GGI Warrant will convert into a Post-Combination Company Warrant to be delivered in the form of ADWs, which will be exercisable for Class A ADSs and subject to substantially the same terms as were applicable to the GGI Warrants under the Existing Warrant Agreement.
Warrant Holder Meeting means the meeting of the holders of GGI Public Warrant that is the subject of this proxy statement/prospectus.
Weil means Weil, Gotshal & Manges LLP, counsel to GGI.
Withum means WithumSmith+Brown, PC, an independent accounting firm.
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The questions and answers below highlight only selected information from this proxy statement/prospectus and only briefly address some commonly asked questions about the Stockholder Special Meeting and the proposals to be presented at the Stockholder Special Meeting, including with respect to the Business Combination, and questions about the Warrant Holder Meeting and the proposals to be presented at the Warrant Holder Meeting. The following questions and answers do not include all the information that is important to GGI stockholders or warrant holders. GGI stockholders and warrant holders are urged to read carefully this entire proxy statement/prospectus, including the Annexes and the other documents referred to herein, to fully understand the proposed Business Combination and the voting procedures for the Stockholder Special Meeting and the Warrant Holder Meeting.
In light of public health concerns regarding the COVID-19 pandemic, the Stockholder Special Meeting will be held via live webcast at www.meetnow.global/MYGAWFM, on [●], 2022 at [●]. The Stockholder Special Meeting can be accessed by visiting www.meetnow.global/MYGAWFM, where you will be able to listen to the meeting live and vote during the meeting. Please note that you will only be able to access the Stockholder Special Meeting by means of remote communication.
In light of public health concerns regarding the COVID-19 pandemic, the Warrant Holder Meeting will be held via live webcast at www.meetnow.global/MYVPLYT, on [●], 2022 at [●]. The Warrant Holder Meeting can be accessed by visiting www.meetnow.global/MYVPLYT, where you will be able to listen to the meeting live and vote during the meeting. Please note that you will only be able to access the Warrant Holder Meeting by means of remote communication.
Q: | Why am I receiving this proxy statement/prospectus? |
A: | GGI stockholders are being asked to consider and vote upon a proposal to adopt the Business Combination Agreement and approve, among other things, the Business Combination. GGI has entered into the Business Combination Agreement. A copy of the Business Combination Agreement is attached to this proxy statement/prospectus as Annexes A-1, A-2, A-3 and A-4. |
GGI warrant holders are being asked to consider and vote upon a proposal to amend the warrant agreement that governs all of GGIs outstanding warrants to permit the conversion of GGI Public Warrants to Post-Combination Company Class C-1 Shares to be delivered in the form of Class C-1 ADSs and the GGI Private Placement Warrants to Post-Combination Company Class C-2 Shares to be delivered in the form of Class C-2 ADSs.
This proxy statement/prospectus and its Annexes contain important information about the proposed Business Combination and the other matters to be acted upon at the Stockholder Special Meeting and the Warrant Holder Meeting. You should read this proxy statement/prospectus and its Annexes carefully and in their entirety.
Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement/prospectus and its Annexes.
Q: | What proposals are GGI stockholders being asked to vote upon? |
A: | At the Stockholder Special Meeting, GGI is asking GGI stockholders to consider and vote upon the following proposals: |
| Business Combination ProposalTo consider and vote upon a proposal to adopt the Business Combination Agreement, a copy which is attached to this proxy statement/prospectus as Annexes A-1, A-2, A-3 and A-4, and approve, among other things, the Business Combination (Stockholder Proposal No. 1); |
| Governance ProposalsTo consider and act upon, on a non-binding advisory basis, separate proposals with respect to certain governance provisions in the Post-Combination Articles, attached hereto as Annex B, in accordance with SEC requirements (Stockholder Proposal No. 2); and |
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| Adjournment ProposalTo consider and vote upon a proposal to allow the chairman of the Stockholder Special Meeting to adjourn the Stockholder Special Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI stockholders to approve the Business Combination Proposal or to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to GGI stockholders (Stockholder Proposal No. 3). |
Q: | Are the proposals GGI stockholders are being asked to vote upon conditioned on one another? |
A: | Yes. The Business Combination is conditioned on the approval of the Business Combination Proposal. If GGI fails to obtain sufficient votes for the Business Combination Proposal, GGI will not satisfy the conditions to consummate the Business Combination Agreement and GGI will prevented from closing the Business Combination. The Governance Proposals and the Adjournment Proposal are not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus. It is important for you to note that in the event that the Business Combination Proposal does not receive the requisite vote for approval, GGI will not consummate the Business Combination. Unless GGI amends the Current GGI Certificate (which requires the affirmative vote of 65% of all then outstanding shares of GGI Common Stock) and amend certain other agreements into which GGI has entered to extend the life of GGI, if GGI does not consummate the Business Combination and fails to complete an initial business combination by March 25, 2023, GGI will be required to dissolve and liquidate the Trust Account by returning the then remaining funds in such account to GGI Public Stockholders. |
Q: | What proposals are GGI Public Warrant holders being asked to vote upon? |
A: | At the Warrant Holder Meeting, GGI is asking GGI Public Warrant holders to consider and vote upon the following proposals: |
| Warrant Amendment ProposalTo consider and vote upon a proposal to approve the Class C Warrant Amendment, a form of which is attached to this proxy statement/prospectus as Annex D (Warrant Holder Proposal No. 1); and |
| Warrant Holder Adjournment ProposalTo consider and act upon a proposal to approve the adjournment of the Warrant Holder Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI warrant holders to approve the Warrant Holder Proposal or to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to GGI warrant holders (Warrant Holder Proposal No. 2). |
Q: | Are the proposals GGI Public Warrant holders are being asked to vote upon conditioned on other proposals? |
A: | Yes. The Warrant Amendment will only become effective if the Business Combination is completed. If the Business Combination is not completed, the Warrant Amendment will not become effective, even if the GGI Public Warrant Holders have approved the Warrant Amendment Proposal. Approval of the Warrant Amendment is not a condition to the consummation of the Business Combination. Accordingly, the Business Combination can be completed even if the Warrant Amendment Proposal is not approved. The Warrant Holder Adjournment Proposal is not conditioned upon the approval of any other proposal. |
Q: | Why is GGI providing stockholders with the opportunity to vote on the Business Combination Proposal? |
A: | Under the Current GGI Certificate, GGI must provide all holders of GGI Public Shares with the opportunity to have their GGI Public Shares redeemed upon the consummation of an initial business combination either in conjunction with a tender offer or in conjunction with a stockholder vote. For business and other reasons, GGI has elected to provide its stockholders with the opportunity to have their GGI Public Shares redeemed |
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in connection with a stockholder vote rather than a tender offer. GGI is seeking to obtain the approval of its stockholders of the Business Combination Proposal and, accordingly, will allow the GGI Public Stockholders to effectuate redemptions of their GGI Public Shares in connection with the Closing. The approval of the Business Combination is required under the Current GGI Certificate. In addition, such approval is also a condition to the Closing under the Business Combination Agreement. |
Q: | Why is GGI providing stockholders with the opportunity to vote on the Governance Proposals? |
A: | As required by applicable SEC guidance, GGI is requesting that GGI Stockholders vote upon, on a non-binding advisory basis, separate proposals with respect to certain provisions in the Post-Combination Articles that materially affect stockholder rights. This separate vote is not otherwise required by Delaware law, but pursuant to SEC guidance, GGI is required to submit these provisions to GGI Stockholders separately for approval. However, the stockholder vote regarding these proposals is advisory, and is not binding on GGI or the GGI Board. Furthermore, the approval of the Business Combination Proposal is not conditioned on the separate approval of the Governance Proposals. For additional information, please see the section titled Stockholder Proposal No. 2The Governance Proposals. |
Q: | Why is GGI providing stockholders with the opportunity to vote on the Adjournment Proposal? |
A: | GGI is proposing the Adjournment Proposal to allow the chairman of the Stockholder Special Meeting to adjourn the Stockholder Special Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI stockholders to approve the Business Combination Proposal or to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to GGI stockholders. For additional information, please see the section titled Stockholder Proposal No. 3The Adjournment Proposal. |
Q: | Why is GGI proposing the Business Combination? |
A: | GGI is a blank check company incorporated as a Delaware corporation on December 21, 2020 and incorporated for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (an initial business combination). GGIs acquisition plan is not limited to a particular industry or geographic region for purposes of consummating an initial business combination. However, GGI (a) must complete an initial business combination with one or more target businesses that together have a fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the initial business combination and (b) is not, under the Current GGI Certificate, permitted to effect an initial business combination with a blank check company or a similar company with nominal operations. |
GGI has identified several criteria and guidelines GGI believes are important for evaluating acquisition opportunities. GGI uses these criteria and guidelines in evaluating acquisition opportunities, but GGI can decide to enter into an initial business combination with a target business that does not meet these criteria and guidelines. GGI is seeking to acquire companies that it believes: (i) have a defensible core business, sustainable revenues and established customer relationships; (ii) are undergoing change in capital structure, strategy, operations or growth; (iii) can benefit from GGIs operational and strategic approach; (iv) offer a unique value proposition with transformational potential that can be substantiated during GGIs detailed due diligence process; and (v) have reached a transition point in their lifecycle presenting an opportunity for transformation. Based on GGIs due diligence investigations of Polestar and the industry in which it operates, including the financial and other information provided by Polestar in the course of negotiations, GGI believes that Polestar meets the criteria and guidelines listed above and is in the best interests of GGI. However, there can be no assurances of this. Although GGI believes that the Business Combination presents a unique business combination opportunity and is in the best interests of GGI, the GGI Board did consider
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certain potentially material negative factors in arriving at that conclusion. Please see the section titled The Business CombinationRecommendation of the GGI Board and Reasons for the Business Combination for additional information.
Q: | Why is GGI providing GGI Public Warrant holders with the opportunity to vote on the Warrant Amendment Proposal? |
A: | GGI is holding the Warrant Holder Meeting to seek approval from GGI Public Warrant holders of the Class C Warrant Amendment, which will amend the Existing Warrant Agreement to permit the conversion of GGI Public Warrants to Post-Combination Company Class C-1 Shares to be delivered in the form of Class C-1 ADSs and the GGI Private Placement Warrants to Post-Combination Company Class C-2 Shares to be delivered in the form of Class C-2 ADSs. A summary of the Warrant Amendment Proposal is set forth in the section titled Warrant Holder Proposal 1The Warrant Amendment Proposal of this proxy statement/prospectus and a form of the Class C Warrant Amendment is attached hereto as Annex D. |
The GGI Board believes it is in the best interests of GGI and GGI Public Warrant holders to permit the conversion of GGI Public Warrants to Class C-1 ADSs and the GGI Private Placement Warrants to Class C-2 ADSs. In the event the Warrant Amendment Proposal is not approved but the Business Combination Proposal is approved, the Existing Warrant Agreement will be amended by the Warrant Amendment Agreement, pursuant to which, among other things, each GGI Warrant will convert into a Post-Combination Company Warrant to be delivered in the form of ADWs, which will be exercisable for Class A ADSs and subject to substantially the same terms as were applicable to the GGI Warrants under the Existing Warrant Agreement. There is a risk that the issue of such Post-Combination Company Warrants might cause a significant UK corporation tax charge to arise for the Post-Combination Company. This UK corporation tax charge is not expected to arise in the event that the GGI Public Warrants and the GGI Private Placement Warrants are instead permitted to be converted into Class C-1 ADSs and Class C-2 ADSs, respectively, pursuant to the terms of the Class C Warrant Amendment. Please see the section titled Risk FactorsIf GGI Warrant holders fail to approve the Warrant Amendment Proposal, GGI and ListCo may be subject to additional expenses incurred in connection with the consummation of the Business Combination for further information.
Q: | Why is GGI providing GGI Public Warrant holders with the opportunity to vote on the Warrant Holder Adjournment Proposal? |
A: | GGI is proposing the Adjournment Proposal to allow the chairman of the Warrant Holder Meeting to adjourn the Warrant Holder Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI warrant holders to approve the Warrant Amendment Proposal or to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to GGI warrant holders. For additional information, please see the section titled Warrant Holder Proposal No. 2The Warrant Holder Adjournment Proposal. |
Q: | Did the GGI Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination? |
A: | Yes. Although the Current GGI Certificate does not require the GGI Board to seek a third-party valuation or fairness opinion in connection with a business combination unless the target is affiliated with the GGI Sponsor or GGIs directors or officers, on September 25, 2021, Barclays rendered an opinion to the GGI Board that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in such opinion, the Class A Share Merger Consideration to be received by the holders of GGI Class A Common Stock, other than GGI Sponsor and its affiliates, in the Merger pursuant to the Business Combination Agreement, after giving effect to the Pre-Closing Reorganization, is fair to the holders of shares of GGI Class A Common Stock, other than GGI Sponsor and its affiliates. |
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Please see the section titled The Business CombinationOpinion of GGIs Financial Advisor and the opinion of Barclays attached hereto as Annex H for additional information.
Q: | What revenues and profits/losses has the Polestar Automotive Holding Limited generated in the last two years? |
A: | For the fiscal years ended December 31, 2021, 2020 and 2019, the Polestar Automotive Holding Limited had total revenues of $1,337 million, $610 million and $92 million and losses of $1,007 million, $485 million and $198 million, respectively. At the end of fiscal year ended December 31, 2021, Polestar Automotive Holding Limiteds total assets were $3,238 million and its total liabilities were $3,116 million. For additional information, please see the Polestar Financial Statements and section Polestars Managements Discussion and Analysis of Financial Condition and Results of Operations. |
Q: | What is expected to happen in the Business Combination? |
A: | Pursuant to the Business Combination Agreement and the Related Agreements, and upon the terms and subject to the conditions set forth therein, GGI, Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub will effect a series of transactions collectively referred to as the Business Combination. Prior to the Closing, Parent will effect the Pre-Closing Reorganization. At or substantially concurrently with the Closing, (i) certain investors will purchase, substantially concurrently with the Closing, approximately 24.5 million Post-Combination Company Class A Shares in the form of Class A ADSs in accordance with the PIPE Subscription Agreements, (ii) the GGI Sponsor will purchase, substantially concurrently with the Closing, approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs in accordance with the Sponsor Subscription Agreement, (iii) Snita will purchase, substantially concurrently with the Closing, approximately 1.1 million Post-Combination Company Class A Shares in the form of Class A ADSs in accordance with the Volvo Cars PIPE Subscription Agreement, (iv) Snita will purchase, substantially concurrently with the Closing, the Post-Combination Company Preference Shares in accordance with the Volvo Cars Preference Subscription Agreement, (v) Merger Sub will merge with and into GGI, pursuant to which the separate corporate existence of Merger Sub will cease and GGI will become a wholly owned subsidiary of ListCo, and each share of GGI Common Stock issued and outstanding immediately prior to the Effective Time will be exchanged for one Class A ADS duly and validly issued against the deposit of an underlying Post-Combination Company Class A Share with the depositary with which ListCo has established an ADR Facility and (vi)(A) in the event the Warrant Amendment Proposal is approved prior to the Effective Time, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-1 ADS representing one Post-Combination Company Class C-1 Share and each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-2 ADS representing one Post-Combination Company Class C-2 Share or (B) in the event that the Warrant Amendment Proposal is not approved prior to the Effective Time, each GGI Warrant will be automatically cancelled and extinguished and converted into the right to receive one ADW. |
For more information on the Business Combination, see the section titled The Business Combination.
Q: | What conditions must be satisfied to complete the Business Combination? |
A: | There are a number of closing conditions in the Business Combination Agreement, including the approval by GGI Stockholders of the Business Combination Proposal. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, please see the section titled The Business Combination Agreement. |
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Q: | Will GGI or Polestar raise new financing in connection with the Business Combination? |
A: | GGI will not obtain new financing in connection with the Business Combination. However, if the Business Combination is consummated, the funds held in the Trust Account will be used to: (i) pay GGI Public Stockholders who properly exercise their redemption rights and (ii) pay the Deferred Discount and certain other fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees and other professional fees) that were incurred by GGI in connection with the Business Combination up to a cap of $60 million, and pursuant to the terms of the Business Combination Agreement. Any remaining funds will be used by the Post-Combination Company for general corporate purposes. |
In addition, ListCo will consummate the transactions contemplated by the Subscription Agreements and the Volvo Cars Preference Subscription Agreement. The proceeds from the Subscription Agreements will be used by the Post-Combination Company to fund its business plan and future vehicle launches. The proceeds of the Volvo Cars Preference Subscription Agreement will be used to satisfy certain accounts payable that are or will be due and payable by certain subsidiaries of Parent to Volvo Cars. The Subscription Agreements and the Volvo Cars Preference Subscription Agreement are contingent upon, among other customary closing conditions, the substantially concurrent consummation of the Business Combination. Neither GGI nor ListCo anticipates obtaining any additional debt financing to fund the Business Combination.
Q: | What is an American depositary share and American depositary warrant? |
A: | An American depositary share, or ADS, is issued by a depositary to represent a specified number of securities of a non-U.S. company deposited with a custodian bank. Each Class A ADS, Class C-1 ADS and Class C-2 ADS will be issued by Citibank, N.A., in its capacity as depositary for the ADSs, to represent one Post-Combination Company Class A Share, one Post-Combination Company Class C-1 Share, or one Post-Combination Company Class C-2 Share, as applicable. Class A ADSs and Class C ADSs will be issued in book-entry form or will be issued in certificated form, in which case they will be evidenced by American depositary receipts, or ADRs. The Class A ADSs and Post-Combination Class C ADSs will be issued pursuant to the terms of the applicable Deposit Agreements. If the Warrant Amendment Proposal is not approved, no Class C ADSs will be issued and no Deposit Agreements for the Class C ADSs will be entered into. Further, if the Warrant Amendment Proposal is not approved, the GGI Warrants will be assumed by ListCo and deposited with the custodian bank at Closing, and corresponding ADWs will be issued by Citibank, N.A., as depositary for the ADWs, pursuant to the ADW Deposit Agreement. No ADWs will be issued and no ADW Deposit Agreement will be entered into at Closing if the Warrant Amendment Proposal is approved. ADWs will be issued in book-entry form or in certificated form, in which case they will be evidenced by American depositary warrant receipts, or ADW Receipts. |
Q: | What are the important differences between a Post-Combination Company Securities and the corresponding ADSs and ADWs? |
A: | While ADSs and ADWs will represent the corresponding Post-Combination Company securities, there are some differences between these types of securities. These differences include, but are not limited to, the following: |
| Only the ADSs and ADWs will be listed, and the corresponding underlying Post-Combination Company securities will not be listed; |
| ADSs and ADWs will be subject to depositary fees payable by the holders of ADSs and ADWs, while no such fees are payable by holders of the corresponding Post-Combination Company securities. For a more detailed discussion of fees that may be owed by holders of AD securities, see Description of the Post-Combination Companys American Depositary Securities; |
| holders of ADSs and ADWs vote the underlying Post-Combination Company securities indirectly only by instructing the depositary how to vote the corresponding Post-Combination Company securities, |
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while direct holders of Post-Combination Company Class A Shares vote directly at the applicable shareholder meetings; |
| certain shareholders rights, such as the right to propose resolutions or the right to convene a General Meeting, may not be exercised by holders of ADSs unless they first convert their ADSs into the corresponding Post-Combination Company Class A Shares; |
| holders of Post-Combination Company securities are entitled to receive mailed copies of proxy materials and documents from ListCo, while, in lieu of distributing such materials, the depositary may distribute to holders of ADSs and ADWs instructions on how to retrieve such materials upon request; and |
| the terms and conditions of the ADSs and ADWs may be amended by agreement between the Post-Combination Company and the depositary (with notice to the applicable ADS and ADW holders), while any amendment of the Post-Combination Company Securities requires approval of a specified percentage of the holders thereof. |
A holder of ADSs and ADWs may at any time exchange such ADSs and ADWs for the corresponding Post-Combination Company securities, subject to certain limitations. For further information, see Can I elect to receive Post-Combination Company Shares instead of ADSs or ADWs?
For a more detailed discussion about Post-Combination Company securities, ADSs and ADWs, see Description of ListCos Securities and Description of the Post-Combination Companys American Depositary Securities.
Q: | Will the ADSs or ADWs issued to GGI Stockholders and GGI Warrant holders at the time of Closing be listed on an exchange? |
A: | GGI Public Shares, GGI Public Units and GGI Public Warrants are currently listed on Nasdaq under the symbols GGPI, GGPIU and GGPIW, respectively. ListCo intends to apply to list the Class A ADSs and the Public ADWs or Class C-1 ADSs on Nasdaq under the symbols PSNY and PSNYW, respectively, upon the Closing. ListCo cannot assure you that the Class A ADSs and the Public ADWs or Class C-1 ADSs will be approved for listing or remain listed on Nasdaq. |
Q: | Can I sell the ADSs and ADWs that I may receive in the Business Combination? |
A: | Yes, so long as there is sufficient market demand for the ADSs and ADWs. The ADSs and ADWs being issued in the Business Combination will be transferable (subject to applicable restrictions under the U.S. securities laws) and will be registered with the SEC. It is a condition to Closing that the ADSs and ADWs being issued to GGI stockholders and GGI warrantholders in the Business Combination and the ADSs issued as part of the PIPE Investment be approved for listing on Nasdaq, subject to official notice of issuance. However, following Business Combination, there can be no assurance that the ADSs or ADWs will continue to satisfy the listing requirements of Nasdaq or that a trading market in the ADSs or ADWs will develop or exist at any time. Further, no prediction can be made regarding the liquidity of any such market or the prices at which the ADSs or ADWs may trade at any point in time. |
Q: | Can I elect to receive Post-Combination Company Shares instead of ADSs or ADWs? |
A: | No. In connection with Closing, all GGI Public Units will be separated into their components and all holders of shares of GGI Common Stock will only be entitled to receive Class A ADSs. Such stockholders may not elect to receive Post-Combination Company Class A Shares in lieu of Class A ADSs. Similarly, holders of GGI Warrants will, if the Warrant Amendment Proposal is approved, receive Class C ADSs, and if the Warrant Amendment Proposal is not approved, receive ADWs. Such warrantholders may not elect to receive Post-Combination Company Class C Shares in lieu of Class C ADSs or Post-Combination Company Warrants in lieu of ADWs. |
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However, once ADSs and ADWs are issued to you, you will have the right to convert those ADSs and ADWs into the corresponding Post-Combination Company securities that have been deposited at Closing with the depositary, subject to the payment of any fees charged by the depositary relating to such conversion of ADSs and ADWs into Post-Combination Company securities.
For a more detailed discussion about the conversion of ADSs and ADWs into Post-Combination Company securities and the fees and charges that may be charged by the depositary in relation to the ADSs and ADWs, see Description of ListCos Securities and Description of the Post-Combination Companys American Depositary Securities.
Q: | How has the announcement of the Business Combination affected the trading price of the GGI Public Shares? |
A: | On September 24, 2021, the trading date before the public announcement of the Business Combination, GGI Public Units, GGI Public Shares and GGI Public Warrants closed at $10.31, $9.98 and $1.79, respectively. On [●], 2022 the trading date immediately prior to the date of this proxy statement/prospectus, GGI Public Units, GGI Public Shares and GGI Public Warrants closed at $[●], $[●] and $[●], respectively. |
Q: | Who will be on the Post-Combination Company Board? |
A: | Upon the Closing, it is anticipated that the Post-Combination Company Board will be composed of three directors in Class I (expected to be Thomas Ingenlath, Daniel Li and David Richter), three directors in Class II (expected to be Carla De Geyseleer, Karl-Thomas Neumann and Håkan Samuelsson) and three directors in Class III (expected to be Karen Francis, Jim Rowan and David Wei). The term of the initial Class I Directors will expire at the first annual general meeting, the term of the initial Class II Directors will expire at the second annual general meeting, and the term of the initial Class III Directors will expire at the third annual general meeting. At each succeeding annual general meeting following the third annual general meeting following Closing, directors shall be elected to serve for a term of three years to succeed the directors of the class whose terms expire at such annual general meeting. At each annual meeting of Post Combination Company shareholders beginning with the first annual meeting of Post-Combination Company shareholders, successors to the class of directors whose term expires at that annual meeting will be elected for a three-year term or until the election and qualification of their respective successors in office, subject to their earlier death, resignation or removal. |
Please see the section titled Management of the Post-Combination Company for additional information.
Q: | Who will be on the management team of the Post-Combination Company? |
A: | It is expected that, following the Closing, the current senior management of Polestar will comprise the senior management of the Post-Combination Company. |
Please see the section titled Management of the Post-Combination Company for additional information.
Q: | What equity stake will current stockholders of GGI, PIPE Investors and Parent Shareholders hold in the Post-Combination Company? |
A: | It is anticipated that, upon consummation of the Business Combination and without giving effect to any issuance of Earn Out Shares, any exercise of Class C ADSs or ADWs or any redemptions: (i) GGI Public Stockholders will retain an ownership interest of approximately 3.8% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs; (ii) the GGI Initial Stockholders (including the GGI Sponsor) will own approximately 0.9% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs (including approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased under the Sponsor Subscription Agreement); (iii) the PIPE |
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Investors will own approximately 1.2% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs; and (iv) the Parent Shareholders will own approximately 94.2% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs (including (a) approximately 1.1 million Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement, (b) approximately 58.9 million Post-Combination Company Class A Shares in the form of Class A ADSs following the conversion of the Post-Combination Company Preference Shares purchased under the Volvo Cars Preference Subscription Agreement and (c) Post-Combination Company Class A Shares in the form of Class A ADSs following the conversion at the Closing of Parent Convertible Notes). |
In the event that, following the Business Combination, 159,397,500 Earn Out Shares are issued to Parent Shareholders and assuming no exercise of Class C ADSs or ADWs, no redemptions and that no additional Post-Combination Company Shares are issued between the Closing and the realization of all of the benchmark share prices in the earn out: (i) GGI Public Stockholders will retain an ownership interest of approximately 3.5% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs; (ii) the GGI Initial Stockholders (including the GGI Sponsor) will own approximately 0.8% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs (including approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased under the Sponsor Subscription Agreement); (iii) the PIPE Investors will own approximately 1.1% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs; and (iv) the Parent Shareholders will own approximately 94.6% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs (including (a) approximately 1.1 million Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement, (b) approximately 58.9 million Post-Combination Company Class A Shares in the form of Class A ADSs following the conversion of the Post-Combination Company Preference Shares purchased under the Volvo Cars Preference Subscription Agreement and (c) Post-Combination Company Class A Shares in the form of Class A ADSs following the conversion at the Closing of Parent Convertible Notes).
For more information, please see the sections titled The Business CombinationImpact of the Business Combination on Public Float and Unaudited Pro Forma Condensed Combined Financial Information.
Q: | What is the impact on relative stock ownership if a substantial number of GGI Public Stockholders vote in favor of the Business Combination Proposal and exercise their redemption rights? |
A: | GGI Public Stockholders are not required to vote against the Business Combination in order to exercise their redemption rights. Accordingly, the Business Combination may be consummated even though the funds available from the Trust Account and the number of GGI Public Stockholders are reduced as a result of redemptions by GGI Public Stockholders. |
If a GGI Public Stockholder exercises its redemption rights, such exercise will not result in the loss of any warrants that it may hold. Neither GGI nor ListCo can predict the ultimate value of the Class C ADSs or ADWs following the Closing, but assuming that 100% or 80,000,000 shares of GGI Class A Common Stock held by GGI Public Stockholders were redeemed, the 16,000,000 retained outstanding GGI Public Warrants would have an aggregate value of $[●], based on a price per GGI Public Warrant of $[●] on [●], 2022, the most recent practicable date prior to the date of this proxy statement/prospectus. In addition, on [●], 2022, the most recent practicable date prior to the date of this proxy statement/prospectus, the price per share of GGI Class A Common Stock closed at $[●]. If the shares of GGI Class A Common Stock are trading above the exercise price of $11.50 per warrant, the warrants are considered to be in the money and are therefore more likely to be exercised by the holders thereof (when they become exercisable). This in turn increases the risk to non-redeeming stockholders that the warrants will be exercised, which would result in immediate dilution to the non- redeeming stockholders.
In each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios as described below, the residual equity value owned by non-redeeming GGI stockholders, taking into account the respective redemption amounts, is assumed to remain the deemed
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value of $10.00 per share as illustrated in the sensitivity table below. As a result of such redemption amounts and the assumed $10.00 per share value, the implied total equity value of the Post-Combination Company following the Business Combination (including the Subscription Investments and the Volvo Cars Preference Subscription Investment), assuming no dilution from any Additional Dilution Sources, would be (a) $21,253 million in the no redemption scenario, (b) $21,203 million in the illustrative redemption scenario, (c) $21,153 million in the contractual maximum redemption scenario and (d) $20,458 million in the charter redemption limitation scenario. Additionally, the sensitivity table below sets forth (x) the potential additional dilutive impact of each of the Additional Dilution Sources in each redemption scenario, as described further in Notes 9 through 15 below, and (y) the effective underwriting fee incurred in connection with the GGI IPO in each redemption scenario, as further described in Note 16 below.
Holders |
No Redemption Scenario(1) |
% of Total |
Illustrative Redemption Scenario(2) |
% of Total |
Contractual Maximum Redemption Scenario(3) |
% of Total |
Charter Redemption Limitation Scenario(4) |
% of Total |
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GGI Public Stockholders |
80,000,000 | 3.8 | % | 74,994,709 | 3.5 | % | 69,995,062 | 3.3 | % | 499,965 | 0.0 | % | ||||||||||||||||||||
GGI Initial Stockholder (including GGI Sponsor)(5) |
19,350,374 | 0.9 | % | 19,350,374 | 0.9 | % | 19,350,374 | 0.9 | % | 19,350,374 | 0.9 | % | ||||||||||||||||||||
PIPE Investors(6) |
24,532,236 | 1.1 | % | 24,532,236 | 1.2 | % | 24,532,236 | 1.2 | % | 24,532,236 | 1.2 | % | ||||||||||||||||||||
Parent Shareholders(7) |
2,001,417,390 | 94.2 | % | 2,001,417,390 | 94.4 | % | 2,001,417,390 | 94.6 | % | 2,001,417,390 | 97.8 | % | ||||||||||||||||||||
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Total Post-Combination Company Shares Outstanding(8) |
2,125,300,000 | 100 | % | 2,120,294,709 | 100 | % | 2,115,295,062 | 100 | % | 2,045,799,965 | 100 | % | ||||||||||||||||||||
Total Equity Value Post- Redemptions and PIPE Investments ($ in millions) |
$ | 21,253 | | $ | 21,203 | | $ | 21,153 | | $ | 20,458 | | ||||||||||||||||||||
Per Share Value |
$ | 10.00 | | $ | 10.00 | | $ | 10.00 | | $ | 10.00 | |
Additional Dilution Sources |
No Redemption Scenario(1) |
% of Total(9) |
Illustrative Redemption _Scenario(2) |
% of Total(9) |
Contractual Maximum Redemption _Scenario(3) |
% of Total(9) |
Charter Redemption Limitation _Scenario(4) |
% of Total(9) |
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Earn Out Shares(10) |
159,397,500 | 7.0 | % | 159,022,103 | 7.0 | % | 158,647,130 | 7.0 | % | 153,434,997 | 7.0 | % | ||||||||||||||||||||
Class C ADSs and Warrants |
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Class C-1 ADSs or Public ADWs (11) |
16,000,000 | 0.7 | % | 16,000,000 | 0.7 | % | 16,000,000 | 0.8 | % | 16,000,000 | 0.8 | % | ||||||||||||||||||||
Class C-2 ADSs or PP ADWs(12) |
9,000,000 | 0.4 | % | 9,000,000 | 0.4 | % | 9,000,000 | 0.4 | % | 9,000,000 | 0.4 | % | ||||||||||||||||||||
Equity Incentive Plans |
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Equity Plan(13) |
10,000,000 | 0.5 | % | 10,000,000 | 0.5 | % | 10,000,000 | 0.5 | % | 10,000,000 | 0.5 | % | ||||||||||||||||||||
Employee Stock Purchase Plan(14) |
2,000,000 | 0.1 | % | 2,000,000 | 0.1 | % | 2,000,000 | 0.1 | % | 2,000,000 | 0.1 | % | ||||||||||||||||||||
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Marketing Consulting Agreement(15) |
500,000 | 0.0 | % | 500,000 | 0.0 | % | 500,000 | 0.0 | % | 500,000 | 0.0 | % | ||||||||||||||||||||
Total Additional Dilution Sources(16) |
196,897,500 | 8.5 | % | 196,522,103 | 8.5 | % | 196,147,130 | 8.5 | % | 190,934,997 | 8.5 | % |
Deferred Discount |
No Redemption Scenario(1) |
% of Total |
Illustrative Redemption Scenario(2) |
% of Total |
Contractual Maximum Redemption Scenario(3) |
% of Total |
Charter Redemption Limitation Scenario(4) |
% of Trust Account |
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Effective Deferred Discount(17) |
$ | 28,000,000 | 3.5 | % | $ | 28,000,000 | 3.7 | % | $ | 28,000,000 | 4.0 | % | $ | 28,000,000 | 560.0 | % |
(1) | This scenario assumes that no shares of GGI Class A Common Stock are redeemed by GGI Public Stockholders. The no redemption scenario excludes 159,397,500 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI Private Placement Warrant holders and 138,898 vested shares pursuant to the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
(2) | This scenario assumes that approximately 5,005,291 shares of GGI Class A Common Stock are redeemed by GGI Public Stockholders. The illustrative redemption scenario excludes 159,022,103 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI Private Placement Warrant holders and 138,898 vested shares pursuant to the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
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(3) | This scenario assumes that approximately 10,004,938 shares of GGI Class A Common Stock are redeemed by GGI Public Stockholders, which, based on the amount of $800,056,447 in the Trust Account as of December 31, 2021, represents the maximum amount of redemptions that would still enable GGI to have sufficient cash to satisfy the Minimum Cash Condition. The contractual maximum redemption scenario excludes 158,647,130 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI Private Placement Warrant holders and 138,898 vested shares pursuant to the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
(4) | This scenario assumes that approximately 79,500,035 shares of GGI Class A Common Stock are redeemed by GGI Public Stockholders, which, based on the amount of $800,056,447 in the Trust Account as of December 31, 2021, represents the maximum amount of redemptions that would still enable GGI to have sufficient cash to satisfy the provision in the Current GGI Certificate that prohibits GGI from redeeming shares of GGI Class A Common Stock in an amount that would result in GGIs failure to have net tangible assets equaling or exceeding $5,000,001. The charter redemption scenario excludes 153,434,997 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI Private Placement Warrant holders and 138,898 vested shares pursuant to the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
(5) | This row includes approximately 891,000 Post-Combination Company Class A Shares underlying the approximately 891,000 Class A ADSs to be purchased under the Sponsor Subscription Agreement. |
(6) | This row excludes approximately 891,000 Post-Combination Company Class A Shares underlying the approximately 891,000 Class A ADSs to be purchased under the Sponsor Subscription Agreements and excludes the approximately 1,117,390 Post-Combination Company Class A Shares underlying the approximately 1,117,390 Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement. |
(7) | This row excludes Earn Out Shares that are issuable to Parent Shareholders upon the realization of all of the benchmark share prices in the earn out and includes approximately 1,117,390 Post-Combination Company Class A Shares underlying the approximately 1,117,390 Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement. This row includes all Post-Combination Company Class A Shares in respect of outstanding convertible notes of Parent, all of which will be converted into Post-Combination Company Class A Shares at the Closing and 58,882,610 Post-Combination Company Class A Shares in respect of Post-Combination Company Preference Shares to be purchased by Snita upon and subject to the Closing under the Volvo Cars Preference Subscription Agreement, all of which are currently contemplated to be converted into Post-Combination Company Class A Shares at Closing. |
(8) | This row excludes Earn Out Shares and the Post-Combination Company Class A Shares underlying the Class C ADSs and ADWs into which GGI Warrants will convert, depending on whether the Warrant Amendment Proposal is approved. |
(9) | The Percentage of Total with respect to each Additional Dilution Source set forth below, including the Total Additional Dilution Sources, includes the full amount of shares issued with respect to the applicable Additional Dilution Source in both the numerator and denominator. For example, in the illustrative redemption scenario, the Percentage of Total with respect to the Employee Stock Purchase Plan would be calculated as follows: (a) 2,000,000 Class A ADSs issued pursuant to the Employee Stock Purchase Plan (reflecting 0.09% of the total number of shares of Post-Combination Company Shares outstanding as of immediately following the Closing); divided by (b) (i) 2,120,294,709 Post-Combination Company Shares (the number of shares outstanding prior to any issuance pursuant to the Employee Stock Purchase Plan) plus (ii) 2,000,000 Class A ADSs issued pursuant to the Employee Stock Purchase Plan. |
(10) | This row assumes 159,397,500, 159,022,103, 158,647,130 and 153,434,997 Earn Out Shares are issued, assuming the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, respectively, and assumes that no additional Post-Combination Company Shares are issued between the Closing and the realization of all of the benchmark share prices in the earn out. The total number of Earn Out Shares issuable to Parent Shareholders is partially determined by the number of issued and outstanding Post-Combination Company Shares as of immediately after the Effective Time. Total outstanding Percentages in this row represent (a) the foregoing Earn Out Share amounts, as applicable, divided by (b) (i) the amounts included in the row titled Total Post- Combination Company Shares Outstanding plus (ii) 159,397,500, 159,022,103, 158,647,130 or 153,434,997 Post-Combination Company Shares, assuming the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, respectively. Approximately 15.2% of the Earn Out Shares will be issued as Post-Combination Company Class A Shares, while the remaining 84.8% of the Earn Out Shares will be issued as Post-Combination Company Class B Shares. Each Post-Combination Company Class B Share will entitle the holder thereof to 10 votes per share. |
(11) | This row assumes exercise of Class C-1 ADSs or Public ADWs to purchase 16,000,000 Post-Combination Company Class A Shares (following the conversion of GGI Public Warrants into Class C-1 ADSs in the event the Warrant Amendment Proposal is approved or Public ADWs in the event the Warrant Amendment Proposal is not approved). Percentages in this row represent (a) the 16,000,000 Post- Combination Company Class A Shares underlying the Class C-1 ADSs or Public ADWs divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 16,000,000 Post-Combination Company Class A Shares underlying the Class C-1 ADSs or Public ADWs. |
(12) | This row assumes exercise of Class C-2 ADSs or PP ADWs to purchase 9,000,000 Post-Combination Company Class A Shares (following the conversion of GGI Private Placement Warrants into Class C-2 ADSs in the event the Warrant Amendment Proposal is approved or PP ADWs in the event the Warrant Amendment Proposal is not approved). Percentages in this row represent (a) the 9,000,000 Post-Combination Company Class A Shares underlying the Class C-2 ADSs or PP ADWs divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 9,000,000 Post-Combination Company Class A Shares underlying the Class C-2 ADSs or PP ADWs. |
(13) | This row assumes the issuance of all Class A ADSs reserved for issuance under the Equity Plan at Closing, which equals 10,000,000 Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. Percentages in this row represent (a) 10,000,000, divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 10,000,000 Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. The Equity Plan provides that the number of Class A ADSs reserved for issuance thereunder will automatically increase annually on the first day of each fiscal year beginning with the Evergreen Commencement Date in an amount equal to the lesser of (i) 0.5% of the aggregate number of Post-Combination Company Shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of Post-Combination |
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Company Shares as determined by the Post-Combination Company Board. For additional information, please see Management of the Post- Combination CompanyCompensation Arrangements after the Business CombinationEquity Plan. |
(14) | This row assumes the issuance of all Class A ADSs reserved for issuance under the Employee Stock Purchase Plan at Closing, which equals 2,000,000 Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. Percentages in this row represent (a) 2,000,000, divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 2,000,000 Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. The Employee Stock Purchase Plan provides that the number of Class A ADSs reserved for issuance thereunder will automatically increase annually on the first day of each fiscal year beginning with the Evergreen Commencement Date in an amount equal to the lesser of (i) 0.1% of the aggregate number of Post-Combination Company Shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of Post-Combination Company Shares as determined by the Post-Combination Company Board. For additional information, please see Management of the Post-Combination CompanyCompensation Arrangements after the Business CombinationEmployee Stock Purchase Plan. |
(15) | Represents shares to be issued pursuant to a consulting marketing agreement following the Closing. 250,000 shares will vest and be issued on the date the Resale Registration Statement becomes effective. 250,000 shares will vest over a 24-month period with one eighth of these shares vesting each quarter. None of these vested shares will be issued prior to the effectiveness of the Resale Registration Statement. |
(16) | This row assumes the issuance of all Post-Combination Company Shares in connection with each of the Additional Dilution Sources, as described further in Notes 9 through 14 above, which equals 196,897,500 Post-Combination Company Shares in the no redemption scenario, 196,522,103 Post-Combination Company Shares in the illustrative redemption scenario, 196,147,130 Post-Combination Company Shares in the contractual maximum redemption scenario or 190,934,997 Post-Combination Company Shares in the charter redemption limitation scenario, in each case, following the Closing. Percentages in this row represent (a) the foregoing share amounts, as applicable, divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 196,897,500 Post-Combination Company Shares in the no redemption scenario, 196,522,103 Post-Combination Company Shares in the illustrative redemption scenario, 196,147,130 Post-Combination Company Shares in the contractual maximum redemption scenario or 190,934,997 Post-Combination Company Shares in the charter redemption limitation scenario. |
(17) | Reflects the Deferred Discount of $28,000,000 incurred in connection with the GGI IPO. |
The foregoing table is provided for illustrative purposes only and there can be no assurance that the AD securities will trade at the illustrative per share values set forth therein, regardless of the levels of redemption. Percentages may not sum due to rounding.
For more information, please see the sections titled The Business CombinationImpact of the Business Combination on Public Float and Unaudited Pro Forma Condensed Combined Financial Information.
Q: | What are the material U.S. federal income tax consequences of the Business Combination and the material UK tax consequences of holding and transferring ADSs and ADWs? |
A: | For a detailed discussion of material U.S. federal income tax consequences of the Business Combination and a summary of material UK tax consequences of holding and transferring ADSs and ADWs, see the sections titled Material U.S. Federal Income Tax Considerations and Material United Kingdom Tax Considerations in this proxy statement/prospectus. |
Q: | What are the U.S. federal income tax consequences of exercising my redemption rights? |
A: | The U.S. federal income tax consequences of the redemption depend on particular facts and circumstances. Please see the section titled Material U.S. Federal Income Tax Considerations. We urge you to consult your tax advisors regarding the tax consequences of exercising your redemption rights in your particular situation. |
Q: | How many votes do I have at the Stockholder Special Meeting and/or the Warrant Holder Meeting? |
A: | GGI Stockholders are entitled to one vote on each proposal presented at the Stockholder Special Meeting for each share of GGI Common Stock held of record as of April 20, 2022 the record date for the Stockholder Special Meeting. GGI Public Warrant holders are entitled to one vote on each proposal presented at the Warrant Holder Meeting for each GGI Public Warrant held of record as of April 20, 2022 the record date for the Warrant Holder Meeting. |
As of the close of business on the record date of the Stockholder Special Meeting, there were 100,000,000 outstanding shares of GGI Common Stock. As of the close of business on the record date of the Warrant Holder Meeting, there were 16,000,000 outstanding GGI Public Warrants.
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Q: | What happens if I sell my shares of GGI Class A Common Stock or GGI Public Warrants before the Stockholder Special Meeting and/or Warrant Holder Meeting? |
A: | The record date for the Stockholder Special Meeting and the Warrant Holder Meeting is earlier than the date that the Business Combination is expected to be completed. If you transfer your shares of GGI Class A Common Stock after the record date, but before the Stockholder Special Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Stockholder Special Meeting. However, you will not be able to seek redemption of your shares of GGI Class A Common Stock because you will no longer be able to deliver them for cancellation upon consummation of the Business Combination. If you transfer your shares of GGI Class A Common Stock prior to the record date, you will have no right to vote those shares at the Stockholder Special Meeting, or redeem those shares for a pro rata portion of the proceeds held in the Trust Account. |
If you transfer your GGI Public Warrants after the record date, but before the Warrant Holder Meeting, unless the transferee obtains from you a proxy to vote those warrants, you will retain your right to vote at the Warrant Holder Meeting. If you transfer your GGI Public Warrants prior to the record date, you will have no right to vote those warrants at the Warrant Holder Meeting.
Q: | What vote is required to approve the proposals presented at the Stockholder Special Meeting? |
A: | The following votes are required for each proposal at the Stockholder Special Meeting: |
| The approval of the Business Combination Proposal requires the affirmative vote of holders of a majority of the outstanding shares of GGI Common Stock entitled to vote thereon at the Stockholder Special Meeting. Because the GGI Initial Stockholders have agreed to vote the shares of GGI Common Stock they own in favor of the Business Combination Proposal (which amount constitutes approximately 20% of the outstanding shares of GGI Common Stock), holders of approximately 38% of GGI Public Shares will need to vote in favor of the Business Combination Proposal for the Business Combination Proposal to be approved. Accordingly, a GGI Stockholders failure to vote by proxy or to vote in person via the virtual meeting platform at the Stockholder Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Business Combination Proposal, will have the same effect as a vote AGAINST the Business Combination Proposal. |
| The approval of the Governance Proposals requires the affirmative vote of at least a majority of the votes cast by holders of the outstanding shares of GGI Common Stock represented in person via the virtual meeting platform or by proxy and entitled to vote thereon at the Stockholder Special Meeting. Accordingly, a GGI Stockholders failure to vote by proxy or to vote in person via the virtual meeting platform at the Stockholder Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Governance Proposals will have no effect on the Governance Proposals. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Governance Proposals. The GGI Initial Stockholders have agreed to vote the shares of GGI Class F Common Stock they own in favor of the Governance Proposals. |
| The approval of the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of outstanding shares of GGI Common Stock represented in person via the virtual meeting platform or by proxy and entitled to vote thereon at the Stockholder Special Meeting. Accordingly, a GGI Stockholders failure to vote by proxy or to vote in person via the virtual meeting platform at the Stockholder Special Meeting, as well as a broker non-vote with regard to the Adjournment Proposal will have no effect on the Adjournment Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Adjournment Proposal. The GGI Initial Stockholders have agreed to vote the shares of GGI Class F Common Stock they own in favor of the Adjournment Proposal. |
For purposes of the Stockholder Special Meeting, an abstention occurs when a stockholder attends the meeting and does not vote or returns a proxy with an abstain vote.
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Q: | What vote is required to approve the proposals presented at the Warrant Holder Meeting? |
A: | The following votes are required for each proposal at the Warrant Holder Meeting: |
| Approval of the Warrant Amendment Proposal requires the affirmative vote of the holders of at least 50% of outstanding GGI Public Warrants. Accordingly, a GGI Public Warrant holders failure to vote by proxy or to vote in person via the virtual meeting platform at the Warrant Holder Meeting, as well as an abstention from voting and a broker non-vote with regard to the Warrant Amendment Proposal, will have the same effect as a vote AGAINST the Warrant Amendment Proposal. |
| Approval of the Warrant Holder Adjournment Proposal requires the affirmative vote of a majority of the votes cast by GGI Public Warrant holders present or represented by proxy and entitled to vote at the Warrant Holder Meeting. Accordingly, a GGI Public Warrant holders failure to vote by proxy or to vote in person via the virtual meeting platform at the Warrant Holder Meeting, as well as a broker non-vote with regard to the Warrant Holder Adjournment Proposal will have no effect on the Warrant Holder Adjournment Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Warrant Holder Adjournment Proposal. |
For purposes of the Warrant Holder Meeting, an abstention occurs when a GGI Public Warrant holder attends the meeting and does not vote or returns a proxy with an abstain vote.
Q: | What constitutes a quorum at the Stockholder Special Meeting and the Warrant Holder Meeting? |
A: | A majority of the issued and outstanding shares of GGI Common Stock entitled to vote as of the record date at the Stockholder Special Meeting must be present, in person via the virtual meeting platform or represented by proxy, at the Stockholder Special Meeting to constitute a quorum and in order to conduct business at the Stockholder Special Meeting. Abstentions will be counted as present for the purpose of determining a quorum. The GGI Initial Stockholders, who currently own 20% of the issued and outstanding shares of GGI Common Stock, will count towards this quorum. In the absence of a quorum, the chairman of the Stockholder Special Meeting has power to adjourn the Stockholder Special Meeting. As of the record date for the Stockholder Special Meeting, 50,000,001 shares of GGI Common Stock would be required to achieve a quorum. |
A quorum will be present at the Warrant Holder Meeting if a majority of the GGI Public Warrants outstanding and entitled to vote at the Warrant Holder Meeting is represented virtually or by proxy. In the absence of a quorum, the chairman of the Warrant Holder Meeting has power to adjourn the Warrant Holder Meeting. As of the close of business on the record date of the Warrant Holder Meeting, there were 16,000,000 outstanding GGI Public Warrants.
Q: | How will the GGI Sponsor and GGIs directors and officers vote at the Stockholder Special Meeting and Warrant Holder Meeting? |
A: | Prior to the GGI IPO, GGI entered into agreements with the GGI Sponsor and each of GGIs directors and officers, pursuant to which each agreed to vote any shares of GGI Common Stock owned by them in favor of the Business Combination Proposal. In addition, pursuant to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, the GGI Initial Stockholders have agreed to vote their GGI Class F Common Stock in favor of the Business Combination Proposal and any other proposals for the Stockholder Special Meeting included in this proxy statement/prospectus, and against any alternative business combination. None of the GGI Sponsor or GGIs directors or officers have purchased any shares of GGI Common Stock during or after the GGI IPO and, as of the date of this proxy statement/prospectus, neither GGI nor the GGI Sponsor or GGIs directors or officers have entered into agreements, and are not currently in negotiations, to purchase shares prior to the consummation of the Business Combination. Currently, the GGI Initial Stockholders own 20% of the issued and outstanding shares of GGI Common Stock, including all of the GGI Class F Common Stock, and will be able to vote all such shares at the Stockholder Special Meeting. |
The GGI Sponsor and GGIs directors and officers do not hold any GGI Public Warrants and will thus not be entitled to vote at the Warrant Holder Meeting.
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Q: | What interests do the GGI Sponsor and GGIs current officers and directors have in the Business Combination? |
A: | The GGI Sponsor, certain members of the GGI Board and GGIs officers may have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interests. You should take these interests into account in deciding whether to approve the Business Combination. These interests include: |
| the fact that the GGI Initial Stockholders have agreed not to redeem any Founder Shares or GGI Class A Common Stock held by them in connection with a stockholder vote to approve a proposed initial business combination; |
| the fact that the GGI Initial Stockholders have agreed to waive their rights to conversion price adjustments with respect to any Founder Shares they may hold in connection with the consummation of the Business Combination and therefore, the Founder Shares will convert on a one-for-one basis into Class A ADSs at the Closing; |
| the fact that the GGI Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if GGI fails to complete an initial business combination by March 25, 2023; |
| the fact that the GGI Sponsor paid an aggregate of $25,000 for 21,562,500 Founder Shares at approximately $0.001 per share, and, after giving effect to the cancellation of 1,562,500 Founder Shares on May 9, 2021, the remaining 20,000,000 Founder Shares will become worthless if GGI fails to complete an initial business combination by March 25, 2023. In particular, in exchange for serving on the GGI Board, GGIs independent directors, Mr. Bort, Ms. Marcellino and Ms. Tellem, each received 25,000 Founder Shares at their original purchase price of $0.001 per share from the GGI Sponsor. Because these Founder Shares will become worthless if GGI fails to complete an initial business combination by March 25, 2023, GGIs independent directors may have a conflict of interest in determining whether a particular business is an appropriate business with which to effectuate GGIs initial business combination; |
| the fact that after giving effect to the cancellation of 1,562,500 Founder Shares on May 9, 2021 and the forfeiture of up to 1,540,835 shares of GGI Class F Common Stock pursuant to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, the remaining 18,459,165 Founder Shares that will be exchanged for Class A ADSs at the Closing will have a significantly higher value than their aggregate purchase price, which if unrestricted and freely tradable would be valued at approximately $185 million (however, given the restrictions on such shares, GGI believes such shares have a lesser value); |
| the fact that, given the differential in the purchase price that the GGI Sponsor paid for the Founder Shares as compared to the price of the GGI Public Units and the substantial number of Class A ADSs that the GGI Sponsor will receive upon exchange of the Founder Shares at the Closing, the GGI Sponsor and its affiliates may earn a positive rate of return on their investment even if the Class A ADSs trade below the price initially paid for the GGI Public Units in the GGI IPO and GGI Public Stockholders experience a negative rate of return following the completion of the Business Combination; |
| the fact that the GGI Sponsor paid an aggregate of approximately $18,000,000 for its 9,000,000 GGI Private Placement Warrants, and that such GGI Private Placement Warrants will expire worthless if an initial business combination is not consummated by March 25, 2023. The GGI Private Placement Warrants are identical to the GGI Public Warrants sold as part of the GGI Public Units except that, so long as they are held by the GGI Sponsor or its permitted transferees: (i) they will not be redeemable by GGI, except as described in the Existing Warrant Agreement; (ii) they (including the GGI Class A Common Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the GGI Sponsor until 30 days after the completion of an initial business combination; (iii) they may be exercised by the holders on a cashless basis; and (iv) they are subject to registration rights. For additional information regarding the GGI Private Placement Warrants and the GGI Public Warrants, please see the Existing Warrant Agreement, attached hereto as Annex C; |
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| the fact that, in connection with the Business Combination, each GGI Private Placement Warrant will, in the event the Warrant Amendment Proposal is approved prior to the Effective Time, be converted into the right to receive one Class C-2 ADS, issued against the deposit of an underlying Post-Combination Company Class C-2 Share, which will be exercisable to acquire a Post-Combination Company Class A Share in the form of a Class A ADS on substantially the same terms as the GGI Private Placement Warrants; |
| the fact that, in connection with the Business Combination, each GGI Private Placement Warrant will, in the event the Warrant Amendment Proposal is not approved prior to the Effective Time, be converted into the right to receive one PP ADW, issued against the deposit of an underlying Post-Combination Company Warrant, which will be exercisable to acquire a Post-Combination Company Class A Share in the form of a Class A ADS on substantially the same terms as the GGI Private Placement Warrants; |
| the continued right of the GGI Sponsor to hold the Class A ADSs to be issued to the GGI Sponsor upon exercise of Class C-2 ADSs or ADWs following the Business Combination, subject to certain lock-up periods; |
| the fact that if the Trust Account is liquidated, including in the event GGI is unable to complete an initial business combination within the required time period, the GGI Sponsor has agreed to indemnify GGI to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which GGI has entered into an acquisition agreement or claims of any third party (other than the independent public accountants) for services rendered or products sold to GGI, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account; |
| the continued indemnification of the existing directors and officers of GGI and the continuation of the directors and officers liability insurance after the Business Combination; |
| the fact that the GGI Sponsor and GGIs officers and directors will lose their entire investment in GGI and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by March 25, 2023, including the expected reimbursement at the closing of an initial business combination of approximately $615,000 of an aggregate of approximately $948,000 of expenses incurred by GGI Sponsor and its affiliates as of March 1, 2022; |
| the fact that the GGI Sponsor made available to GGI a loan of up to $4,000,000 pursuant to a promissory note, of which a net amount of $2,500,000 was advanced by the GGI Sponsor to GGI as of March 1, 2022, and that the note will mature on the earlier of March 11, 2023 and the date on which GGI consummates an initial business combination; |
| the fact that GGI has entered into the Sponsor Subscription Agreement, pursuant to which the GGI Sponsor has agreed to purchase approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs at a purchase price of $9.09 per share on the date of Closing, and the GGI Sponsor has the right to syndicate its commitment to acquire such Class A ADSs in advance of the Closing; |
| the fact that Guggenheim Securities, LLC, an affiliate of the GGI Sponsor and Andrew Rosenfield, is acting as a joint placement agent in connection with the Subscription Investments and will receive a portion of a transaction fee equal to 3% of the gross proceeds raised by the placement agents in connection with the Subscription Investments, and as a financial advisor to GGI for no additional fee; and |
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| the fact that the GGI Sponsor and GGIs officers and directors would beneficially own the following number of Class A ADSs at the Closing: |
Name of Person/Entity |
Number of Class A ADSs(1) |
Value of Class A ADSs(2) |
||||||
Gores Guggenheim Sponsor LLC(3) |
19,350,374 | $ | 193,503,740 | |||||
GGP Sponsor Holdings LLC(3) |
19,350,374 | $ | 193,503,740 | |||||
Alec Gores(3) |
19,350,374 | $ | 193,503,740 | |||||
Andrew Rosenfield (3) |
19,350,374 | $ | 193,503,740 | |||||
Mark Stone(4) |
171,841 | $ | 1,718,410 | |||||
Andrew McBride |
20,892 | $ | 208,920 | |||||
Randall Bort |
25,000 | $ | 250,000 | |||||
Elizabeth Marcellino |
25,000 | $ | 250,000 | |||||
Nancy Tellem(5) |
40,670 | $ | 406,700 |
(1) | Does not reflect beneficial ownership of Class A ADSs subject to exercise of Post-Combination Company Class C Shares or Post-Combination Company Warrants, because such shares or warrants, as applicable, are not exercisable within 60 days of the date of this proxy statement/prospectus. |
(2) | Assumes a value of $10.00 per share, the deemed value of the GGI Common Stock in the Business Combination. |
(3) | Represents shares held by Gores Guggenheim Sponsor LLC which is jointly controlled indirectly by Mr. Gores and GGP Sponsor Holdings LLC. GGP Sponsor Holdings LLC is controlled by Mr. Rosenfield. Each of Mr. Gores and GGP Sponsor Holdings LLC may be deemed to beneficially own 19,350,374 Class A ADSs and ultimately exercises voting and dispositive power of the securities held by Gores Guggenheim Sponsor LLC. Voting and disposition decisions with respect to such securities are jointly made by Mr. Gores and GGP Sponsor Holdings LLC. Each of Mr. Gores, GGP Sponsor Holdings LLC and Mr. Rosenfield disclaim beneficial ownership of these securities except to the extent of any pecuniary interest therein. |
(4) | Reflects Class A ADSs to be purchased by Mark Stone and his immediate family as December PIPE Investors. |
(5) | Includes 15,670 Class A ADSs to be purchased by Nancy Tellem as a December PIPE Investor. |
| the fact that, pursuant to the Business Combination Agreement, the Post-Combination Company Board will include one independent director as reasonably determined by the GGI Sponsor and consented to by Parent. In addition, pursuant to the Post-Combination Articles, the Post-Combination Company Board will be subject to restrictions on its ability to convene a general meeting which proposes a resolution to remove an independent director, subject to certain conditions, and pursuant to the Shareholder Acknowledgement Agreement, Parent and the Parent Shareholders are subject to undertakings that restrict on their ability to vote in favor of the removal of independent directors on the Post-Combination Company Board, and the GGI Sponsor will have third party beneficiary rights to enforce such undertakings; |
| the fact that the GGI Initial Stockholders have entered into the Registration Rights Agreement as Registration Rights Holders, which provides such Registration Rights Holders and their permitted transferees with registration rights in respect of certain Post-Combination Company securities, ADSs and ADWs at the Closing; |
| the fact that the GGI Initial Stockholders have agreed to vote any shares of GGI Common Stock owned by them in favor of the Business Combination Proposal; |
| the fact that GGI, Parent, ListCo and the GGI Initial Stockholders have entered into the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, pursuant to which the GGI Initial Stockholders have, among other things, agreed to (i) vote their GGI Class F Common Stock in favor of each of the proposals at the Special Meeting and referenced in this proxy statement/prospectus, and against any alternative business combination, (ii) waive all adjustments to the conversion ratio set forth in the Current GGI Certificate with respect to the GGI Class F Common Stock, (iii) be bound by certain transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants, and (iv) not to transfer any Class A ADSs issued pursuant to the Business Combination Agreement in respect of shares of GGI Class F Common Stock during the period beginning on the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein; and |
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| the fact that GGI will reimburse the GGI Sponsor for the fees and expenses it incurs in connection with the Business Combination; provided, that such fees and expenses, together with all of GGIs other fees and expenses in connection with the Business Combination, are not in excess of $60 million in the aggregate. |
In the aggregate, the GGI Sponsor and its affiliates have approximately $218,000,000 at risk that depends upon the completion of a business combination. Specifically, $200,000,000 of such amount is the value of the GGI Sponsors and its affiliates GGI Class F Common Stock (assuming a value of $10.00 per share, the deemed value of the GGI Common Stock in the Business Combination), and $18,000,000 of such amount is the value of the GGI Private Placement Warrants held by the GGI Sponsor (based on the purchase price of $2.00 per GGI Private Placement Warrant). There are no fees contingent upon a business combination payable to the GGI Sponsors affiliates upon consummation of the Business Combination. The foregoing interests present a risk that the GGI Sponsor and its affiliates will benefit from the completion of a business combination, including in a manner that may not be aligned with GGI Public Stockholders. As such, the GGI Sponsor may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to GGI Public Stockholders rather than liquidate.
These interests may influence the GGI Board in making their recommendation that GGI stockholders vote in favor of the approval of the Business Combination Proposal and the other proposals to be voted on at the Stockholder Special Meeting, and their recommendation that the GGI warrant holders vote in favor of the proposals to be voted on at the Warrant Holder Meeting.
Q: | Do I have redemption rights? |
A: | If you are a GGI Public Stockholder, you may redeem your GGI Public Shares for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest not previously released to GGI to fund Regulatory Withdrawals and/or to pay its franchise and income taxes, by (ii) the total number of then-outstanding GGI Public Shares; provided that GGI may not redeem any shares of GGI Class A Common Stock issued in the GGI IPO to the extent that such redemption would result in GGIs failure to have net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) in excess of $5,000,000. A GGI Public Stockholder, together with any of its affiliates or any other person with whom it is acting in concert or as a group (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the groups shares, in excess of 15% of the GGI Public Shares. Holders of outstanding GGI Public Warrants do not have redemption rights in connection with the Business Combination. |
The GGI Sponsor and GGIs directors and officers have agreed to waive their redemption rights with respect to their shares of GGI Common Stock in connection with the consummation of the Business Combination, and the Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. The GGI Initial Stockholders have also agreed to waive their right to a conversion price adjustment with respect to any shares of GGI Common Stock they may hold in connection with the consummation of the Business Combination. For illustrative purposes, based on the balance of the Trust Account of $800,056,447 as of December 31, 2021, the estimated per share redemption price would have been approximately $10.00. Additionally, shares properly tendered for redemption will only be redeemed if the Business Combination is consummated; otherwise holders of such shares will only be entitled to a pro rata portion of the Trust Account (including interest not previously released to GGI to fund Regulatory Withdrawals and/or to pay its franchise and income taxes) in connection with the liquidation of the Trust Account, unless GGI completes an alternative initial business combination prior to March 25, 2023 or GGI amends the Current GGI Certificate (which requires the affirmative vote of 65% of all then outstanding shares of GGI Common Stock) and amend certain other agreements into which GGI has entered to extend the life of GGI.
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Q: | Is there a limit on the number of shares I may redeem? |
A: | Yes. A GGI Public Stockholder, together with any of its affiliates or any other person with whom it is acting in concert or as a group (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the groups shares, in excess of 15% of the GGI Public Shares. In addition, in no event will GGI redeem GGI Public Shares in an amount that would result in GGIs failure to have net tangible assets equaling or exceeding $5,000,001. Each redemption of GGI Public Shares will reduce the amount in the Trust Account. Other than the foregoing, there are no additional specified maximum redemption thresholds under the Current GGI Certificate. |
In no event is your ability to vote all of your shares (including those shares held by you or by a group in excess of 15% of the shares sold in the GGI IPO) for or against the Business Combination restricted.
Each redemption of shares of GGI Class A Common Stock by GGI Public Stockholders will reduce the amount in the Trust Account, which held cash and investment securities with a fair value of $800,056,447 as of December 31, 2021.
Q: | Is there a limit on the total number of GGI Public Shares that may be redeemed? |
A: | Yes. The Current GGI Certificate provides that GGI may not redeem GGI Public Shares in an amount that would result in GGIs failure to have net tangible assets in excess of $5,000,000 (such that GGI is not subject to the SECs penny stock rules) or any greater net tangible asset or cash requirement which may be contained in the Business Combination Agreement. Based on a value of $10.00 per share, up to 79,500,035 GGI Public Shares may be redeemed under the Current GGI Certificate. This is referred to as the charter redemption limitation scenario. |
Q: | Are there other redemption thresholds that affect the Business Combination? |
A: | Yes. The Business Combination Agreement also provides that the obligation of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub to consummate the Business Combination is conditioned on the total of the amount in the Trust Account and all other funds immediately available to GGI equaling or exceeding $950,000,000 (after giving effect to any redemptions by GGI Public stockholders, the Sponsor Investment Amount, the PIPE Investment Amount and the Volvo Cars PIPE Investment Amount). As a result, GGI may be able to complete the Business Combination even though a substantial portion of the GGI Public Stockholders do not agree with the Business Combination and have redeemed their shares or have entered into privately negotiated agreements to sell their shares to the GGI Sponsor or GGIs directors or officers or their affiliates. |
As of the date of this proxy statement/prospectus, no agreements with respect to the private purchase of GGI Public Shares by GGI or the persons described above have been entered into with any such investor or holder. GGI will file a Current Report on Form 8-K with the SEC to disclose private arrangements, if any, entered into or significant private purchases made by any of the aforementioned persons that would affect the vote on the Business Combination Proposal or other proposals (as described in this proxy statement/prospectus) at the Stockholder Special Meeting or the Warrant Holder Meeting. Based on the amount of $800,056,447 in the Trust Account as of December 31, 2021, approximately 10,004,938 shares of GGI Class A Common Stock may be redeemed and still enable GGI to have sufficient cash to satisfy the cash closing conditions in the Business Combination Agreement. This is referred to as the contractual maximum redemption scenario.
Q: | Will how I vote affect my ability to exercise redemption rights? |
A: | No. You may exercise your redemption rights whether you vote your GGI Public Shares for or against, or whether you abstain from voting on, the Business Combination Proposal, the Governance Proposals or any other stockholder proposal described by this proxy statement/prospectus. As a result, the Business |
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Combination Agreement can be approved by GGI Stockholders who will redeem their shares and no longer remain GGI Stockholders, leaving GGI Stockholders who choose not to redeem their shares holding shares in a company with a potentially less-liquid trading market, fewer stockholders, potentially less cash and the potential inability of GGI or the Post-Combination Company to meet the listing standards of Nasdaq or another national securities exchange. |
Q: | How do I exercise my redemption rights? |
A: | In order to exercise your redemption rights, you must (i) if you hold GGI Public Units, separate the underlying GGI Public Shares and GGI Public Warrants, and (ii) prior to 5:00 P.M., Eastern Time on [●], 2022 (two business days before the Stockholder Special Meeting), tender your shares physically or electronically and submit a request in writing that GGI redeem your GGI Public Shares for cash to Computershare Trust Company, N.A., the Transfer Agent, at www.ggiredemption.com or to the following address: |
Computershare Trust Company, N.A.
Attn: Corporate Actions Voluntary Offer
150 Royall Street, Suite V
Canton, MA 02021
Additionally, you must identify to GGI the beneficial holder of the GGI Public Shares being redeemed in order to validly redeem GGI Public Shares. A GGI Public Stockholder, together with any of its affiliates or any other person with whom it is acting in concert or as a group (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the groups shares, in excess of 15% of the GGI Public Shares. Accordingly, all GGI Public Shares in excess of the aforementioned 15% threshold beneficially owned by a GGI Public Stockholder or group will not be redeemed for cash.
GGI Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the Transfer Agent and time to effect delivery. It is GGIs understanding that GGI Stockholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, GGI does not have any control over this process and it may take longer than two weeks. GGI Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.
GGI Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in street name are required to either tender their certificates to the Transfer Agent prior to the date set forth in this proxy statement/prospectus, or up to two business days prior to the vote on the proposal to approve the Business Combination at the Stockholder Special Meeting, or to deliver their shares to the Transfer Agent electronically using The Depository Trust Companys (DTC) Automated Tender Offer Program (ATOP) system, at such stockholders option. The requirement for physical or electronic delivery prior to the Stockholder Special Meeting ensures that a redeeming stockholders election to redeem is irrevocable once the Business Combination is approved.
Q: | If I am a warrant holder, can I exercise redemption rights with respect to my warrants? |
A: | No. The holders of GGI Public Warrants have no redemption rights with respect to such GGI Public Warrants. However, if a holder of GGI Public Warrants elects to exercise its redemption rights with respect to any GGI Public Shares held by such holder, such exercise of redemption rights will not affect the holders entitlement to exercise its GGI Public Warrants to purchase GGI Class A Common Stock in accordance with the procedures set forth herein. Please see the section titled Description of ListCos SecuritiesPost-Combination Company Warrants for more information regarding the procedure to be followed by holders of GGI Public Warrants that wish to exercise their GGI Public Warrants and purchase shares of GGI Class A Common Stock. |
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Q: | Do I have appraisal or dissenters rights if I object to the proposed Business Combination? |
A: | No. Appraisal rights or dissenters rights are not available to holders of shares of GGI Common Stock in connection with the Business Combination. |
Q: | What happens to the funds deposited in the trust account after consummation of the Business Combination? |
A: | If the Business Combination is consummated, the funds held in the Trust Account will be used to (i) pay GGI Public Stockholders who properly exercise their redemption rights and (ii) pay the Deferred Discount and certain other fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees and other professional fees) that were incurred by GGI in connection with the Business Combination up to a cap of $60 million, and pursuant to the terms of the Business Combination Agreement. Any remaining funds will be used by the Post-Combination Company for general corporate purposes. |
Q: | What happens if the Business Combination is not consummated? |
A: | There are certain circumstances under which the Business Combination Agreement may be terminated. Please see the section titled The Business Combination Agreement for information regarding the parties specific termination rights. |
If GGI does not consummate the Business Combination, GGI may continue to try to complete a business combination with a different target business until March 25, 2023. Unless GGI amends the Current GGI Certificate (which requires the affirmative vote of the holders of 65% of all then outstanding shares of GGI Common Stock) and amend certain other agreements into which GGI has entered to extend the life of GGI, if GGI fails to complete an initial business combination by March 25, 2023, then GGI will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter subject to lawfully available funds therefor, redeem 100% of the GGI Public Shares, at a per-share price, payable in cash equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to GGI to fund Regulatory Withdrawals and/or to pay franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish GGI Public Stockholders rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of remaining GGI Stockholders and the GGI Board, dissolve and liquidate, subject in each case to GGIs obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the GGI IPO. Please see the section titled Risk FactorsRisks Related to GGI and the Business Combination.
The GGI Initial Stockholders have waived any right to any liquidation distribution with respect to such shares. In addition, if GGI fails to complete an initial business combination by March 25, 2023, there will be no redemption rights or liquidating distributions with respect to outstanding GGI Warrants, which will expire worthless unless GGI amends the Current GGI Certificate and amend certain other agreements into which GGI has entered to extend the life of GGI.
Q: | When do you expect the Business Combination to be completed? |
A: | The Closing is expected to take place on or prior to the third business day following the satisfaction or waiver of the conditions described below in the subsection titled The Business Combination AgreementConditions to Closing of the Business Combination. The Closing is expected to occur in the first half of 2022. |
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Q: | What else do I need to do now? |
A: | You are urged to read carefully and consider the information contained in this proxy statement/prospectus, including the Annexes, and to consider how the Business Combination will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy cards or, if you hold your shares or warrants through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee. |
Q: | How do I vote my shares of GGI Common Stock? |
A: | If you were a holder of record of shares of GGI Common Stock on April 20, 2022, the record date for the Stockholder Special Meeting, you may vote with respect to the proposals in person via the virtual meeting platform at the Stockholder Special Meeting, or by completing, signing, dating and returning the enclosed GGI stockholder proxy card in the postage-paid envelope provided. |
Voting by Mail. By signing the GGI stockholder proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the GGI stockholder proxy card to vote your shares at the Stockholder Special Meeting in the manner you indicate. You are encouraged to sign and return the GGI stockholder proxy card even if you plan to attend the Stockholder Special Meeting so that your shares will be voted if you are unable to attend the Stockholder Special Meeting. If you receive more than one GGI stockholder proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all GGI stockholder proxy cards to ensure that all of your shares are voted. Votes submitted by mail must be received by [●] on [●], 2022.
Voting at the Stockholder Special Meeting via the Virtual Meeting Platform. If you attend the Stockholder Special Meeting and plan to vote in person via the virtual meeting platform, you will be provided with explicit instructions on how to vote in person via the virtual meeting platform. If your shares are registered directly in your name, you are considered the stockholder of record and you have the right to vote in person via the virtual meeting platform at the Stockholder Special Meeting. If you hold your shares in street name, which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the Stockholder Special Meeting and vote in person via the virtual meeting platform, you will need to contact your broker, bank or nominee to obtain a legal proxy that will authorize you to vote these shares. For additional information, please see the section titled Special Meeting of GGI Stockholders.
Q: | How do I vote my GGI Public Warrants? |
A: | If you were a holder of record of GGI Public Warrants on April 20, 2022, the record date for the Warrant Holder Meeting, you may vote with respect to the proposals in person via the virtual meeting platform at the Warrant Holder Meeting, or by completing, signing, dating and returning the enclosed GGI warrant holder proxy card in the postage-paid envelope provided. |
Voting by Mail. By signing the GGI warrant holder proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the GGI warrant holder proxy card to vote your GGI Public Warrants at the Warrant Holder Meeting in the manner you indicate. You are encouraged to sign and return the GGI warrant holder proxy card even if you plan to attend the Warrant Holder Meeting so that your GGI Public Warrants will be voted if you are unable to attend the Warrant Holder Meeting. If you receive more than one GGI warrant holder proxy card, it is an indication that your GGI Public Warrants are held in multiple accounts. Please sign and return all GGI warrant holder proxy cards to ensure that all of your GGI Public Warrants are voted. Votes submitted by mail must be received by [●] on [●], 2022.
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Voting at the Warrant Holder Meeting via the Virtual Meeting Platform. If you attend the Warrant Holder Meeting and plan to vote in person via the virtual meeting platform, you will be provided with explicit instructions on how to vote in person via the virtual meeting platform. If your GGI Public Warrants are registered directly in your name, you are considered the warrant holder of record and you have the right to vote in person via the virtual meeting platform at the Warrant Holder Meeting. If you hold your GGI Public Warrants in street name, which means your GGI Public Warrants are held of record by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or nominee to ensure that votes related to the GGI Public Warrants you beneficially own are properly counted. In this regard, you must provide the record holder of your GGI Public Warrants with instructions on how to vote your GGI Public Warrants or, if you wish to attend the Warrant Holder Meeting and vote in person via the virtual meeting platform, you will need to contact your broker, bank or nominee to obtain a legal proxy that will authorize you to vote these GGI Public Warrants. For additional information, please see the section titled GGI Public Warrant Holder Meeting.
Q: | If my shares of GGI Common Stock and/or GGI Public Warrants are held in street name, will my broker, bank or nominee automatically vote my shares/warrants for me? |
A: | No. Under the rules of various national and regional securities exchanges, your broker, bank, or nominee cannot vote your shares or warrants with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. GGI believes that all of the proposals presented to the stockholders at the Stockholder Special Meeting and the warrant holders at the Warrant Holder Meeting will be considered non-discretionary and, therefore, your broker, bank, or nominee cannot vote your shares without your instruction on any of the proposals presented at the Stockholder Special Meeting, and your broker, bank, or nominee cannot vote your warrants without your instruction on any of the proposals presented at the Warrant Holder Meeting. |
If you do not provide instructions to vote at the Stockholder Special Meeting with your proxy, your broker, bank, or other nominee may deliver a GGI stockholder proxy card expressly indicating that it is NOT voting your shares; this indication that a broker, bank, or nominee is not voting your shares is referred to as a broker non-vote. Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the Stockholder Special Meeting. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.
If you do not provide instructions to vote at the Warrant Holder Meeting with your proxy, your broker, bank, or other nominee may deliver a GGI warrant holder proxy card expressly indicating that it is NOT voting your warrants; this indication that a broker, bank, or nominee is not voting your warrants is referred to as a broker non-vote. Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the Warrant Holder Meeting. Your bank, broker, or other nominee can vote your warrants only if you provide instructions on how to vote. You should instruct your broker to vote your warrants in accordance with directions you provide.
Q: | May I change my vote after I have mailed my signed GGI stockholder proxy card and/or GGI warrant holder proxy card? |
A: | Yes. You may change your vote in the Stockholder Special Meeting by sending a later-dated, signed GGI stockholder proxy card to GGIs Secretary at the address listed below so that it is received by GGIs Secretary prior to the Stockholder Special Meeting, or by attending the Stockholder Special Meeting in person via the virtual meeting platform and vote. You also may revoke your proxy granted in respect of your shares by sending a notice of revocation to GGIs Secretary, which must be received by GGIs Secretary prior to the Stockholder Special Meeting. |
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You may change your vote in the Warrant Holder Meeting by sending a later-dated, signed GGI warrant holder proxy card to GGIs Secretary at the address listed below so that it is received by GGIs Secretary prior to the Warrant Holder Meeting, or by attending the Warrant Holder Meeting in person via the virtual meeting platform and vote. You also may revoke your proxy granted in respect of your warrants by sending a notice of revocation to GGIs Secretary, which must be received by GGIs Secretary prior to the Warrant Holder Meeting.
Q: | What will happen if I sign and return my GGI stockholder proxy card and/or GGI warrant holder proxy card without indicating how I wish to vote? |
A: | If you sign, date and return your GGI stockholder proxy card without indicating how you wish to vote, your proxy will be voted FOR each of the proposals presented at the Stockholder Special Meeting. The proxyholders may use their discretion to vote on any other matters that properly come before the Stockholder Special Meeting. |
If you sign, date and return your GGI warrant holder proxy card without indicating how you wish to vote, your proxy will be voted FOR each of the proposals presented at the Warrant Holder Meeting. The proxyholders may use their discretion to vote on any other matters that properly come before the Warrant Holder Meeting.
Q: | How do I register to attend the Stockholder Special Meeting and/or the Warrant Holder Meeting virtually? |
A: | If you are a holder of GGI Common Stock on the record date, you do not need to register to attend the Stockholder Special Meeting virtually. Please follow the instructions on your GGI stockholder proxy card. If your shares are held in the name of your broker, bank or other nominee, you must register in advance to attend the Stockholder Special Meeting virtually. |
If you are a holder of GGI Public Warrants on the record date, you do not need to register to attend the Warrant Holder Meeting virtually. Please follow the instructions on your GGI warrant holder proxy card. If your warrants are held in the name of your broker, bank or other nominee, you must register in advance to attend the Warrant Holder Meeting virtually.
To register to attend the Stockholder Special Meeting or Warrant Holder Meeting in person via the virtual meeting platform, you must obtain a proxy from the broker, bank or other nominee, reflecting your GGI holdings along with your name and email address and submit to legalproxy@computershare.com. Requests for registration must be labeled as Legal Proxy and be received no later than 5:00 p.m., Eastern Time, on [●], 2022. You will receive a confirmation of your registration by email.
Q: | If I am not going to attend the Stockholder Special Meeting or Warrant Holder Meeting via the virtual meeting platform, should I return my GGI stockholder proxy card and/or GGI warrant holder proxy card instead? |
A: | Yes. Whether or not you plan to attend the Stockholder Special Meeting or Warrant Holder Meeting, please read the enclosed proxy statement/prospectus carefully. |
Please vote your shares by completing, signing, dating and returning the enclosed GGI stockholder proxy card in the postage-paid envelope provided.
Please vote your warrants by completing, signing, dating and returning the enclosed GGI warrant holder proxy card in the postage-paid envelope provided.
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Q: | What happens if I fail to take any action with respect to the Stockholder Special Meeting and/or Warrant Holder Meeting? |
A: | If you fail to take any action with respect to the Stockholder Special Meeting and the Business Combination Proposal is approved by GGI stockholders and the Business Combination is consummated, you will become a holder of ADSs and/or ADWs. If you fail to take any action with respect to the Stockholder Special Meeting and the Business Combination is not approved, you will continue to be a stockholder and/or warrant holder of GGI. |
If you fail to take any action with respect to the Warrant Holder Meeting and the Business Combination Proposal is approved by GGI stockholders and the Business Combination is consummated, and the Warrant Amendment Proposal is approved by GGI Public Warrant holders, you will become a holder of Class C ADSs representing Post-Combination Company Class C Shares. If you fail to take any action with respect to the Warrant Holder Meeting and the Business Combination Proposal is approved by GGI stockholders and the Business Combination is consummated, but the Warrant Amendment Proposal is not approved by GGI Public Warrant holders, you will become a holder of ADWs. If you fail to take any action with respect to the Warrant Holder Meeting and the Business Combination Proposal is not approved, you will continue to be a stockholder and/or warrant holder of GGI.
Q: | What should I do if I receive more than one set of voting materials? |
A: | You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus, multiple GGI stockholder proxy cards or voting instruction cards, multiple GGI warrant holder proxy cards or voting instruction cards. |
For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one GGI stockholder proxy card. If you hold your GGI Public Warrants in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold GGI Public Warrants. If you are a holder of record and your GGI Warrants are registered in more than one name, you will receive more than one GGI warrant holder proxy card.
Please complete, sign, date and return each GGI stockholder proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.
Please complete, sign, date and return each GGI warrant holder proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your warrants.
Q: | Who will solicit and pay the cost of soliciting proxies for the Stockholder Special Meeting and the Warrant Holder Meeting? |
A: | GGI will pay the cost of soliciting proxies for the Stockholder Special Meeting and the Warrant Holder Meeting. GGI has engaged Morrow Sodali LLC (Morrow) to assist in the solicitation of proxies for the Stockholder Special Meeting and the Warrant Holder Meeting. GGI has agreed to pay Morrow a fee of $47,500, plus disbursements, and will reimburse Morrow for its reasonable out-of-pocket expenses and indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses. GGI will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of GGI Common Stock and GGI Public Warrants for their expenses in forwarding soliciting materials to beneficial owners of shares of GGI Common Stock and GGI Public Warrants and in obtaining voting instructions from those owners. GGIs directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies. |
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Q: | Who can help answer my questions? |
A: | If you have questions about the proposals or if you need additional copies of this proxy statement/prospectus or the enclosed proxy cards you should contact: |
Gores Guggenheim, Inc.
6260 Lookout Road
Boulder, CO 80301
(303) 531-3100
Email: jchou@gores.com
You may also contact the proxy solicitor for GGI at:
Morrow Sodali LLC
333 Ludlow Street
5th Floor, South Tower
Stamford, Connecticut 06902
Individuals, please call toll-free: (800) 662-5200
Banks and brokerage, please call: (203) 658-9400
Email: GGPI.info@investor.morrowsodali.com
To obtain timely delivery, GGI Stockholders must request the materials no later than [●], 2022, or five business days prior to the Stockholder Special Meeting and the Warrant Holder Meeting.
You may also obtain additional information about GGI from documents filed with the SEC by following the instructions in the section titled Additional Information.
If you intend to seek redemption of your GGI Public Shares, you will need to notify the Transfer Agent and deliver your GGI Public Shares (either physically or electronically) to the Transfer Agent prior to the Stockholder Special Meeting in accordance with the procedures detailed under the question How do I exercise my redemption rights? If you have questions regarding the certification of your position or delivery of your GGI Public Shares, please contact the Transfer Agent:
Computershare Trust Company, N.A.
Attn: Corporate Actions Voluntary Offer
150 Royall Street, Suite V
Canton, MA 02021
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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this proxy statement/prospectus and does not contain all of the information that is important to you. To better understand the proposals to be submitted for a vote at the Stockholder Special Meeting and the Warrant Holder Meeting, including the Business Combination Proposal, you should read this entire document carefully, including the Business Combination Agreement attached as Annexes A-1, A-2, A-3 and A-4 to this proxy statement/prospectus. The Business Combination Agreement is the legal document that governs the Business Combination and the transactions that will be undertaken in connection with the Business Combination. It is also described in detail in this proxy statement/prospectus in the section titled The Business Combination Agreement.
The Parties to the Business Combination
Polestar
Polestar Automotive Holding UK Limited is a limited company incorporated under the laws of England and Wales (ListCo). ListCo intends to apply to list the Class A ADSs and the Public ADWs or Class C-1 ADSs on Nasdaq under the symbols PSNY and PSNYW, respectively, upon the Closing.
ListCo is a direct wholly owned subsidiary of Polestar Automotive Holding Limited, a Hong Kong incorporated company (Parent). Prior to Closing, Parent will, and will cause its subsidiaries; ListCo, Polestar Singapore, Polestar Sweden and their respective subsidiaries to, complete the Pre-Closing Reorganization, pursuant to which, among other things, Polestar Singapore, Polestar Sweden and their respective subsidiaries will become, directly or indirectly, wholly owned subsidiaries of ListCo. Polestar Sweden is the principal operating entity, is responsible for, and is engaged in product strategy and development as well as marketing and distribution of Polestar vehicles. Polestar Sweden manages sales globally in conjunction with the local Polestar sales units. Polestar Singapore is a holding company with finance and intra-group lending operations. Polestar Singapore also imports Polestar products for sale in the Singapore market. Parent and its subsidiaries (including ListCo) are collectively referred to herein as Polestar or we, our, us, or the company.
Polestar is determined to improve society by accelerating the shift to sustainable mobility.
Polestar is a pure play, premium electric performance car brand headquartered in Sweden with global operations, including manufacturing, distribution and sales operations through Chinese subsidiaries, designing products that are engineered to excite consumers and drive change. Polestar defines market-leading standards in design, technology and sustainability. Polestar was established as a premium electric car brand by Volvo Cars and Geely in 2017. Polestar benefits from the technological, engineering and manufacturing capabilities of these established global car manufacturers. Polestar has an asset-light, highly scalable business model with immediate operating leverage. Polestar currently offers two performance car models; Polestar 1 and Polestar 2. As a UK company, headquartered in Sweden with global operations, including manufacturing, distribution and sales operations through Chinese subsidiaries, Polestar is exposed to unique risks. In particular, regulatory and other actions taken by Chinas government, could have a material adverse effect on Polestars operations and the value of securities issued by Polestar could materially change. See Risk Factors Risks Related to Polestars Business and IndustryPolestar relies heavily on manufacturing facilities based in China and its growth strategy will depend on growing its business in China. This subjects Polestar to economic, operational, regulatory and legal risk specific to China.
Polestar 1, an electric performance hybrid Grand Tourer, or GT, was launched to establish Polestar in the premium luxury electric vehicle market in 2019. With a carbon fiber body, Polestar 1 has a combined 609 horse power (hp) and 1,000 Newton-metre (Nm) of torque. Production of the Polestar 1 ceased at the end of 2021.
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Polestar 2, an electric performance fastback and our first fully electric, high volume car was launched in 2020. Polestar 2 has three variants with a combination of long- and standard range batteries as large as 78 kWh, and dual- and single-motor powertrains with up to 300 kW / 408 hp and 660 Nm of torque. Polestar 1 and Polestar 2 have received major acclaim, winning multiple globally recognized awards across design, innovation and sustainability. Highlights for Polestar 1 include Insider car of the year and GQs Best Hybrid Sports Car. Polestar 2 alone has won over 50 awards, including various Car of the Year awards, the Golden Steering Wheel, Red Dots Best of the Best Product Design and a 2021 Innovation by Design award from Fast Company.
Today Polestars cars are on the road in nineteen markets across Europe, North America, China and Asia Pacific. Polestar intends to continue its rapid market expansion with the aim that its cars will be available in an aggregate of 30 markets by the end of 2023. Polestar also plans to introduce three new electric vehicles by 2024; Polestar 3, an aerodynamically optimized Sport Utility Vehicle, or SUV; Polestar 4, a sporty SUV coupe and Polestar 5, a luxury 4 door GT. Polestars target is a production volume of approximately 290,000 vehicles per annum by the end of 2025. With these expanded markets and additional vehicles, Polestar expects to compete in segments constituting almost 80% of the global premium luxury vehicle market by volume of units sold. Polestar believes the premium luxury vehicle segment is one of the fastest growing vehicle segments, and expects the electric-only vehicle portion of this segment to grow at a faster rate than the overall segment.
Polestar has also established an important goal to create a truly climate neutral car by the end of 2030, which it refers to as the Polestar 0 project. The development of a truly climate neutral car by the end of 2030 is a significant milestone on the path to Polestars goal of becoming a climate neutral company by the end of 2040.
Polestars vehicles are currently manufactured at a plant in Luqiao, China that is owned and operated by Volvo Cars. The plant, referred to by Volvo Cars as the Taizhou plant, was acquired by Volvo Cars from Geely in December 2021. Prior to that time, the plant had been owned by Geely and operated by Volvo Cars. The Polestar 2 vehicles have been manufactured at this plant since production commenced in 2020. Commencing with the Polestar 3, Polestar intends to produce vehicles both in China and in Charleston, South Carolina in the United States (a facility operated by Volvo Cars). Polestars ability to leverage the manufacturing footprint of both Volvo Cars and Geely provides it with access to a combined installed production capacity of about 750,000 units per annum across three continents, and gives Polestars highly scalable business model immediate operating leverage. Polestar also plans on expanding its production capacity in Europe by leveraging plants that are owned and operated by Volvo Cars.
Polestar uses a digital first, direct to consumer approach that enables its customers to browse Polestars products, configure their preferred vehicle and place their order on-line. Alternatively, Polestar Locations are where customers can see, feel and test drive Polestars vehicles prior to making an on-line purchase. Polestar believes this combination of digital and physical retail presence delivers a seamless experience for its customers. Polestars customer experience is further enhanced by its comprehensive service network that leverages the existing Volvo Cars service center network. Polestar currently has over 40 permanent Polestar Locations (and over 60 temporary or pop up locations). Polestar plans to extend its retail locations to a total of over 150 in existing and new markets by the end of 2023. In addition, Polestar leverages the Volvo Cars service center network to provide access to over 800 customer service points worldwide in support of its international expansion.
Polestars research and development expertise is a core competence and Polestar believes it is a significant competitive advantage. Current proprietary technologies under development include bonded aluminum chassis architectures and their manufacture, a high-performance electric motor and bi-directional compatible battery packs and charging technology.
Polestar has drawn extensively on the industrial heritage, knowledge and market infrastructure of Volvo Cars. This combination of deep automotive expertise, paired with cutting-edge technologies and an agile, entrepreneurial culture, underpins Polestars differentiation, potential for growth and success.
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ListCo
To date, ListCo has not conducted any material activities other than those incident to its formation and the pending Business Combination and only has nominal assets.
The mailing address of Polestars principal executive office is Assar Gabrielssons Väg 9, 405 31 Göteborg, Sweden. Its agent for U.S. federal securities law purposes is Polestar Automotive USA Inc., 777 MacArthur Blvd, Mahwah, NJ 07430, Tel: (949) 735-1834. Polestar maintains a website at www.polestar.com. Information contained in, or accessible through, Polestars website is not a part of, and is not incorporated into, this proxy statement/prospectus.
Merger Sub
PAH UK Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of ListCo that was incorporated on September 15, 2021 to facilitate the consummation of the Business Combination. In connection with the Business Combination, Merger Sub will merge with and into GGI in the Merger, pursuant to which the separate corporate existence of Merger Sub will cease, with GGI being the surviving corporation and becoming a wholly owned subsidiary of ListCo.
The registered address of Merger Sub is 251 Little Falls Drive, Wilmington, New Castle County, DE 19808.
GGI
GGI is a blank check company incorporated on December 21, 2020 as a Delaware corporation and formed for the purpose of effecting an initial business combination with one or more target businesses.
GGI Public Shares, GGI Public Units and GGI Public Warrants are currently listed on Nasdaq under the symbols GGPI, GGPIU and GGPIW, respectively.
The mailing address of GGIs principal executive office is 6260 Lookout Road, Boulder, CO 80301 and its telephone number is (303) 531-3100.
Recent Developments
Operational Highlights
The table below summarizes key operational results of Polestar for the years ended December 31, 2020 and 2021. The following should be read in conjunction with the Risk Factors and Polestars Managements Discussion and Analysis of Financial Condition and Results of Operations sections and the Polestar Financial Statements and the related notes thereto included elsewhere in this proxy statement/prospectus.
Operational Results |
December 31, 2020 |
December 31, 2021 |
||||||
Global Volumes (1) |
10,046 | 28,677 | ||||||
including 13 and 2,836 external vehicles with repurchase obligations for the years ended December 31, 2020 and December 31, 2021, respectively. |
||||||||
including 792 and 2,081 internal vehicles transferred for demonstration and commercial purposes for the years ended December 31, 2020 and December 31, 2021, respectively, as well as vehicles transferred to Polestar employees |
||||||||
Markets (2) |
10 | 19 | ||||||
Locations (3) |
40 | 103 | ||||||
Service Points (4) |
444 | 811 |
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(1) | Represents total volumes of vehicles delivered, including external sales at time of invoicing and internal sales of vehicles transferred for demonstration and commercial purposes as well as vehicles transferred to Polestar employees at time of registration. Transferred vehicles for demonstration and commercial purposes are owned by Polestar and included in Inventory. |
(2) | Represents the markets in which Polestar operates. |
(3) | Represents Polestar Spaces and Polestar Destinations and Polestar Test Drive Centers. |
(4) | Represents Volvo Cars service center networks to provide access to customer service points worldwide in support of Polestars international expansion. |
Global Strategic Partnership with Hertz
On March 11, 2022, Polestar entered into a letter of intent with The Hertz Corporation (Hertz) pursuant to which Hertz intends to commit to purchase 65,000 or more Polestar vehicles during a 5-year period beginning in 2022. Polestar and Hertz intend to sign four regional purchase agreements covering the United States, Canada, Europe, and Australia. The new global strategic partnership was announced by Polestar and Hertz Global Holdings, Inc. (NASDAQ: HTZ) on April 4, 2022. Availability of vehicles is expected to begin in Spring 2022 in Europe and late 2022 in North America and Australia. Under the partnership, Hertz is expected to initially order Polestar 2s.
Declarations of Intent by Snita and PSD Investment Limited
Polestars business is capital-intensive, and Polestar expects that the costs and expenses associated with its planned operations will continue to increase in the near term and, accordingly, ListCo anticipates that it will need to raise additional funds from time to time. Snita and PSD Investment Limited have each executed a Declaration of Intent (the Declarations of Intent). The Declarations of Intent are substantially identical and set forth the parties intention to subscribe for their pro rata share of equity or equity linked securities issued by ListCo in the event of any offering of such securities until March 31, 2024. The Declarations of Intent also provide that, (i) Polestar will actively seek appropriate debt financing and engage in raising capital from the market, and (ii) to the extent either Snita and/or PSD Investment Limited decide to make such investments, those investments will be made on market terms and conditions substantially identical to, or better than, those offered to third party investors and will be subject to all necessary corporate and/or regulatory approvals of Snita, Volvo Cars and/or PSD Investment Limited, as the case may be. The Declarations of Intent are not undertakings or guarantees, and any decision to invest in any offerings of securities by ListCo in the future are within the sole discretion of Snita and PSD Investment Limited, respectively. There can be no assurance that Snita and/or PSD Investment Limited will make any investment in the share capital of ListCo prior to March 31, 2024, or at all. There can also be no assurance that the amount of any further investment in ListCo by Snita and/or PSD Investment Limited will be sufficient to meet ListCos requirements or on terms acceptable to ListCo. See Risk FactorsRisks Related to Financing and Strategic TransactionsPolestar will require additional capital to support business growth, and this capital might not be available on commercially reasonable terms, or at all and Certain Relationships and Related TransactionsDeclarations of Intent by Snita and PSD Investment Limited.
The Business Combination
On September 27, 2021, GGI entered into the Business Combination Agreement with Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub. On December 17, 2021, the parties to the Business Combination Agreement amended the Business Combination to provide for certain administrative changes to reflect the December PIPE Subscription Agreements by entering into Amendment No. 1 to the Business Combination Agreement. On March 24, 2022, the parties to the Business Combination Agreement further amended the Business Combination Agreement to provide for certain administrative changes to reflect the March PIPE Subscription Agreements by entering into Amendment No. 2 to the Business Combination Agreement. Pursuant to the Business Combination Agreement and in connection therewith, among other things and subject to the terms and conditions contained therein:
| in connection with the Merger, prior to the Closing, Parent will, and will cause ListCo, Polestar Singapore, Polestar Sweden and their respective subsidiaries to, complete the Pre-Closing Reorganization; |
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| following the Pre-Closing Reorganization at the Closing, Merger Sub will merge with and into GGI in the Merger, pursuant to which the separate corporate existence of Merger Sub will cease and GGI will be the surviving corporation and will become a wholly owned subsidiary of ListCo; |
| at the Effective Time and by virtue of the Merger: |
| any units of GGI that are outstanding immediately prior to the Effective Time held by GGI stockholders will be automatically separated and the holder thereof will be deemed to hold one share of GGI Class A Common Stock and one-fifth of a GGI Public Warrant, which underlying securities will be converted as described below; |
| each share of GGI Class A Common Stock issued and outstanding immediately prior to the Effective Time, other than those held in treasury, will be exchanged for one Class A ADS; |
| each share of GGI Class F Common Stock issued and outstanding immediately prior to the Effective Time, other than those held in treasury, will be exchanged for one newly issued Class A ADS; and |
| all GGI Common Stock held in treasury will be canceled and extinguished without consideration; |
| in the event the Warrant Amendment Proposal is approved prior to the Effective Time, pursuant to the Class C Warrant Amendment, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-1 ADS representing one Post-Combination Company Class C-1 Share. Each Post-Combination Company Class C-1 Share will be exercisable to acquire a Post-Combination Company Class A Share (in the form of a Class A ADS) at an exercise price of $11.50 per share. In addition, each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-2 ADS representing one Post-Combination Company Class C-2 Share. Each Post-Combination Company Class C-2 Share will be exercisable to acquire a Post-Combination Company Class A Share (in the form of a Class A ADS) at an exercise price of $11.50 per share; |
| in the event that the Warrant Amendment Proposal is not approved prior to the Effective Time, pursuant to the Warrant Amendment Agreement, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one Public ADW. In addition, each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one PP ADW; |
| ListCo will adopt the Post-Combination Articles, to provide for, among other things, that (i) the initial Post-Combination Company Board will include nine directors, each serving staggered three-year terms, (ii) for a period of three years following the Closing, a majority of the Post-Combination Company Board will be (a) independent under applicable stock exchange rules and (b) unaffiliated with the Volvo Cars or Geely, and (iii) for a period of three years following the Closing, except as required by applicable law, the Post-Combination Company Board may not convene a general meeting which proposes a resolution to remove an independent director unless a majority of the directors (including at least two independent directors) approve of such resolution and following any such removal, a majority of the directors (including at least two independent directors) must approve the appointment of any new independent director to fill the vacancy; |
| Parent, Parent Shareholders, ListCo, the GGI Sponsor and the independent directors of GGI entered into the Registration Rights Agreement; and |
| prior to the Closing (but after the completion of the Pre-Closing Reorganization), ListCo and Parent will approve and adopt the Equity Plan and the Employee Stock Purchase Plan. |
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In addition and in connection with the foregoing,
| pursuant to the Registration Rights Agreement, the Registration Rights Holders and their permitted transferees are entitled to registration rights in respect of certain Post-Combination Company securities, ADSs and ADW at the Closing; |
| pursuant to the Parent Shareholder Acknowledgement, that Parent and the Parent shareholders have undertaken that (i) the initial Post-Combination Company Board will include nine directors, a majority of whom will be independent directors, (ii) for a period of three years following the Closing, Parent and the Parent shareholders will not vote in favor of the removal any independent directors of ListCo unless at least two independent directors vote in favor of such removal, (iii) for a period of three years following the Closing, Parent and the Parent shareholders will not require ListCo to convene a general meeting for the purpose of removing an independent director, and (iv) for three years following the Closing, Parent and the Parent shareholders will not vote in favor of any amendment to the Post-Combination Articles relating to the composition of the Post-Combination Company Board or the appointment or removal of ListCo directors. The GGI Sponsor will have third party beneficiary rights to enforce the aforementioned undertakings; |
| pursuant to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, each GGI Initial Stockholder has, among other things, agreed to (i) vote their GGI Class F Common Stock in favor of the Business Combination Proposal and any other proposals for the Stockholder Special Meeting included in this proxy statement/prospectus, and against any alternative business combination, (ii) waive all adjustments to the conversion ratio set forth in the Current GGI Certificate with respect to the GGI Class F Common Stock, (iii) be bound by certain transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants, and (iv) not transfer any Class A ADSs issued pursuant to the Business Combination Agreement during the period beginning on the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein. In addition, the GGI Sponsor has agreed to the forfeiture of up to 1,540,835 shares of GGI Class F Common Stock; |
| pursuant to the Parent Lock-Up Agreement, each Parent Shareholder has, subject to certain exceptions, among other things, agreed not to transfer any equity security of ListCo issued to them pursuant to the Business Combination Agreement or other transaction documents contemplated by the Business Combination Agreement during the period commencing the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein; |
| pursuant to the Initial PIPE Subscription Agreements, the Initial PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of approximately 7.43 million Initial PIPE Shares for a purchase price of $9.09 per share in a private placement, for an aggregate amount of approximately $67.5 million. In addition, pursuant to the December PIPE Subscription Agreements, the December PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of 14.3 million December PIPE Shares for an average purchase price of $9.54 per share in a private placement, for an aggregate amount of approximately $136.0 million. In addition, pursuant to the March PIPE Subscription Agreements, the March PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of 2.8 million March PIPE Shares for an average purchase price of $9.57 per share in a private placement, for an aggregate amount of approximately $27.2 million. The issuance of the PIPE Shares pursuant to the PIPE Subscription Agreements is contingent upon, among other customary closing conditions, the substantially concurrent consummation of the Business Combination. Pursuant to the PIPE Subscription Agreements, ListCo agreed to file with the SEC (at ListCos sole cost and expense), within 30 calendar days after the date of Closing, a registration statement registering the resale of the PIPE Shares (the Resale Registration Statement), and to use its commercially reasonable efforts to have the Resale Registration Statement declared effective as soon as practicable after the filing thereof; |
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| pursuant to the Sponsor Subscription Agreement, the GGI Sponsor has agreed to purchase an additional approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.09 per share on the date of Closing, for an aggregate investment of approximately $8.1 million. The Sponsor Subscription Agreement, as amended, is substantially similar to the Initial PIPE Subscription Agreements, except that the GGI Sponsor has the right to syndicate its commitment to acquire the Class A ADSs to be purchased under the Sponsor Subscription Agreement in advance of the Closing; |
| pursuant to the Volvo Cars PIPE Subscription Agreement, Snita has agreed to purchase an additional approximately 1.1 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $10.00 per share on the date of Closing, for an aggregate investment amount equal to approximately $11.2 million. The Volvo Cars PIPE Subscription Agreement, as amended, is substantially similar to the Initial PIPE Subscription Agreements, except with regard to purchase price. Snita may, in accordance with the terms of the Volvo Cars PIPE Subscription Agreement, syndicate its commitment to acquire the Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement in advance of the Closing; and |
| pursuant to the Volvo Cars Preference Subscription Agreement Snita has agreed to purchase, upon and subject to the Closing, the Post-Combination Company Preference Shares for an aggregate subscription price of $10.00 per share, for an aggregate investment amount equal to $588,826,100. The proceeds of such subscription will be used to satisfy certain accounts payable that are or will be due and payable by certain subsidiaries of Parent to Volvo Cars. As of the date hereof, it is currently anticipated that all of the Post-Combination Company Preference Shares will convert into Post-Combination Company Class A Shares at Closing, in accordance with, and subject to, the terms of the Post-Combination Company Preference Shares. |
Consideration to Parent in the Business Combination
Pursuant to the Business Combination Agreement, Parent will receive stock consideration. following the Pre-Closing Reorganization, Parent will hold an aggregate number of Post-Combination Company Shares equal to approximately (a) $20,003,000,000 divided by $10.00, less (b) (i) the aggregate principal amount due in respect of the Parent Convertible Notes, divided by (ii) the applicable conversion price of such notes, less (c) 58,882,610 which represents the aggregate number of Post-Combination Company Preference Shares issued pursuant to the Volvo Cars Preference Subscription Agreement.
As additional consideration for Parents contribution to ListCo of all the issued and outstanding equity securities of Polestar Sweden, Parent will be entitled to receive, subject to the terms provided in the Business Combination Agreement, earn out shares from Post-Combination Company, issuable in Post-Combination Company Class A Shares and Post-Combination Company Class B Shares up to an aggregate number equal to approximately (a) 0.075 multiplied by (b) the number of issued and outstanding Post-Combination Company Shares as of immediately after the Closing (including Post-Combination Company Shares issued pursuant to the Subscription Agreements).
Conditions to Closing of the Business Combination.
The Closing is expected to take place electronically through the exchange of documents via e-mail or facsimile as promptly as practicable (and in any event no later than 9:00 a.m., New York time, on the third business day after the date on which all of the conditions described below under the subsection Conditions to Closing of the Business Combination have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the Closing)) or at such other time, date and location as GGI and Polestar may mutually agree in writing.
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The respective obligations of each of GGI and Polestar to complete the Business Combination are subject to the satisfaction of the following conditions, any one or more of which may be waived (if legally permitted) in writing by all of such parties:
| the applicable waiting period (and any extension thereof) under the HSR Act relating to the Business Combination will have expired, been terminated or obtained (or deemed, by applicable law, to have been obtained); |
| there will not have been enacted or promulgated any law or other legal restraint or prohibition issued by any court of competent jurisdiction or other governmental authority preventing the consummation of the Business Combination; |
| this proxy statement/prospectus will have become effective in accordance with the provisions of the Securities Act, and no stop order will have been issued by the SEC and remain in effect with respect to this proxy statement/prospectus; |
| the Business Combination Proposal will have been approved; |
| the Required Parent Shareholder Approval will have been obtained; |
| after completion of the GGI stockholder redemptions and prior to the Closing, GGI will have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act); |
| the Class A ADSs that constitute the share consideration paid to GGI and Class A ADSs that are issued in connection with the PIPE Investment will have been approved for listing on Nasdaq; |
| the ADWs or the Class C-1 ADSs, as applicable, will have been approved for listing on Nasdaq; and |
| the Post-Combination Company Board will have a number of directors and composition of directors determined in accordance with the Business Combination Agreement as of the Closing. |
Conditions to Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Subs Obligations
The obligation of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub to consummate and effect the Merger and the other transactions contemplated by the Business Combination Agreement are subject to the satisfaction, at or prior to the Closing, of each of the following conditions, any one or more of which may be waived in writing by Parent:
| (i) the representations and warranties of GGI related to corporate organization, due authorization, capitalization and brokers will be true and correct in all material respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all material respects as of such earlier date), (ii) representations and warranties related to the capitalization of GGI will be true and correct in all respects (except for de minimis inaccuracies) as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all respects (except for de minimis inaccuracies) as of such earlier date), (iii) the representation and warranty related to the absence of certain changes will be true and correct in all respects as of the Closing Date as though made on and as of the Closing Date and (iv) the other representations and warranties of GGI (other than the representations and warranties related to corporate organization, due authorization, capitalization and brokers) will be true and correct (without giving effect to any limitations as to materiality or any similar limitation set forth in the Business Combination Agreement) in all respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty |
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will be true and correct in all respects as of such earlier date), except where the failure of such representations and warranties to be true and correct, individually and in the aggregate has not had a GG Material Adverse Effect (as defined in the Business Combination Agreement); |
| the covenants and agreements of GGI contained in the Business Combination Agreement to be performed prior to the Closing will have been performed in all material respects; |
| the sum of (a) the amount in the Trust Account (after taking into account any stockholder redemptions), (b) the Sponsor Investment Amount, (c) the Volvo Cars PIPE Investment Amount and (d) the PIPE Investment Amount will be no less than $950,000,000, prior to the payment of any unpaid or contingent liabilities and fees and expenses of GGI (including, as applicable, any GGI transaction expenses) as of the Closing; and |
| GGI will have delivered, or caused to be delivered, to Polestar, ListCo and Parent a certificate, duly executed by an authorized officer of GGI, dated as of the Closing Date, to the effect that the conditions specified in the first two bullets are satisfied. |
Conditions to GGIs Obligations
The obligations of GGI to consummate and effect the Merger and the other transactions contemplated by the Business Combination Agreement are subject to the satisfaction, at or prior to the Closing, of each of the following conditions, any one or more of which may be waived in writing by GGI:
| (i) certain representations and warranties of the Parent and Polestar related to corporate organization, due authorization, capitalization and brokers will be true and correct (without giving effect to any limitation as to materiality set forth therein) in all material respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all material respects as of such earlier date), (ii) the representations and warranties set forth in certain representations and warrants of the Parent and Polestar related to the capitalization of Parent, Polestar and ListCo will be true and correct in all respects (except for de minimis inaccuracies) as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all respects (except for de minimis inaccuracies) as of such earlier date), (iii) the representation and warranty related to the absence of certain changes with respect to Parent and Polestar will be true and correct in all respects as of the Closing Date as though made on and as of the Closing Date and (iv) the representations and warranties of Polestar, ListCo and Merger Sub (other than the representations and warranties of Parent and Polestar related to corporate organization, due authorization, capitalization and brokers, certain representations and warranties of Parent, Polestar and ListCo relating to capitalization of equity securities) will be true and correct (without giving effect to any limitation as to materiality or Material Adverse Effect or any similar limitation set forth in the Business Combination Agreement) in all respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all respects as of such earlier date), except where the failure of such representations and warranties to be true and correct, individually and in the aggregate has not had a Material Adverse Effect; |
| the covenants and agreements of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub contained in the Business Combination Agreement to be performed prior to the Closing will have been performed in all material respects; |
| the Pre-Closing Reorganization will have been completed; and |
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Parent will have delivered, or caused to be delivered, to GGI a certificate duly executed by an authorized officer of Parent, dated as of the Closing Date, to the effect that the conditions specified in the first two bullets above are satisfied.
Organizational Structure
The following diagram shows the current ownership structure of GGI:
(1) | For more information about the ownership interests of the GGI Initial Stockholders, including the GGI Sponsor, prior to the Business Combination, please see the section titled Beneficial Ownership of Securities. |
The following diagram shows the current ownership structure of ListCo:
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The following diagram illustrates the ownership percentages and structure of the Post-Combination Company ((i) without giving effect to any issuance of Earn Out Shares or shares pursuant to the Equity Plan, Employee Stock Purchase Plan and a consulting marketing agreement, (ii) assuming no redemptions of GGI Class A Common Stock, the conversion of Polestars convertible notes and no conversion or redemption of any of the Post-Combination Company Class C Shares or Post-Combination Company Warrants, and (iii) excluding any Post-Combination Company Class C Shares issued to GGI Private Placement Warrant holders):
(1) | Including Subscription Shares to be issued to GGI Sponsor. |
(2) | Including Subscription Shares and Post-Combination Company Class A Shares converted from Post-Combination Company Preference Shares to be issued to Snita. |
(3) | Excluding Subscription Shares to be issued to GGI Sponsor and Snita. |
Impact of the Business Combination on Public Float
It is anticipated that, upon consummation of the Business Combination and without giving effect to any issuance of Earn Out Shares, any exercise of Class C ADSs or ADWs or any redemptions: (i) GGI Public Stockholders will retain an ownership interest of approximately 3.8% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs; (ii) the GGI Initial Stockholders (including the GGI Sponsor) will own approximately 0.9% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs (including approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased under the Sponsor Subscription Agreement); (iii) the PIPE Investors will own approximately 1.2% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs; and (iv) the Parent Shareholders will own approximately 94.2% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs (including (a) approximately 1.1 million Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement, (b) approximately 58.9 million Post-Combination Company Class A Shares in the form of Class A ADSs following the conversion of the Post-Combination Company Preference Shares purchased under the Volvo Cars Preference Subscription Agreement and (c) Post-Combination Company Class A Shares in the form of Class A ADSs following the conversion at the Closing of Parent Convertible Notes).
In the event that, following the Business Combination, 159,397,500 Earn Out Shares are issued to Parent Shareholders and assuming no exercise of Class C ADSs or ADWs, no redemptions and that no additional Post-Combination Company Shares are issued between the Closing and the realization of all of the benchmark share prices in the earn out: (i) GGI Public Stockholders will retain an ownership interest of approximately 3.5% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs; (ii) the GGI Initial Stockholders (including the GGI Sponsor) will own approximately 0.8% of the Post-Combination Company
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Shares by virtue of their ownership of Class A ADSs (including approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased under the Sponsor Subscription Agreement); (iii) the PIPE Investors will own approximately 1.1% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs; and (iv) the Parent Shareholders will own approximately 94.6% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs (including (a) approximately 1.1 million Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement, (b) approximately 58.9 million Post-Combination Company Class A Shares in the form of Class A ADSs following the conversion of the Post-Combination Company Preference Shares purchased under the Volvo Cars Preference Subscription Agreement and (c) Post-Combination Company Class A Shares in the form of Class A ADSs following the conversion at the Closing of Parent Convertible Notes).
For more information, please see the sections titled The Business CombinationImpact of the Business Combination on Public Float and Unaudited Pro Forma Condensed Combined Financial Information.
The GGI Boards Reasons for Approval of the Business Combination
Recommendation of the GGI Board and Reasons for the Business Combination
GGI was formed for the purpose of effecting an initial business combination with one or more businesses. GGI sought to do this by utilizing the networks and industry experience of both the GGI Sponsor and the GGI Board to identify and consummate an initial business combination with one or more businesses within or outside of the United States, although GGI was not limited to a particular industry or sector.
In particular, the GGI Board considered the following positive factors, although not weighted or in any order of significance:
| Competitive Advantage in the Fast Growing EV Industry. The GGI Board took into account that Polestar already has a global market presence in the Electric Vehicle (EV) industry, favorably positioning Polestar to capitalize on the highest pockets of growth in a rapidly accelerating EV market. Specifically, the GGI Board considered that Polestar currently operates in 14 markets across three continents and that Polestar already has two award winning cars on the road, including the 47 awards Polestar 2 had won as of the signing of the Business Combination Agreement. The GGI Board also recognized that Polestar is one of only two global premium pure play EV companies already in mass production. |
| Focus on Design, Performance, Technology and Sustainability. The GGI Board noted that Polestars focus on design, performance, technology, and sustainability differentiates Polestar from other EV companies. |
| Ability to Leverage Strategic Partnerships. The GGI Board considered that Polestars ability to leverage partnerships with Volvo Cars and Geely in areas such as manufacturing, procurement, safety testing, customer delivery and after-sales support both de-risks Polestars ability to execute on its business plan and allows Polestar to focus more of its efforts on core areas of differentiation, such as avant-garde designs, sports-oriented performance, rapid adoption of latest technologies and development of industry-leading sustainability solutions. The GGI Board also noted that Polestars contract manufacturing arrangements with Volvo Cars and Geely allow Polestar to immediately benefit from operating leverage, have contracted access to production capacity required to execute its business plan, and maintain an asset-light operating model with less capital intensity than other OEMs. |
| Significant, Long-Term Growth Potential. The GGI Board took into account Polestars anticipated growth, with Polestar expecting to enter a period of rapid growth starting with the launch of its first premium electric SUV, the Polestar 3, in 2022. The GGI Board further noted Polestars plans to launch |
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production of three new models by 2024, and to expand its global distribution footprint to approximately 30 markets by 2023 with over 150 locations and 800 service points. Additionally, the GGI Board noted that with Polestars planned launch of its three additional models, Polestar is expected to cover a substantial majority of the premium/luxury market. |
| Proven Leadership Team with Deep Technology, Operations and Electric Vehicle Experience. The GGI Board noted that the Polestar management team has deep technology, operations and EV experience, and that the Polestar management team is expected to remain with the Post-Combination Company upon the Closing. Additionally, the GGI Board believes that Polestars proven management team and strategy will help enable Polestar to deliver continued strategic growth. |
| Opinion of GGIs Financial Advisor. The GGI Board took into account the opinion of Barclays, dated September 25, 2021, to the GGI Board to the effect that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the Class A Share Merger Consideration to be received by the holders of shares of GGI Class A Common Stock, other than the GGI Sponsor and its affiliates (the Excluded Holders), in the Merger pursuant to the Business Combination Agreement, after giving effect to the Pre-Closing Reorganization, is fair to the holders of shares of GGI Class A Common Stock, other than the Excluded Holders, as more fully described under the caption The Business CombinationOpinion of GGIs Financial Advisor. |
| Other Alternatives. The GGI Board believed, after a review of other business combination opportunities reasonably available to GGI, that the proposed Business Combination represents the best potential business combination for GGI based on its evaluation of Polestar and other potential acquisition targets. |
| Due Diligence. The GGI Board took into account the results of its due diligence investigation of Polestar conducted by GGIs management team and GGIs financial and legal advisors. |
| Stockholder Approval. The GGI Board considered the fact that, in connection with the Business Combination, GGI stockholders have the option to (i) remain shareholders of the Post-Combination Company, (ii) sell their shares of GGI Class A Common Stock or (iii) redeem their shares of GGI Class A Common Stock for the per share amount held in the Trust Account pursuant to the terms of the Current GGI Certificate. |
| Negotiated Terms of the Business Combination Agreement. The GGI Board considered the terms and conditions of the Business Combination Agreement and the Business Combination. |
| Governance of the Post-Combination Company. The GGI Board evaluated the governance profile of the Post-Combination Company that was agreed upon in connection with the negotiation of the other terms and conditions of the Business Combination, including the requirement that, for the three years following the Closing, the Post-Combination Company Board must be comprised of a majority of independent directors. However, the Post-Combination Company may, as a controlled company under Nasdaq listing rules, avail itself of the exemption from having a board of directors that consists of a majority of independent directors after such three year period. See Management of the Post-Combination Company-Controlled Company. |
| Independent Director Role. The GGI Board is comprised of a majority of independent directors who are not affiliated with the GGI Sponsor and its affiliates, including The Gores Group and Gores Guggenheim. In connection with the Business Combination, GGIs independent directors, Mr. Randall Bort, Ms. Elizabeth Marcellino and Ms. Nancy Tellem, took an active role in evaluating the proposed terms of the Business Combination, including the Business Combination Agreement, the Related Agreements and the amendments to the Current GGI Certificate to take effect in connection with the Business Combination, and unanimously approved, as members of the GGI Board, the Business Combination Agreement and the Business Combination. |
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The GGI Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination, including, but not limited to, the following:
| Benefits May Not Be Achieved. The risk that the potential benefits of the Business Combination may not be fully achieved, or may not be achieved within the expected timeframe. |
| Stockholder Vote. The risk that GGI stockholders may fail to provide the votes necessary to effect the Business Combination. |
| Redemption Risk. The risk that a significant number of GGI stockholders may elect to redeem their shares prior to the consummation of the Business Combination pursuant to the Current GGI Certificate, which may potentially make the Business Combination more difficult to complete. |
| Closing Conditions. The fact that consummation of the Business Combination is conditioned on the satisfaction of certain closing conditions that are not within GGIs control. |
| Litigation. The possibility of litigation challenging the Business Combination or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the Business Combination. |
| Fees and Expenses. The fees and expenses associated with completing the Business Combination. |
| Liquidation of GGI. The risks and costs to GGI if the Business Combination is not completed, including the risk of diverting GGIs managements focus and resources from other initial business combination opportunities, which, if the Business Combination is not consummated, could result in GGI being unable to effect an initial business combination by March 25, 2023 and force GGI to liquidate and the GGI Public Warrants to expire worthless. |
| GGI Public Stockholders Holding a Minority Position in the Post-Combination Company. The risk that GGI Public Stockholders will hold a minority position in the Post-Combination Company (approximately 3.8% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs, assuming the no redemption scenario and excluding the impact of the exercise of any Class C ADSs or ADWs), which may reduce the influence that GGIs current stockholders have on the management of Polestar. |
| Risks Related to Polestars Business in China. The risks associated with Polestars reliance on manufacturing facilities based in China and its strategy to grow its business in China. |
| Risks Related to Polestars Partnerships. The risks associated with Polestar being unable to maintain agreements or partnerships with its existing strategic partners, including Geely and Volvo Cars, or enter into new agreements or partnerships. |
| Other Risks. Various other risks associated with the Business Combination, the business of Polestar and ownership of the Post-Combination Companys shares described under the section titled Risk Factors. |
In addition to considering the factors described above, the GGI Board also considered that:
| Interests of Certain Persons. Some of GGIs officers and directors may have interests in the Business Combination as individuals that are in addition to, and that may be different from, the interests of GGIs stockholders (see The Business CombinationInterests of Certain Persons in the Business CombinationInterests of the GGI Initial Stockholders and GGIs Directors and Officers). GGIs independent directors reviewed and considered these interests during the negotiation of the Business Combination and in evaluating and unanimously approving, as members of the GGI Board, the Business Combination Agreement and the Business Combination. |
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The GGI Board concluded that the potential benefits it expected GGI and its stockholders to achieve as a result of the Business Combination outweighed the potentially negative factors associated with the Business Combination. Accordingly, the GGI Board unanimously determined that the Business Combination Agreement and the Business Combination, were advisable, fair to, and in the best interests of GGI and its stockholders.
Independent Director Oversight
The GGI Board is comprised of a majority of independent directors who are not affiliated with the GGI Sponsor and its affiliates, including The Gores Group and Guggenheim. In connection with the Business Combination, GGIs independent directors, Randall Bort, Elizabeth Marcellino and Nancy Tellem, took an active role in evaluating the proposed terms of the Business Combination, including the Business Combination Agreement, the Related Agreements and the Post-Combination Articles to take effect in connection with the Closing. As part of their evaluation of the Business Combination, GGIs independent directors were aware of the potential conflicts of interest with the GGI Sponsor and its affiliates, including Guggenheim and The Gores Group, that could arise with regard to the proposed terms of the Business Combination Agreement and Related Agreements. The GGI Board did not deem it necessary to, and did not form, a special committee of the GGI Board to exclusively evaluate and negotiate the proposed terms of the Business Combination, as the GGI Board is comprised of a majority of independent and disinterested directors and did not deem the formation of a special committee necessary or appropriate. GGIs independent directors reviewed and considered these interests during the negotiation of the Business Combination and in evaluating and unanimously approving, as members of the GGI Board, the Business Combination Agreement and the Business Combination. Please see the section titled The Business CombinationIndependent Director Oversight.
Satisfaction of 80% Test
It is a requirement under the Current GGI Certificate and Nasdaq listing requirements that GGIs initial business combination must occur with one or more target businesses that together have a fair market value equal to at least 80% of the balance of the funds in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the execution of a definitive agreement for GGIs initial business combination. As of September 27, 2021, the date of the execution of the Business Combination Agreement, the balance of the Trust Account was approximately $800,036,186 (excluding $28,000,000 of deferred underwriting commissions and taxes payable on the income earned on the Trust Account) and 80% thereof represents approximately $640,028,949. In reaching its conclusion that the Business Combination meets the 80% asset test, the GGI Board reviewed the enterprise value of the Polestar Group of approximately $21.3 billion, which was implied based on the terms of the transaction agreed to by the parties in negotiating the Business Combination Agreement. In determining whether the enterprise value described above represents the fair market value of the Polestar Group, the GGI Board considered all of the factors described above in this section and the fact that the purchase price for Polestar was the result of an arms length negotiation. As a result, the GGI Board concluded that the fair market value of the business acquired was significantly in excess of 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account).
Special Meeting of GGI Stockholders
Date, Time and Place of Special Meeting
In light of public health concerns regarding the COVID-19 pandemic, the Special Meeting will be held via live webcast at www.meetnow.global/MYGAWFM, on [●], 2022, at [●]. The Special Meeting can be accessed by visiting www.meetnow.global/MYGAWFM, where you will be able to listen to the meeting live and vote during the meeting. Please note that you will only be able to access the Special Meeting by means of remote communication.
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Proposals at the Stockholder Special Meeting
At the Stockholder Special Meeting, GGI stockholders will vote on the following proposals:
1. | Business Combination ProposalTo consider and vote upon a proposal to adopt the Business Combination Agreement, a copy of which is attached to this proxy statement/prospectus as Annexes A-1, A-2, A-3 and A-4, and approve, among other things, the Business Combination (Stockholder Proposal No. 1); |
2. | Governance ProposalsTo consider and act upon, on a non-binding advisory basis, separate proposals with respect to certain governance provisions in the Post-Combination Articles, attached hereto as Annex B, in accordance with SEC requirements (Stockholder Proposal No. 2); and |
3. | Adjournment ProposalTo consider and vote upon a proposal to allow the chairman of the Stockholder Special Meeting to adjourn the Stockholder Special Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI stockholders to approve the Business Combination Proposal or to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to GGI stockholders (Stockholder Proposal No. 3). |
Voting Power; Record Date
Only GGI stockholders have a right to vote on the proposals that will be presented at the Stockholder Special Meeting. GGI stockholders will be entitled to vote or direct votes to be cast at the Stockholder Special Meeting if they owned shares of GGI Common Stock at the close of business on April 20, 2022 which is the record date for the Stockholder Special Meeting. GGI stockholders are entitled to one vote for each share of GGI Common Stock that they owned as of the close of business on the record date. If GGI stockholders shares are held in street name or are in a margin or similar account, GGI stockholders should contact their broker, bank or other nominee to ensure that votes related to the shares GGI stockholders beneficially own are properly counted. On the record date, there were 100,000,000 shares of GGI Common Stock outstanding, of which 80,000,000 are GGI Public Shares and 20,000,000 are Founder Shares held by the GGI Initial Stockholders.
Vote of the GGI Initial Stockholders and GGIs Other Directors and Officers
The GGI Initial Stockholders have agreed to vote any shares of GGI Common Stock owned by them in favor of the Business Combination Proposal. As of the date hereof, the GGI Initial Stockholders own shares equal to 20% of the issued and outstanding shares of GGI Common Stock. As a result, holders of approximately 38% of GGI Public Shares will need to vote in favor of the Business Combination Proposal for the Business Combination Proposal to be approved.
In addition, the GGI Initial Stockholders have agreed to vote their GGI Class F Common Stock in favor of any other proposals for the Stockholder Special Meeting included in this proxy statement/prospectus.
Quorum and Required Vote for Proposals for the Stockholder Special Meeting
A majority of the issued and outstanding shares of GGI Common Stock entitled to vote as of the record date at the Stockholder Special Meeting must be present, in person via the virtual meeting platform or represented by proxy, at the Stockholder Special Meeting to constitute a quorum and in order to conduct business at the Stockholder Special Meeting. The Business Combination Proposal (and consequently, the Business Combination Agreement and the Business Combination, including the Merger) will be approved only if the holders of a majority of the outstanding shares of GGI Common Stock entitled to vote thereon at the Stockholder Special Meeting vote FOR the Business Combination Proposal. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Stockholder Special Meeting, abstentions and broker non-votes will have the same effect as a vote AGAINST the Business Combination Proposal. The Governance Proposals will be
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approved only if the holders of a majority of the votes cast by holders of the outstanding shares of GGI Common Stock represented in person via the virtual meeting platform or by proxy and entitled to vote thereon at the Stockholder Special Meeting vote FOR the Governance Proposals. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Stockholder Special Meeting, abstentions and broker non-votes will have no effect on the vote to approve the Governance Proposals. The Adjournment Proposal will be approved only if the holders of a majority of the votes cast by holders of the outstanding shares of GGI Common Stock represented in person via the virtual meeting platform or by proxy and entitled to vote thereon at the Stockholder Special Meeting vote FOR the Adjournment Proposal. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Stockholder Special Meeting, abstentions and broker non-votes will have no effect on the vote to approve the Adjournment Proposal.
GGI Public Warrant Holder Meeting
Date, Time and Place of Warrant Holder Meeting
In light of public health concerns regarding the COVID-19 pandemic, the Warrant Holder Meeting will be held via live webcast at www.meetnow.global/MYVPLYT, on [●], 2022 at [●]. The Warrant Holder Meeting can be accessed by visiting www.meetnow.global/MYVPLYT, where you will be able to listen to the meeting live and vote during the meeting. Please note that you will only be able to access the Warrant Holder Meeting by means of remote communication. Please have your Control Number, which can be found on your GGI warrant holder proxy card, to join the Warrant Holder Meeting. If you do not have a control number, please contact Computershare Trust Company, N.A., the Transfer Agent.
Proposals at the Warrant Holder Meeting
At the Warrant Holder Meeting, holders of GGI Public Warrants will vote on the following proposals:
1. | Warrant Amendment ProposalTo consider and vote upon a proposal to approve the Class C Warrant Amendment, a form of which is attached to this proxy statement/prospectus as Annex D (Warrant Holder Proposal No. 1); and |
2. | Warrant Holder Adjournment ProposalTo consider and act upon a proposal to approve the adjournment of the Warrant Holder Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI warrant holders to approve the Warrant Amendment Proposal or to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to GGI warrant holders (Warrant Holder Proposal No. 2). |
Voting Power; Record Date
Only GGI Public Warrant holders have a right to vote on the proposals that will be presented at the Warrant Holder Meeting. GGI Public Warrant holders will be entitled to vote or direct votes to be cast at the Warrant Holder Meeting if they owned GGI Public Warrants at the close of business on April 20, 2022 which is the record date for the Warrant Holder Meeting. GGI Public Warrant holders are entitled to one vote for each GGI Public Warrant that they owned as of the close of business on the record date. If GGI Public Warrants are held in street name or are in a margin or similar account, GGI Public Warrant holders should contact their broker, bank or other nominee to ensure that votes related to the GGI Public Warrants they beneficially own are properly counted. As of the record date of the Warrant Holder Meeting, there were 16,000,000 outstanding GGI Public Warrants.
Vote of the GGI Initial Stockholders and GGIs Other Directors and Officers
The GGI Sponsor and GGIs directors and officers do not hold any GGI Public Warrants and will thus not be entitled to vote at the Warrant Holder Meeting.
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Quorum and Required Vote for Proposals for the Warrant Holder Meeting
A majority of the GGI Public Warrants outstanding and entitled to vote at the Warrant Holder Meeting must be present, in person via the virtual meeting platform or represented by proxy, at the Warrant Holder Meeting to constitute a quorum and in order to conduct business at the Warrant Holder Meeting. The Warrant Amendment Proposal will be approved only if the holders of at least 50% of outstanding GGI Public Warrants vote FOR the Warrant Amendment Proposal. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Warrant Holder Meeting, abstentions and broker non-votes will have the same effect as a vote AGAINST the Warrant Amendment Proposal. The Warrant Holder Adjournment Proposal will be approved only if the holders of a majority of the votes cast by holders of GGI Public Warrant present or represented by proxy and entitled to vote at the Warrant Holder Meeting vote FOR the Warrant Holder Adjournment Proposal. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Warrant Holder Meeting, abstentions and broker non-votes will have no effect on the vote to approve the Warrant Holder Adjournment Proposal.
Recommendation of the GGI Board
The GGI Board believes that approval of each of the Business Combination Proposal, the Governance Proposals and the Adjournment Proposal to be presented at the Stockholder Special Meeting is in the best interests of GGI and its stockholders and unanimously recommends that its stockholders vote FOR each of the proposals.
The GGI Board also believes that approval of each of the Warrant Amendment Proposal the Warrant Holder Adjournment Proposal to be presented at the Warrant Holder Meeting is in the best interests of GGI and its GGI Public Warrant holders and unanimously recommends that its GGI Public Warrant holders vote FOR each of the proposals.
Opinion of GGIs Financial Advisor
GGI engaged Barclays Capital Inc. (Barclays) to act as its financial advisor with respect to the Business Combination. On September 25, 2021, Barclays rendered its oral opinion (which was subsequently confirmed in writing) to the GGI Board that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the Class A Share Merger Consideration to be received by the holders of shares of GGI Class A Common Stock, other than the GGI Sponsor and its affiliates (the Excluded Holders), in the Merger pursuant to the Business Combination Agreement, after giving effect to the Pre-Closing Reorganization, is fair to the holders of shares of GGI Class A Common Stock, other than the Excluded Holders.
Interests of Certain Persons in the Business Combination
Interests of the GGI Initial Stockholders and GGIs Directors and Officers
When considering the GGI Boards recommendation to vote in favor of approving the Business Combination Proposal, the Warrant Amendment Proposal and the other proposals described in this proxy statement/prospectus, GGIs stockholders and warrant holders should keep in mind that the GGI Sponsor and GGIs directors and officers have interests in such proposals that may be different from, or in addition to (and which may conflict with), the interests of GGI stockholders and warrant holders generally. The GGI Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination, and in recommending to GGI stockholders and GGI warrant holders that they approve the proposals to be presented to GGI stockholders and GGI warrant holders, respectively. GGI stockholders and GGI warrant holders should take these interests into account in deciding whether to approve the proposals set forth in this proxy statement/prospectus.
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These interests include, among other things:
| the fact that the GGI Initial Stockholders have agreed not to redeem any Founder Shares or GGI Class A Common Stock held by them in connection with a stockholder vote to approve a proposed initial business combination; |
| the fact that the GGI Initial Stockholders have agreed to waive their rights to conversion price adjustments with respect to any Founder Shares they may hold in connection with the consummation of the Business Combination and therefore, the Founder Shares will convert on a one-for-one basis into Class A ADSs at the Closing; |
| the fact that the GGI Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if GGI fails to complete an initial business combination by March 25, 2023; |
| the fact that the GGI Sponsor paid an aggregate of $25,000 for 21,562,500 Founder Shares at approximately $0.001 per share, and, after giving effect to the cancellation of 1,562,500 Founder Shares on May 9, 2021, the remaining 20,000,000 Founder Shares will become worthless if GGI fails to complete an initial business combination by March 25, 2023. In particular, in exchange for serving on the GGI Board, GGIs independent directors, Mr. Bort, Ms. Marcellino and Ms. Tellem, each received 25,000 Founder Shares at their original purchase price of $0.001 per share from the GGI Sponsor. Because these Founder Shares will become worthless if GGI fails to complete an initial business combination by March 25, 2023, GGIs independent directors may have a conflict of interest in determining whether a particular business is an appropriate business with which to effectuate GGIs initial business combination; |
| the fact that after giving effect to the cancellation of 1,562,500 Founder Shares on May 9, 2021 and the forfeiture of up to 1,540,835 shares of GGI Class F Common Stock pursuant to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, the remaining 18,459,165 Founder Shares that will be exchanged for Class A ADSs at the Closing will have a significantly higher value than their aggregate purchase price, which if unrestricted and freely tradable would be valued at approximately $185 million (however, given the restrictions on such shares, GGI believes such shares have a lesser value); |
| the fact that, given the differential in the purchase price that the GGI Sponsor paid for the Founder Shares as compared to the price of the GGI Public Units and the substantial number of Class A ADSs that the GGI Sponsor will receive upon exchange of the Founder Shares at the Closing, the GGI Sponsor and its affiliates may earn a positive rate of return on their investment even if the Class A ADSs trade below the price initially paid for the GGI Public Units in the GGI IPO and GGI Public Stockholders experience a negative rate of return following the completion of the Business Combination; |
| the fact that the GGI Sponsor paid an aggregate of approximately $18,000,000 for its 9,000,000 GGI Private Placement Warrants, and that such GGI Private Placement Warrants will expire worthless if an initial business combination is not consummated by March 25, 2023. The GGI Private Placement Warrants are identical to the GGI Public Warrants sold as part of the GGI Public Units except that, so long as they are held by the GGI Sponsor or its permitted transferees: (i) they will not be redeemable by GGI, except as described in the Existing Warrant Agreement; (ii) they (including the GGI Class A Common Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the GGI Sponsor until 30 days after the completion of an initial business combination; (iii) they may be exercised by the holders on a cashless basis; and (iv) they are subject to registration rights. For additional information regarding the GGI Private Placement Warrants and the GGI Public Warrants, please see the Existing Warrant Agreement, attached hereto as Annex C; |
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| the fact that, in connection with the Business Combination, each GGI Private Placement Warrant will, in the event the Warrant Amendment Proposal is approved prior to the Effective Time, be converted into the right to receive one Class C-2 ADS, issued against the deposit of an underlying Post-Combination Company Class C-2 Share, which will be exercisable to acquire a Post-Combination Company Class A Share in the form of a Class A ADS on substantially the same terms as the GGI Private Placement Warrants; |
| the fact that, in connection with the Business Combination, each GGI Private Placement Warrant will, in the event the Warrant Amendment Proposal is not approved prior to the Effective Time, be converted into the right to receive one PP ADW, issued against the deposit of an underlying Post-Combination Company Warrant, which will be exercisable to acquire a Post-Combination Company Class A Share in the form of a Class A ADS on substantially the same terms as the GGI Private Placement Warrants; |
| the continued right of the GGI Sponsor to hold the Class A ADSs to be issued to the GGI Sponsor upon exercise of Class C-2 ADSs or ADWs following the Business Combination, subject to certain lock-up periods; |
| the fact that if the Trust Account is liquidated, including in the event GGI is unable to complete an initial business combination within the required time period, the GGI Sponsor has agreed to indemnify GGI to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which GGI has entered into an acquisition agreement or claims of any third party (other than the independent public accountants) for services rendered or products sold to GGI, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account; |
| the continued indemnification of the existing directors and officers of GGI and the continuation of the directors and officers liability insurance after the Business Combination; |
| the fact that the GGI Sponsor and GGIs officers and directors will lose their entire investment in GGI and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by March 25, 2023, including the expected reimbursement at the closing of an initial business combination of approximately $615,000 of an aggregate of approximately $948,000 of expenses incurred by GGI Sponsor and its affiliates as of March 1, 2022; |
| the fact that the GGI Sponsor made available to GGI a loan of up to $4,000,000 pursuant to a promissory note, of which a net amount of $2,500,000 was advanced by the GGI Sponsor to GGI as of March 1, 2022, and that the note will mature on the earlier of March 11, 2023 and the date on which GGI consummates an initial business combination; |
| the fact that GGI has entered into the Sponsor Subscription Agreement, pursuant to which the GGI Sponsor has agreed to purchase approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs at a purchase price of $9.09 per share on the date of Closing, and the GGI Sponsor has the right to syndicate its commitment to acquire such Class A ADSs in advance of the Closing; |
| the fact that Guggenheim Securities, LLC, an affiliate of the GGI Sponsor and Andrew Rosenfield, is acting as a joint placement agent in connection with the Subscription Investments and will receive a portion of a transaction fee equal to 3% of the gross proceeds raised by the placement agents in connection with the Subscription Investments, and as a financial advisor to GGI for no additional fee; |
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| the fact that the GGI Sponsor and GGIs officers and directors would beneficially own the following number of Class A ADSs at the Closing: |
Name of Person/Entity |
Number of Class A ADSs(1) |
Value of Class A ADSs(2) |
||||||
Gores Guggenheim Sponsor LLC(3) |
19,350,374 | $ | 193,503,740 | |||||
GGP Sponsor Holdings LLC(3) |
19,350,374 | $ | 193,503,740 | |||||
Alec Gores(3) |
19,350,374 | $ | 193,503,740 | |||||
Andrew Rosenfield (3) |
19,350,374 | $ | 193,503,740 | |||||
Mark Stone(4) |
171,841 | $ | 1,718,410 | |||||
Andrew McBride |
20,892 | $ | 208,920 | |||||
Randall Bort |
25,000 | $ | 250,000 | |||||
Elizabeth Marcellino |
25,000 | $ | 250,000 | |||||
Nancy Tellem(5) |
40,670 | $ | 406,700 |
(1) | Does not reflect beneficial ownership of Class A ADSs subject to exercise of Post-Combination Company Class C Shares or Post-Combination Company Warrants, because such shares or warrants, as applicable, are not exercisable within 60 days of the date of this proxy statement/prospectus. |
(2) | Assumes a value of $10.00 per share, the deemed value of the GGI Common Stock in the Business Combination. |
(3) | Represents shares held by Gores Guggenheim Sponsor LLC which is jointly controlled indirectly by Mr. Gores and GGP Sponsor Holdings LLC. GGP Sponsor Holdings LLC is controlled by Mr. Rosenfield. Each of Mr. Gores and GGP Sponsor Holdings LLC may be deemed to beneficially own 19,350,374 Class A ADSs and ultimately exercises voting and dispositive power of the securities held by Gores Guggenheim Sponsor LLC. Voting and disposition decisions with respect to such securities are jointly made by Mr. Gores and GGP Sponsor Holdings LLC. Each of Mr. Gores, GGP Sponsor Holdings LLC and Mr. Rosenfield disclaim beneficial ownership of these securities except to the extent of any pecuniary interest therein. |
(4) | Reflects Class A ADSs to be purchased by Mark Stone and his immediate family as December PIPE Investors. |
(5) | Includes 15,670 Class A ADSs to be purchased by Nancy Tellem as a December PIPE Investor. |
| the fact that, pursuant to the Business Combination Agreement, the Post-Combination Company Board will include one independent director as reasonably determined by the GGI Sponsor and consented to by Parent. In addition, pursuant to the Post-Combination Articles, the Post-Combination Company Board will be subject to restrictions on its ability to convene a general meeting which proposes a resolution to remove an independent director, subject to certain conditions, and pursuant to the Shareholder Acknowledgement Agreement, Parent and the Parent Shareholders are subject to undertakings that restrict on their ability to vote in favor of the removal of independent directors on the Post-Combination Company Board, and the GGI Sponsor will have third party beneficiary rights to enforce such undertakings; |
| the fact that the GGI Initial Stockholders have entered into the Registration Rights Agreement as Registration Rights Holders, which provides such Registration Rights Holders and their permitted transferees with registration rights in respect of certain Post-Combination Company securities, ADS and ADWs at the Closing; |
| the fact that the GGI Initial Stockholders have agreed to vote any shares of GGI Common Stock owned by them in favor of the Business Combination Proposal; |
| the fact that GGI, Parent, ListCo and the GGI Initial Stockholders have entered into the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, pursuant to which the GGI Initial Stockholders have, among other things, agreed to (i) vote their GGI Class F Common Stock in favor of each of the proposals at the Special Meeting and referenced in this proxy statement/prospectus, and against any alternative business combination, (ii) waive all adjustments to the conversion ratio set forth in the Current GGI Certificate with respect to the GGI Class F Common Stock, (iii) be bound by certain transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants, and (iv) not to transfer any Class A ADSs issued pursuant to the Business Combination Agreement in respect of shares of GGI Class F Common Stock during the period |
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beginning on the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein; and |
| the fact that GGI will reimburse the GGI Sponsor for the fees and expenses it incurs in connection with the Business Combination; provided, that such fees and expenses, together with all of GGIs other fees and expenses in connection with the Business Combination, are not in excess of $60 million in the aggregate. |
In the aggregate, the GGI Sponsor and its affiliates have approximately $218,000,000 at risk that depends upon the completion of a business combination. Specifically, $200,000,000 of such amount is the value of the GGI Sponsors and its affiliates GGI Class F Common Stock (assuming a value of $10.00 per share, the deemed value of the GGI Common Stock in the Business Combination), and $18,000,000 of such amount is the value of the GGI Private Placement Warrants held by the GGI Sponsor (based on the purchase price of $2.00 per GGI Private Placement Warrant). There are no fees contingent upon a business combination payable to the GGI Sponsors affiliates upon consummation of the Business Combination. The foregoing interests present a risk that the GGI Sponsor and its affiliates will benefit from the completion of a business combination, including in a manner that may not be aligned with GGI Public Stockholders. As such, the GGI Sponsor may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to GGI Public Stockholders rather than liquidate.
These interests may influence the GGI Board in making their recommendation that GGI stockholders vote in favor of the approval of the Business Combination Proposal and the other proposals to be voted on at the Stockholder Special Meeting, and their recommendation that the GGI warrant holders vote in favor of the proposals to be voted on at the Warrant Holder Meeting.
Management of the Post-Combination Company
The following individuals are expected to serve as directors and executive officers of the Post-Combination Company upon consummation of the Business Combination:
Name |
Age | Title | ||||
Håkan Samuelsson |
70 | Director Nominee (Chairman) | ||||
Thomas Ingenlath |
57 | Chief Executive Officer and Director | ||||
Johan Malmqvist |
46 | Chief Financial Officer | ||||
Dennis Nobelius |
49 | Chief Operating Officer | ||||
Carla De Geyseleer |
53 | Director Nominee | ||||
Karen C. Francis |
59 | Director Nominee | ||||
Donghui (Daniel) Li |
51 | Director Nominee | ||||
Dr. Karl-Thomas Neumann |
60 | Director Nominee | ||||
David Richter |
56 | Director Nominee | ||||
James Rowan |
56 | Director Nominee | ||||
Zhe (David) Wei |
51 | Director Nominee |
Listing of Securities
Listing of Class A ADSs and ADWs or Class C ADSs on Nasdaq
Class A ADSs and ADWs or Class C ADSs are not currently traded on a stock exchange. ListCo intends to apply to list the Class A ADSs and the Public ADWs or Class C-1 ADSs on Nasdaq under the symbols PSNY and PSNYW, respectively, upon the Closing. ListCo cannot assure you that the Class A ADSs and the Public ADWs or Class C-1 ADSs will be approved for listing or remain listed on Nasdaq.
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Delisting of GGI Class A Common Stock and Deregistration of GGI
GGI Public Shares, GGI Public Units and GGI Public Warrants are currently listed on Nasdaq under the symbols GGPI, GGPIU and GGPIW, respectively. ListCo and GGI anticipate that, following consummation of the Business Combination, the GGI Class A Common Stock, GGI Public Units and GGI Public Warrants will be delisted from Nasdaq, and GGI will be deregistered under the Exchange Act.
Foreign Private Issuer
As a foreign private issuer, ListCo is subject to different U.S. securities laws compared to domestic U.S. issuers. As long as the Post-Combination Company continues to qualify as a foreign private issuer under the Exchange Act, the Post-Combination Company will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
| the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; |
| the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and |
| the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. |
In addition, ListCo is not required to file annual reports and financial statements with the SEC as promptly as U.S. domestic companies whose securities are registered under the Exchange Act, and is not required to comply with Regulation FD, which restricts the selective disclosure of material information.
Further, ListCo is exempt from certain corporate governance requirements of Nasdaq by virtue of being a foreign private issuer. Although the foreign private issuer status exempts ListCo from most of Nasdaqs corporate governance requirements, ListCo has decided to voluntarily comply with these requirements, except for the requirement to have a compensation committee and a nominating and corporate governance committee consisting entirely of independent directors.
Furthermore, Nasdaq rules also generally require each listed company to obtain shareholder approval prior to the issuance of securities in certain circumstances in connection with the acquisition of the stock or assets of another company, equity based compensation of officers, directors, employees or consultants, change of control and certain transactions other than a public offering. As a foreign private issuer, ListCo is exempt from these requirements and may elect not to obtain shareholders approval prior to any further issuance of our Class A ADSs other than as may be required by the laws of England and Wales.
Subject to requirements under the Post-Combination Articles and Shareholder Acknowledgment Agreement that the ListCo Board be comprised of a majority of independent directors for the three years following the Closing, ListCo may in the future elect to avail itself of these exemptions or to follow home country practices with regard to other matters. As a result, its shareholders will not have the same protections afforded to shareholders of companies that are subject to all of Nasdaqs corporate governance requirements.
Controlled Company
By virtue of being a controlled company under Nasdaq listing rules, ListCo may elect not to comply with certain Nasdaq corporate governance requirements, including that:
| a majority of the board of directors consist of independent directors (however, pursuant to the Post-Combination Articles and Shareholder Acknowledgment Agreement, for the three years following the |
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Closing, the Post-Combination Company Board must be comprised of a majority of independent directors); |
| the compensation committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; |
| the nominating and governance committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; and |
| there be an annual performance evaluation of the compensation and nominating and corporate governance committees. |
Other than as specified above, ListCo may in the future elect to avail itself of these exemptions. As a result, its shareholders will not have the same protections afforded to shareholders of companies that are subject to all of Nasdaqs corporate governance requirements.
Comparison of Stockholders Rights
There are certain differences in the rights of GGI stockholders and the holders of Post-Combination Company securities, ADSs and ADWs after the Business Combination. Please see the section titled Comparison of Stockholder Rights.
Material Tax Consequences
For a detailed discussion of material U.S. federal income tax consequences of the Business Combination and a summary of material UK tax consequences of transferring ADSs and ADWs, see the sections titled Material U.S. Federal Income Tax Considerations and Material United Kingdom Tax Considerations in this proxy statement/prospectus.
The parties to the Merger intend that the Merger, taken together with certain related transactions, qualifies as a transaction described under Section 351 of the Code, and, as discussed further below, not subject the GGI Public Stockholders to U.S. federal income tax under Section 367 of the Code (subject to entry into gain recognition agreements by any such stockholders required to enter into such agreements to preserve tax-free treatment under Section 367 of the Code) (the Intended Tax Treatment). Subject to the limitations and qualifications described below under the heading Material U.S. Federal Income Tax Considerations, and based upon customary assumptions and representations made by Parent and GGI, as well as certain covenants and undertakings of Parent and GGI, Weil, GGIs tax counsel, is currently of the opinion that the Merger should qualify for the Intended Tax Treatment. However, the closing of the Merger is not conditioned upon the receipt of an opinion of counsel regarding the U.S. federal income tax treatment of the Merger, and neither GGI nor Parent intends to request a ruling from the IRS regarding the U.S. federal income tax consequences of the Merger. If any of the assumptions, representations, covenants or undertakings by Parent or GGI is incorrect, incomplete or inaccurate or is violated, the accuracy of the opinion may be affected and the U.S. federal income tax consequences of the Merger could differ from those described below under the heading Material U.S. Federal Income Tax Considerations. Further, the qualification of the Merger for the Intended Tax Treatment depends on numerous facts and circumstances, some of which may change between the date of this proxy statement/prospectus and the closing of the Merger, and may cause the opinion to no longer be in effect. The opinion is given only as of the date thereof, and is not binding on the IRS or any court. No assurance can be given that the IRS will not challenge the conclusions in the opinion, or that a court would not sustain such a challenge.
Anticipated Accounting Treatment
The Business Combination will be accounted for as a capital reorganization in accordance with IFRS. Under this method of accounting, GGI will be treated as the acquired company for financial reporting purposes, and
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Polestar Group will be the accounting acquirer. This determination was based on evaluation of the following facts and circumstances:
| Parent Shareholders will have the largest voting interest in the Post-Combination Company under all redemption scenarios; |
| the Post-Combination Company Board will have four members nominated by Parent, compared to only one nominated by the GGI Sponsor. Additionally, Parent will have the ability to appoint the remaining members of the Post-Combination Company Board as deemed necessary; |
| Parents senior management will be the senior management of the Post-Combination Company; |
| Polestar Group operations will substantially comprise the ongoing operations of the Post-Combination Company; and |
| Polestar Group is the larger entity, in terms of substantive operations and employee base. |
The Business Combination, which is not within the scope of IFRS 3 Business Combinations as GGI does not meet the definition of a business, will be accounted for within the scope of IFRS 2 Share-based Payment. For accounting purposes, the transaction will be treated as the equivalent of Parent issuing shares for the net assets of GGI, accompanied by a recapitalization. The net assets of GGI will be stated at historical cost, with no goodwill or other intangible assets recorded. Any excess fair value of Post-Combination Company Shares issued over the fair value of GGIs identifiable net assets acquired represents compensation for the service of a stock exchange listing for its shares and is expensed as incurred.
Redemption Rights
Pursuant to the Current GGI Certificate, holders of GGI Public Shares may elect to have their shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest not previously released to fund Regulatory Withdrawals and/or to pay franchise and income taxes, by (ii) the total number of then-outstanding GGI Public Shares. However, (x) in no event will GGI redeem shares of GGI Class A Common Stock in an amount that would result in GGIs failure to have net tangible assets equaling or exceeding $5,000,001 and (y) a GGI Public Stockholder, together with any of its affiliates or any other person with whom it is acting in concert or as a group (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the groups shares, in excess of 15% of the shares of GGI Common Stock included in the GGI Public Units sold in the GGI IPO.
If a holder exercises its redemption rights, then such holder will be exchanging its shares of GGI Class A Common Stock for cash and will no longer own shares of the Post-Combination Company. Such a holder will be entitled to receive cash for its GGI Public Shares only if it properly demands redemption, identifies to GGI the beneficial holder of the GGI Public Shares being redeemed and delivers its shares (either physically or electronically) to GGIs Transfer Agent in accordance with the procedures described herein. Please see the section titled Special Meeting of GGI StockholdersRedemption Rights for the procedures to be followed if you wish to redeem your shares for cash.
Appraisal Rights
Appraisal rights or dissenters rights are not available to holders of shares of GGI Common Stock in connection with the Business Combination.
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Proxy Solicitation
GGI is soliciting proxies on behalf of the GGI Board in connection with the Stockholder Special Meeting and the Warrant Holder Meeting. Proxies may be solicited by mail, via telephone or via e- mail or other electronic correspondence. GGI has engaged Morrow to assist in the solicitation of proxies.
If a GGI stockholder or GGI Public Warrant holder grants a proxy, such stockholder or warrant holder may still vote its shares or warrants in person via the virtual meeting platform if it revokes its proxy before the Stockholder Special Meeting or Warrant Holder Meeting. A GGI stockholder or GGI Public Warrant holder may also change its vote by submitting a later-dated proxy, as described in the sections titled Special Meeting of GGI StockholdersRevoking Your Proxy and GGI Public Warrant Holder MeetingRevoking Your Proxy.
Risk Factor Summary
In evaluating the proposals to be presented at the Stockholder Special Meeting and Warrant Holder Meeting, you should carefully read this proxy statement/prospectus and especially consider the factors discussed in the section titled Risk Factors. These risks include, but are not limited to the following:
Risks Related to Polestars Business and Industry
| Polestars operations rely heavily on a variety of agreements with its strategic partners Volvo Cars and Geely, including agreements related to research and development, purchasing, manufacturing engineering and logistics, and Polestar may come to rely on other original equipment manufacturers, vendors and technology providers. The inability of Polestar to maintain agreements or partnerships with its existing strategic partners or to enter into new agreements or partnerships could have a material and adverse effect on Polestars ability to operate as a standalone business, produce vehicles, reach its development and production targets or focus efforts on its core areas of differentiation. |
| Polestars ability to produce vehicles and its future growth depend upon its ability to maintain relationships with its existing suppliers and strategic partners, and source new suppliers for its critical components, and to complete building out its supply chain, while effectively managing the risks due to such relationships. |
| Polestar is dependent on its strategic partners and suppliers, some of which are single-source suppliers, and the inability of these strategic partners and suppliers to deliver necessary components of Polestars products on schedule and at prices, quality levels and volumes acceptable to Polestar, or Polestars inability to efficiently manage these components, could have a material and adverse effect on Polestars results of operations and financial condition. |
| Polestar may not be able to accurately estimate the supply and demand for its vehicles, which could result in inefficiencies in its business, hinder its ability to generate revenue and create delays in the production of its vehicles. If Polestar fails to accurately predict its manufacturing requirements, Polestar incurs the risk of having to pay for production capacities that it reserved but will not be able to use or that Polestar will not be able to secure sufficient additional production capacities at reasonable costs in case product demand exceeds expectations. |
| Polestar may be unable to grow its global product sales, delivery capabilities and its servicing and vehicle charging partnerships, or Polestar may be unable to accurately project and effectively manage its growth. If Polestar is unable to expand its charging network and servicing capabilities, customers perception of Polestar could be negatively affected, which could materially and adversely affect Polestars business, financial condition, results of operations and prospects. |
| Polestar relies on its partnerships with vehicle charging networks to provide charging solutions for its vehicles. |
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| Polestar relies on its strategic partners for servicing its vehicles and their integrated software. If Polestar or its strategic partners are unable to adequately address the service requirements of its customers, Polestars business, prospects, financial condition and results of operations may be materially and adversely affected. |
| Polestar has experienced and may in the future experience significant delays in the design, development, manufacture, launch and financing of its vehicles, which could harm its business and prospects. |
| Polestar has incurred net losses each year since its inception and expects to incur increasing expenses and substantial losses for the foreseeable future. |
| Polestar Groups independent registered public accounting firm has included an explanatory paragraph relating to Polestar Groups ability to continue as a going concern in its report on Polestar Groups audited consolidated financial statements included in this proxy statement/prospectus. |
| Increases in costs, disruption of supply or shortage of materials, in particular for lithium-ion cells or semiconductors, could harm Polestars business. Polestar will need to maintain and significantly grow its access to battery cells, including through the development and manufacture of its own cells, and control its related costs. |
| Polestar relies on its partners to manufacture vehicles and Polestars partners have limited experience in producing electric vehicles. Further, Polestar relies on sufficient production capacity being available and/or allocated to it by its partners in order to manufacture its vehicles. Delays in the timing of expected business milestones and commercial launches, including Polestars ability to mass produce its electric vehicles and/or complete and/or expand its manufacturing capabilities, could materially and adversely affect Polestars business, financial condition, results of operations and prospects. |
| Polestar relies heavily on manufacturing facilities based in China and its growth strategy will depend on growing its business in China. This subjects Polestar to economic, operational, regulatory and legal risks specific to China. |
| The Chinese government may intervene in or influence Polestars or Polestars partners operations in China at any time, which could result in a material change in Polestars operations and ability to produce vehicles significantly and adversely impact the value of Polestars securities. |
| Changes in Chinese policies, regulations and rules may be quick with little advance notice and the enforcement of laws of the Chinese government is uncertain and could have a significant impact upon Polestars and its partners ability to operate profitably. |
| Polestar and its subsidiaries (i) may not receive or maintain permissions or approvals to operate in China, (ii) may inadvertently conclude that such permissions or approvals are not required, or (iii) may be required to obtain new permissions or approvals in the future due to changes in applicable laws, regulations, or interpretations related thereto. |
| Polestars operating and financial results forecasts and projections rely in large part upon assumptions and analyses developed by it. If the assumptions or analyses that Polestar made in connection with its projections and forecasts prove to be incorrect, Polestars actual results of operations may be materially different from its forecasted results. |
| Polestar depends on revenue generated from a limited number of models and expects this to continue in the foreseeable future. |
| Polestars distribution model is different from the currently predominant distribution model for automakers, and its long-term viability is unproven. Polestar will not have a third-party retail product distribution network in all of the countries in which it operates. Polestar may face regulatory challenges to or limitations on its ability to sell vehicles directly. |
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| Insufficient reserves to cover future warranty or part replacement needs or other vehicle repair requirements, including any potential software upgrades, could materially and adversely affect Polestars business, prospects, financial condition and results of operations. |
| Polestar is subject to risks associated with advanced driver assistance system technology. Polestar is also working on adding autonomous driving technology to its vehicles and expects to be subject to the risks associated with this technology. Polestar cannot guarantee that its vehicles will achieve its targeted assisted or autonomous driving functionality within its projected timeframe, or ever. |
| Polestar may be unable to offer attractive leasing and financing options for its current vehicle models and future vehicles, which would adversely affect consumer demand for its vehicles. |
| Polestars vehicles will make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame. |
| Polestar operates in an intensely competitive market, which is generally cyclical and volatile. Should Polestar not be able to compete effectively against its competitors then it is likely to lose market share, which could have a material and adverse effect on the business, financial condition, results of operations and prospects of Polestar. |
| Polestars ability to generate meaningful product revenue will depend on consumer adoption of electric vehicles. However, the market for electric vehicles is still evolving and changes in governmental programs incentivizing consumers to purchase electric vehicles, fluctuations in energy prices, the sustainability of electric vehicles and other regulatory changes might negatively impact adoption of electric vehicles by consumers. If the pace and depth of electric vehicle adoption develops more slowly than Polestar expects, its revenue may decline or fail to grow, and Polestar may be materially and adversely affected. |
| If vehicle owners customize Polestar vehicles or change the charging infrastructure with aftermarket products, the vehicle may not operate properly, which may create negative publicity and could harm Polestars business. |
Risks Related to Cybersecurity and Data Privacy
| Any unauthorized control or manipulation of Polestars products, digital sales tools and systems could result in loss of confidence in Polestar and its products. |
| Polestar is subject to evolving laws, regulations, standards, policies, and contractual obligations related to data privacy, security and consumer protection, and any actual or perceived failure to comply with such obligations could harm Polestars reputation and brand, subject Polestar to significant fines and liability, or otherwise adversely affect its business. |
Risks Related to Polestars Employees and Human Resources
| Polestars ability to effectively manage its growth relies on the performance of highly skilled personnel, including its Chief Executive Officer Thomas Ingenlath, the senior management team and other key employees, and Polestars ability to recruit and retain key employees. The loss of key personnel or an inability to attract, retain and motivate qualified personnel may impair Polestars ability to expand its business. |
Risks Related to Litigation and Regulation
| Polestar may choose to or be compelled to undertake product recalls or take other actions, which could result in litigation and adversely affect its business, prospects, results of operations, reputation and financial condition. |
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Risks Related to Financing and Strategy Transactions
| Polestar will require additional capital to support business growth, and this capital might not be available on commercially reasonable terms, or at all. |
| Polestars financial results may vary significantly from period to period due to fluctuations in its operating costs, product demand and other factors. |
Risks Related to GGI and the Business Combination
| The GGI Initial Stockholders have agreed to vote in favor of the Business Combination, regardless of how GGIs stockholders vote. |
| The Sponsor, certain members of the GGI Board and GGI officers have interests in the Business Combination that are different from or are in addition to other stockholders in recommending approving the Business Combination and the other matters that will be described in a proxy statement/prospectus that will be filed in connection with the Business Combination. Such conflicts of interests include that the GGI Sponsor and GGIs officers and directors will lose their entire investment in GGI if the Business Combination is not completed. |
| Because ListCo will become a publicly listed company by virtue of a merger as opposed to an underwritten initial public offering (which uses the services of one or more underwriters), less due diligence on Polestar may have been conducted as compared to an underwritten initial public offering. |
| GGI stockholders will experience dilution as a consequence of the issuance of Post-Combination Company securities and ADSs and ADWs as consideration in the Business Combination and may experience dilution from several additional sources in connection with and after the Business Combination, including any future issuances or resales of securities of ListCo. Having a minority share position may reduce the influence that GGI stockholders have on the management of the Post-Closing Company. |
| Past performance by The Gores Group, including its management team, may not be indicative of future performance of an investment in GGI or ListCo. |
| GGI and Polestar expect to incur significant transaction costs in connection with the Business Combination. Whether or not the Business Combination is completed, the incurrence of these costs will reduce the amount of cash available to be used for other corporate purposes by GGI. |
| GGI has no operating history and is subject to a mandatory liquidation and subsequent dissolution requirement. As such, there is a risk that GGI will be unable to continue as a going concern if GGI does not consummate an initial business combination by March 25, 2023. Unless GGI amends the Current GGI Certificate and certain other agreements into which it has entered to extend the life of GGI, if GGI is unable to effect an initial business combination by March 25, 2023, it will be forced to liquidate and the GGI Warrants will expire worthless. |
| If third parties bring claims against GGI, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by GGIs stockholders may be less than $10.00 per share. |
| Polestars operating and financial results forecasts, which were presented to the GGI Board, may not prove accurate. |
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Risks Related to ADSs and ADWs Following the Business Combination
| If the Business Combinations benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of the ADSs and ADWs may decline. |
| The requirements of being a public company may strain ListCos resources and distract its management, which could make it difficult to manage its business. |
| ListCo will be a foreign private issuer within the meaning of the rules under the Exchange Act, and as such it will be exempt from certain provisions applicable to United States domestic public companies. As a result, its shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements. |
| The combined Company may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses. |
| Polestar has identified material weaknesses in its internal control over financial reporting. If ListCo is unable to remediate these material weaknesses or identifies additional material weaknesses, it could lead to errors in ListCos financial reporting, which could adversely affect ListCos business and the market price of the ADSs and ADWs. |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus includes statements that express ListCo, Polestar and GGIs opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, forward-looking statements. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms believes, estimates, anticipates, expects, seeks, projects, intends, plans, may, will or should or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this proxy statement/prospectus and include statements regarding ListCo, Polestar and GGIs intentions, beliefs or current expectations concerning, among other things: the Business Combination; the benefits of the Business Combination; results of operations; financial condition; liquidity; prospects; growth; strategies and the markets in which Polestar operates, including estimates and forecasts of financial and operational metrics, projections of market opportunity, market share and vehicle sales; expectations and timing related to commercial product launches, including the start of production and launch of any future products of Polestar, the performance, range, autonomous driving and other features of the vehicles of Polestar; future market opportunities, including with respect to energy storage systems and automotive partnerships; future manufacturing capabilities and facilities; future sales channels and strategies; and future market launches and expansion.
Such forward-looking statements are based on available current market information and the current expectations of ListCo, Polestar and GGI, including beliefs and forecasts concerning future developments and the potential effects of such developments on the Business Combination, ListCo, Polestar and GGI. Factors that may impact such forward-looking statements include:
| the inability of the parties to successfully or timely consummate the Business Combination, including the risk that any required regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect GGI, Polestar or ListCo or the expected benefits of the proposed transactions, or that the approval of the GGI Public Stockholders is not obtained; |
| the amount of redemption requests made by GGI Public Stockholders; |
| failure to realize the anticipated benefits of the Business Combination; |
| the outcome of any legal proceedings that may be instituted against GGI or Polestar in connection with the Business Combination; |
| the ability to meet stock exchange listing standards following the consummation of the Business Combination; |
| changes in domestic and foreign business, market, financial, political and legal conditions; |
| Polestars ability to enter into or maintain partnerships with its strategic partners, including Volvo Cars and Geely, original equipment manufacturers, vendors and technology providers, and to source new suppliers for its critical components, and to complete building out its supply chain, while effectively managing the risks due to such relationships; |
| risks relating to the uncertainty of the projected financial information of Polestar, including underlying assumptions regarding expected development and launch timeliness for Polestars five carlines, manufacturing in the United States starting as planned, demand for Polestars vehicles or car sale volumes, revenue and margin development based on pricing, variant and market mix, cost reduction efficiencies, logistics and growing aftersales as the total Polestar fleet of cars and customer base grow; |
| delays in the development, design, manufacture, launch and financing of Polestars vehicles and Polestars reliance on a limited number of vehicle models to generate revenues; |
| risks related to the timing of expected business milestones and commercial launches, including Polestars ability to mass produce its current and new vehicle models and complete the upgrade or tooling of its manufacturing facilities; |
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| increases in costs, disruption of supply or shortage of materials, in particular for lithium-ion cells or semiconductors; |
| Polestars reliance on its partners to manufacture vehicles at a high volume, some of which have limited experience in producing electric vehicles, and on the allocation of sufficient production capacity to Polestar by its partners in order for Polestar to be able to increase its vehicle production volumes; |
| risks related to future market adoption of Polestars offerings; |
| risk related to Polestars distribution model; |
| the effects of competition and the pace and depth of electric vehicle adoption generally on Polestars future business; |
| changes in regulatory requirements, governmental incentives and fuel and energy prices; |
| Polestars ability to rapidly innovate; |
| Polestars ability to effectively manage its growth and recruit and retain key employees, including its chief executive officer and executive team; |
| Polestars reliance on its partnerships with vehicle charging networks to provide charging solutions for its vehicles and its strategic partners for servicing its vehicles and their integrated software; |
| Polestars ability to establish its brand and capture additional market share, and the risks associated with negative press or reputational harm; |
| the outcome of any potential litigation, government and regulatory proceedings, investigations and inquiries; |
| the impact of the global COVID-19 pandemic on GGI and Polestars business, projected results of operations, financial performance or other financial metrics or on any of the foregoing risks; and |
| the other risks and uncertainties included in this proxy statement/prospectus in the section titled Risk Factors as well as the other risks and uncertainties set forth in the section titled Risk Factors and Cautionary Note Regarding Forward-Looking Statements in GGIs final prospectus relating to its initial public offering (File No. 333-253338) declared effective by the SEC on March 22, 2021, and other documents filed, or to be filed, with the SEC by GGI or ListCo. |
There can be no assurance that future developments affecting ListCo, Polestar and/or GGI will be those that ListCo, Polestar or GGI has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond ListCo, Polestar or GGIs control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading Risk Factors. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. ListCo, Polestar or GGI will not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Before a GGI stockholder or warrant holder grants its proxy or instructs how its vote should be cast or votes on the proposals included in this proxy statement/prospectus, it should be aware that the occurrence of the events described in the Risk Factors section and elsewhere in this proxy statement/prospectus may adversely affect ListCo, Polestar or GGI.
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You should carefully review and consider the following risk factors and the other information contained in this proxy statement/prospectus, including the financial statements and notes to the financial statements included herein, in evaluating the Business Combination and the proposals described herein. Certain of the following risk factors apply to the business and operations of Polestar and will also apply to the business and operations of Post-Combination Company following the Closing. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination, and may have a material and adverse effect on the business, cash flows, financial condition and results of operations of the Post-Combination Company. GGI, Polestar, ListCo and the Post-Combination Company may face additional risks and uncertainties that are not presently known to such entity, or that are currently deemed immaterial, which may also impair the business or financial condition of GGI, Polestar, ListCo and/or the Post-Combination Company.
Risks Related to Polestars Business and Industry
Polestars operations rely heavily on a variety of agreements with its strategic partners Volvo Cars and Geely, including agreements related to research and development, purchasing, manufacturing engineering and logistics, and Polestar may come to rely on other original equipment manufacturers, vendors and technology providers. The inability of Polestar to maintain agreements or partnerships with its existing strategic partners or to enter into new agreements or partnerships could have a material and adverse effect on Polestars ability to operate as a standalone business, produce vehicles, reach its development and production targets or focus efforts on its core areas of differentiation.
Polestars operations rely heavily on a variety of agreements, including agreements related to research and development, purchasing, manufacturing engineering and logistics, with its strategic partners, including Volvo Cars, Geely and certain other original equipment manufacturers, vendors and technology providers. Polestars reliance on these agreements subjects it to a number of significant risks, including the risk of being unable to operate as a standalone business, produce vehicles, reach its development and production targets or focus its efforts on core areas of differentiation.
Of particular importance for Polestars operations are the related party agreements with Volvo Cars and Geely. These related party agreements include agreements pertaining to research and development, manufacturing agreements, licensing agreements, purchasing agreements, component supply agreements, customer care agreements, logistics agreements and distribution agreements, amongst other areas. These agreements are described in more details in this proxy statement/prospectus under Certain Relationships and Related Person TransactionsPolestar Relationships and Related Party Transactions. These partnerships permit Polestar to benefit from the decades of experience of established auto-manufacturers while focusing its efforts on core areas of differentiation, such as design, performance and rapid adoption of the latest technologies and sustainability solutions. Polestar intends to continue to rely on these partnerships as part of its strategy. Polestar intends to rely solely on its arrangements with Volvo Cars, Geely and other contract partners to manufacture future Polestar models. If Polestar is unable to maintain agreements or partnerships with its existing strategic partners or to enter into new agreements or partnerships Polestars ability to operate as a standalone business, produce vehicles, reach its development and production targets or focus its efforts on core areas of differentiation could be materially and adversely affected.
Polestars ability to produce vehicles and its future growth depend upon its ability to maintain relationships with its existing suppliers and strategic partners, to source new suppliers for its critical components, and to complete building out its supply chain, while effectively managing the risks due to such relationships.
Polestars success will be dependent upon its ability to enter into new supplier agreements and maintain its relationships with suppliers and strategic partners who are critical and necessary to the output and production of
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its vehicles. Polestar also relies on suppliers and its strategic partners to provide it with key components and technology for its vehicles. The supplier agreements Polestar has or may enter into with key suppliers and its strategic partners in the future may have provisions where such agreements can be terminated in various circumstances, including potentially without cause. If these suppliers and strategic partners become unable to provide, or experience delays in providing components or technology, or if the supplier and related party agreements Polestar has in place are terminated, it may be difficult to find replacement components and technology. Changes in business conditions, pandemics, governmental changes and other factors beyond Polestars control or that Polestar does not presently anticipate could affect its ability to receive components or technology from its suppliers and strategic partners.
Further, Polestar has not secured supply agreements for all of its components, technology and services. Polestar may be at a disadvantage in negotiating supply agreements for the production of its vehicles due to its limited operating history as a standalone business. In addition, there is the possibility that finalizing the supply agreements for the parts and components of its vehicles will cause significant disruption to Polestars operations, or such supply agreements could be at costs that make it difficult for Polestar to operate profitably.
If Polestar does not enter into longer-term supplier agreements with guaranteed pricing for its parts or components, it may be exposed to fluctuations in prices of components, materials and equipment. Agreements for the purchase of battery cells and other components contain or are likely to contain pricing provisions that are subject to adjustment based on changes in market prices of key commodities. Substantial increases in the prices for such components, materials and equipment would increase Polestars operating costs and could reduce its margins if it cannot recoup the increased costs. Any attempts to increase the announced or expected prices of Polestars vehicles in response to increased costs could be viewed negatively by its customers or potential customers and could adversely affect Polestars business, prospects, financial condition or results of operations.
Polestar is dependent on its strategic partners and suppliers, some of which are single-source suppliers, and the inability of these strategic partners and suppliers to deliver necessary components of Polestars products on schedule and at prices, quality levels and volumes acceptable to Polestar, or Polestars inability to efficiently manage these components, could have a material and adverse effect on Polestars results of operations and financial condition.
Polestar relies on its strategic partners and suppliers for the provision and development of many of the key components and materials used in its vehicles. While Polestar plans to obtain components from multiple sources whenever possible, many of the components used in Polestars vehicles will be purchased by Polestar from a single source, and Polestars limited, and in many cases single-source, supply chain exposes it to multiple potential sources of delivery failure or component shortages for its production. Polestars suppliers may not be able to meet Polestars required product specifications and performance characteristics, which would impact Polestars ability to achieve its product specifications and performance characteristics as well. Additionally, Polestars suppliers may be unable to obtain required certifications or provide necessary warranties for their products that are necessary for use in Polestars vehicles. Polestar may also be impacted by changes in its supply chain or production needs, including cost increases from its suppliers, in order to meet its quality targets and development timelines as well as due to design changes. Likewise, any significant increases in its production may in the future require Polestar to procure additional components in a short amount of time. Polestars suppliers may not ultimately be able to sustainably and timely meet Polestars cost, quality and volume needs, requiring Polestar to replace them with other sources. If Polestar is unable to obtain suitable components and materials used in its vehicles from its suppliers or if its suppliers decide to create or supply a competing product, its business could be adversely affected. Further, if Polestar is unsuccessful in its efforts to control and reduce supplier costs, its results of operations will suffer.
In addition, Polestar could experience delays if its strategic partners and suppliers do not meet agreed upon timelines or experience capacity constraints. Any disruption in the supply of components, whether or not from a single source supplier, could temporarily disrupt production of its vehicles until an alternative supplier is able to
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supply the required material. Even in cases where Polestar may be able to establish alternate supply relationships and obtain or engineer replacement components for its single source components, it may be unable to do so quickly, or at all, at prices or quality levels that are acceptable to it. This risk is heightened by the fact that Polestar has less negotiating leverage with suppliers than larger and more established automobile manufacturers, which could adversely affect its ability to obtain necessary components and materials on favorable pricing and other terms, or at all. Any of the foregoing could materially and adversely affect Polestars results of operations, financial condition and prospects. (See Risks Related to Polestars Business and Industry Increases in costs, disruption of supply or shortage of materials, in particular for lithium-ion cells or semiconductors, could harm Polestars business. Polestar will need to maintain and significantly grow its access to battery cells and control its related costs.)
Furthermore, as the scale of its vehicle production increases, Polestar will need to accurately forecast, purchase, warehouse and transport components internationally to manufacturing facilities and servicing locations and at much higher volumes. If Polestar is unable to accurately match the timing and quantities of component purchases to its actual needs or successfully implement automation, inventory management and other systems to accommodate the increased complexity in its supply chain, Polestar may incur unexpected production disruption, storage, transportation and write-off costs, which could have a material and adverse effect on its results of operations and financial condition.
In addition, as Polestar develops an international manufacturing footprint, it will face additional challenges with respect to international supply chain management and logistics costs. If Polestar is unable to access or develop localized supply chains in the regions where it or its partners already have or develop manufacturing facilities with the quality, costs and capabilities required, Polestar could be required to source components from distant suppliers, which would increase its logistics and manufacturing costs, increase the risk and complexity of Polestars supply chain and significantly impair Polestars ability to develop cost-effective manufacturing operations, which could have a material and adverse effect on Polestars business, results of operations and financial condition.
Furthermore, unexpected changes in business conditions, materials pricing and/or availability, labor issues, wars, governmental changes, tariffs, natural disasters, health epidemics such as the ongoing COVID-19 pandemic, and other factors beyond Polestars and its suppliers control could also affect these suppliers ability to deliver components to Polestar on a timely basis. The loss of a strategic partner or any supplier, particularly a single- or limited-source supplier, or the disruption in the supply of components from its strategic partners or suppliers, could lead to vehicle design changes, production delays, idle manufacturing facilities and potential loss of access to important technology and parts for producing, servicing and supporting Polestars vehicles, any of which could result in negative publicity, damage to its brand and a material and adverse effect on its business, prospects, results of operations and financial condition. In addition, if Polestars suppliers experience substantial financial difficulties, cease operations or otherwise face business disruptions, including as a result of the effects of the COVID-19 pandemic, Polestar may be required to provide substantial financial support to ensure supply continuity, which could have an additional adverse effect on Polestars liquidity and financial condition.
Polestar may not be able to accurately estimate the supply and demand for its vehicles, which could result in inefficiencies in its business, hinder its ability to generate revenue and create delays in the production of its vehicles. If Polestar fails to accurately predict its manufacturing requirements, Polestar incurs the risk of having to pay for production capacities that it reserved but will not be able to use or that Polestar will not be able to secure sufficient additional production capacities at reasonable costs in case product demand exceeds expectations.
It is difficult to predict Polestars future revenues and appropriately budget for its expenses, and Polestar has limited insight into trends that may emerge and affect its business. Polestar is required to provide forecasts of its demand to certain of its strategic partners and suppliers several months prior to the scheduled delivery of vehicles to its prospective customers. Currently, there is little historical basis for making judgments about the demand for
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Polestars vehicles or its ability to develop, manufacture, and deliver vehicles, or its profitability in the future. If Polestar overestimates its requirements, its strategic partners or suppliers may have excess manufacturing capacity and/or inventory, which indirectly would increase its costs. If Polestar underestimates its requirements, its strategic partners and suppliers may have inadequate manufacturing capacity and/or inventory, which could interrupt manufacturing of its products and result in delays in shipments and revenues. In addition, lead times for materials and components that Polestars suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If Polestar fails to order sufficient quantities of product components in a timely manner, the delivery of vehicles to its customers could be delayed, which would harm Polestars brand, business, financial condition and results of operations.
Polestar may be unable to grow its global product sales, delivery capabilities and its servicing and vehicle charging partnerships, or Polestar may be unable to accurately project and effectively manage its growth. If Polestar is unable to expand its charging network and servicing capabilities, customers perceptions of Polestar could be negatively affected, which could materially and adversely affect Polestars business, financial condition, results of operations and prospects.
Polestars success will depend on its ability to continue to expand its sales capabilities. As Polestar develops and grows its products worldwide, its success will depend on its ability to correctly forecast demand in various markets. If Polestar incorrectly forecasts its demand in one market, it cannot move this excess supply to another market where demand for Polestar products exists. Polestar may face difficulties with deliveries at increasing volumes, particularly in international markets requiring significant transit times. Moreover, because of Polestars unique expertise with its vehicles, Polestar recommends that its vehicles be serviced by Polestar or by certain authorized professionals. If Polestar experiences delays in adding servicing capacity or servicing its vehicles efficiently, or experiences unforeseen issues with the reliability of its vehicles, it could overburden Polestars servicing capabilities and parts inventory.
There is no assurance that Polestar will be able to ramp its business to meet its sales, delivery, manufacturing and servicing targets globally, or that Polestars projections on which such targets are based will prove accurate. These plans require significant cash investments and management resources and there is no guarantee that they will generate additional sales or manufacturing of Polestars products, or that Polestar will be able to avoid cost overruns or be able to hire additional personnel to support them. As Polestar expands, it will also need to ensure its compliance with regulatory requirements in various jurisdictions applicable to the manufacturing, sale and servicing of its products. If Polestar fails to manage its growth effectively, its brand, business, prospects, financial condition and operating results may be harmed.
Polestar has experienced and may in the future experience significant delays in the design, development, manufacture, launch and financing of its vehicles, which could harm its business and prospects.
Any delay in the financing, development, design, manufacture and launch of Polestars vehicles, including planned future models, and any future electric vehicles could materially damage Polestars business, prospects, financial condition and results of operations. Automobile manufacturers often experience delays in the development, design, manufacture and commercial release of new vehicle models, and Polestar has experienced in the past, and may experience in the future, such delays with regard to its vehicles. For example, in 2020, Polestar 2s intended start date for production was delayed by one month. Further, delays can also impact features in the vehicles, as seen with Polestars intended introduction of Apple CarPlay into Polestar 2. Polestars plan to commercially manufacture and sell its vehicles is dependent upon the timely availability of funds, upon Polestars finalizing of the related development, component procurement, testing, build-out and manufacturing plans in a timely manner and also upon Polestars ability to execute these plans within the planned timeline. Prior to mass production of its new models, Polestar will also need the vehicles to be fully approved for sale according to differing requirements, including but not limited to regulatory requirements, in the different geographies where Polestar intends to launch its vehicles.
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Furthermore, Polestar relies on its strategic partners and suppliers for the provision and development of many of the key components, technology and materials used in its vehicles. To the extent Polestars strategic partners or suppliers experience any delays in providing Polestar with or developing necessary components, technology and materials, Polestar could experience delays in delivering on its timelines. Any significant delay or other complication in the development, manufacture, launch and production ramp of Polestars future products, features and services, including complications associated with expanding its production capacity and supply chain or obtaining or maintaining related regulatory approvals, or the inability to manage such ramps cost-effectively, could materially damage Polestars brand, business, prospects, financial condition and results of operations.
Increases in costs, disruption of supply or shortage of materials, in particular for lithium-ion cells or semiconductors, could harm Polestars business. Polestar will need to maintain and significantly grow its access to battery cells and control its related costs.
As Polestar produces its vehicles, it may experience increases in the cost of or a sustained interruption in the supply or shortage of materials. Any such increase, supply interruption or shortage could materially and adversely impact Polestars business, results of operations, prospects and financial condition. The production of Polestars vehicles requires lithium-ion cells and semiconductors from suppliers, as well as aluminum, steel, lithium, nickel, copper, cobalt, neodymium, terbium, praseodymium and manganese. The prices for these materials fluctuate, and their available supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased production of electric vehicles and energy storage products by Polestars competitors, and could adversely affect Polestars business and results of operations. Polestars ability to manufacture its vehicles will depend on the continued supply of battery cells for the battery packs used in its products. Polestar has limited flexibility in changing battery cell suppliers, and any disruption in the supply of battery cells from such suppliers could disrupt production of Polestars vehicles until a different supplier is fully qualified. In particular, Polestar is exposed to multiple risks relating to lithium-ion cells. These risks include:
| the inability or unwillingness of current battery manufacturers to build or operate battery cell manufacturing plants to supply the numbers of lithium-ion cells required to support the growth of the electric vehicle industry as demand for such cells increases; |
| an increase in the cost, or a decrease in the available supply, of materials, such as cobalt, used in lithium-ion cells; |
| disruption in the supply of cells due to quality issues or recalls by battery cell manufacturers; and |
| fluctuations in the value of any foreign currencies, and SEK, RMB, USD or EUR in particular, in which battery cell and related raw material purchases are or may be denominated. |
Furthermore, Polestars ability to manufacture its vehicles depends on continuing access to semiconductors and components that incorporate semiconductors. A global semiconductor supply shortage is having wide-ranging effects across multiple industries and the automotive industry in particular, and it has impacted many automotive suppliers and manufacturers, including Polestar, that incorporate semiconductors into the parts they supply or manufacture. Polestar has experienced and may continue to experience an impact on its operations as a result of the semiconductor supply shortage, and such shortage could in the future have a material impact on Polestar or its suppliers, which could delay production or force Polestar or its suppliers to pay exorbitant rates for continued access to semiconductors and could have a material and adverse effect on Polestars business, prospects and results of operations. In addition, prices and transportation expenses for these materials fluctuate depending on many factors beyond Polestars control, including fluctuations in supply and demand, currency fluctuations, tariffs and taxes, fluctuations and shortages in petroleum supply, freight charges, the ongoing COVID-19 pandemic and other economic and political factors. Substantial increases in the prices for Polestars materials or prices charged to Polestar, such as those charged by battery cell or semiconductor suppliers, would increase Polestars operating costs, and could reduce Polestars margins if it cannot recoup the increased costs through
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increased prices. Any attempt to increase product prices in response to increased material costs could result in cancellations of orders and reservations and materially and adversely affect Polestars brand, image, business, results of operations, prospects and financial condition.
The success and growth of Polestars business depends upon its ability to continuously and rapidly innovate, develop and market new products and there are significant risks related to future market adoption of Polestars products. Polestars limited operating history makes evaluating its business and future prospects difficult and may increase the risk of your investment.
The success and growth of Polestars business depends upon its ability to continuously and rapidly innovate, develop and market new products, and there are significant risks related to future market adoption of Polestars products and government programs incentivizing consumers to purchase electric vehicles. Polestar has a limited operating history and operates in a rapidly evolving and highly regulated market. Polestar has encountered and expects to continue to encounter risks and uncertainties frequently experienced by early-stage companies in rapidly changing markets, including risks relating to its ability to, among other things:
| successfully launch commercial production and sales of its vehicles on the timing and with the specifications Polestar has planned; |
| hire, integrate and retain professional and technical talent, including key members of management; |
| continue to make significant investments in research, development, manufacturing, marketing and sales; |
| successfully obtain, maintain, protect and enforce its intellectual property and defend against claims of intellectual property infringement, misappropriation or other violations; |
| build a well-recognized and respected brand; |
| establish and refine its commercial manufacturing capabilities and distribution infrastructure; |
| establish and maintain satisfactory arrangements with its strategic partners and suppliers; |
| establish and expand a customer base; |
| navigate an evolving and complex regulatory environment; |
| anticipate and adapt to changing market conditions, including consumer demand for certain vehicle types, models or trim levels, technological developments and changes in competitive landscape; and |
| successfully design, build, manufacture and market new models of electric vehicles in the future. |
Polestar operates in an intensely competitive market, which is generally cyclical and volatile. Should Polestar not be able to compete effectively against its competitors then it is likely to lose market share, which could have a material and adverse effect on the business, financial condition, results of operations and prospects of Polestar.
The global automotive market, particularly for electric and alternative fuel vehicles, is highly competitive, and Polestar expects it will become even more so in the future. In recent years, the electric vehicle industry has grown, with several companies that focus completely or partially on the electric vehicle market. Polestar expects additional companies to enter this market within the next several years. Polestar also competes with established automobile manufacturers in the luxury vehicle segment, many of which have entered or have announced plans to enter the alternative fuel and electric vehicle market with either fully electric or plug-in hybrid versions of their vehicles, and Polestar also expects to compete for sales with luxury vehicles with internal combustion engines from established manufacturers. Many of Polestars current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than Polestar does and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale, servicing and support of their products. In addition, many of these companies have longer operating histories, greater name
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recognition, larger and more established sales forces, broader customer and industry relationships and other resources than Polestar does. Polestars competitors may be in a stronger position to respond quickly to new technologies and may be able to design, develop, market and sell their products more effectively than it does. Polestar expects competition in its industry to significantly intensify in the future in light of increased demand for alternative fuel vehicles, continuing globalization, favorable governmental policies and consolidation in the worldwide automotive industry. Polestars ability to successfully compete in its industry will be fundamental to its future success in existing and new markets. Further, sales of vehicles in the automotive industry tend to be cyclical in many markets, which may expose Polestar to further volatility as it expands and adjusts its operations. Decreases in the retail or wholesale prices of electricity from utilities or other renewable energy sources could make Polestars products less attractive to customers. There can be no assurance that Polestar will be able to compete successfully in its markets.
Polestars business and prospects depend significantly on the Polestar brand. If Polestar is unable to maintain and enhance its brand and capture additional market share or if its reputation and business are harmed, it could have a material and adverse impact on Polestars business, financial condition, results of operations and prospects.
Polestars business and prospects will heavily depend on its ability to develop, maintain and strengthen the Polestar brand associated with design, sustainability and technological excellence. Promoting and positioning its brand will likely depend significantly on Polestars ability to provide a consistently high-quality customer experience. To promote its brand, Polestar may be required to change its customer development and branding practices, which could result in substantially increased expenses, including the need to use traditional media such as television, radio and print advertising. In particular, any negative publicity, whether or not true, can quickly proliferate on social media and harm consumer perception and confidence in Polestars brand. Polestars ability to successfully position its brand could also be adversely affected by perceptions about the quality of its competitors vehicles or its competitors success. For example, certain of Polestars competitors have been subject to significant scrutiny for incidents involving their self-driving technology and battery fires, which could result in similar scrutiny of Polestar.
In addition, from time to time, Polestars vehicles may be evaluated and reviewed by third parties. Any negative reviews or reviews which compare Polestar unfavorably to competitors could adversely affect consumer perception about its vehicles and reduce demand for its vehicles, which could have a material and adverse effect on Polestars business, results of operations, prospects and financial condition.
Polestars sales will depend in part on its ability to establish and maintain confidence in its business prospects among consumers, analysts and others within its industry.
Consumers may be less likely to purchase Polestars products if they do not believe that its business will succeed or that its operations, including service and customer support operations, will continue for many years. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with Polestar if they are not convinced that its business will succeed. Accordingly, to build, maintain and grow its business, Polestar must establish and maintain confidence among customers, suppliers, analysts and other parties with respect to its liquidity and business prospects. Maintaining such confidence may be particularly difficult as a result of many factors, including Polestars limited operating history, others unfamiliarity with its products, uncertainty regarding the future of electric vehicles, any delays in scaling production, delivery and service operations to meet demand, competition and Polestars production and sales performance compared with market expectations. Many of these factors are largely outside of Polestars control, and any negative perceptions about Polestars business prospects, even if exaggerated or unfounded, would likely harm its business and make it more difficult to raise additional capital in the future. In addition, a significant number of new electric vehicle companies have recently entered the automotive industry, which is an industry that has historically been associated with significant barriers to entry and a high rate of failure. If these new entrants or other manufacturers of electric vehicles go out of business, produce vehicles that do not perform as
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expected or otherwise fail to meet expectations, such failures may have the effect of increasing scrutiny of others in the industry, including Polestar, and further challenging customer, supplier and analyst confidence in Polestars business prospects.
The automotive industry has significant barriers to entry that Polestar must overcome in order to manufacture and sell electric vehicles at scale.
The automobile industry is characterized by significant barriers to entry, including large capital requirements, investment costs of developing, designing, manufacturing and distributing vehicles, long lead times to bring vehicles to market from the concept and design stage, the need for specialized design and development expertise, regulatory requirements, establishing a brand name and image and the need to establish sales and service locations. Since Polestar is focused on electric vehicles, it faces a variety of added challenges to entry that a traditional automobile manufacturer would not encounter, including additional costs of developing and producing an electric powertrain that has comparable performance to a traditional gasoline engine in terms of range and power, inexperience with servicing electric vehicles, regulations associated with the transport of batteries, the need to establish or provide access to sufficient charging locations and unproven high-volume customer demand for fully electric vehicles. If Polestar is not able to overcome these barriers, its business, prospects, results of operations and financial condition will be negatively impacted, and its ability to grow its business will be harmed.
Polestar may be unable to adequately control the substantial costs associated with its operations.
Polestar will require significant capital to develop and grow its business, and will need to seek new financing in the future. Polestar has incurred and expects to continue to incur significant expenses, including leases, sales and distribution expenses as its builds its brand and markets its vehicles; expenses relating to developing and manufacturing its vehicles; tooling and expanding its manufacturing facilities; research and development expenses, raw material procurement costs; and general and administrative expenses as it scales its operations and incurs the costs of being a public company. In addition, Polestar expects to incur significant costs servicing and maintaining customers vehicles, including establishing its service operations and facilities. These expenses could be significantly higher than Polestar currently anticipates. In addition, any delays in the start of production, obtaining necessary equipment or supplies, expansion of Polestars manufacturing facilities or manufacturing agreements, or the procurement of permits and licenses relating to Polestars expected manufacturing, sales and distribution model could significantly increase Polestars expenses. In such event, Polestar could be required to seek additional financing earlier than it expects, and such financing may not be available on commercially reasonable terms, or at all.
In the longer term, Polestars ability to become profitable in the future will depend on its ability not only to control costs, but also to sell in quantities and at prices sufficient to achieve its expected margins. If Polestar is unable to cost-efficiently develop, design, manufacture, market, sell, distribute and service its vehicles, its margins, profitability and prospects would be materially and adversely affected.
Polestar has incurred net losses each year since its inception and expects to incur increasing expenses and substantial losses for the foreseeable future.
As of December 31, 2021, Polestars accumulated deficit was $1,762 million. Polestar expects to continue to incur substantial losses and increasing expenses in the foreseeable future as it:
| continues to design and develop its vehicles; |
| builds up inventories of parts and components for its vehicles; |
| manufactures an available inventory of its vehicles; |
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| develops and deploys vehicle charging partnerships; |
| expands its design, research, development, maintenance and repair capabilities; |
| increases its sales and marketing activities and develops its distribution infrastructure; and |
| expands its general and administrative functions to support its growing operations and status as a public company. |
If Polestars product development or commercialization is delayed, its costs and expenses may be significantly higher than it currently expects. Because Polestar will incur the costs and expenses from these efforts before it receives any incremental revenues with respect thereto, Polestar expects its losses in future periods will be significant.
Polestar Groups independent registered public accounting firm has included an explanatory paragraph relating to Polestar Groups ability to continue as a going concern in its report on Polestar Groups audited consolidated financial statements included in this proxy statement/prospectus.
Polestar Groups audited consolidated financial statements were prepared assuming that Polestar Group will continue as a going concern. However, the report of Polestar Groups independent registered public accounting firm included elsewhere in this proxy statement/prospectus contains an explanatory paragraph on Polestar Groups consolidated financial statements stating there is substantial doubt about its ability to continue as a going concern, meaning that Polestar Group may not be able to continue in operation for the foreseeable future or be able to realize assets and discharge liabilities in the ordinary course of operations. Such an opinion could materially limit Polestar Groups ability to raise additional funds through the issuance of new debt or equity securities or otherwise. There is no assurance that sufficient financing will be available when needed to allow Polestar Group to continue as a going concern. The perception that Polestar Group may not be able to continue as a going concern may also make it more difficult to raise additional funds or operate Polestar Groups business due to concerns about its ability to meet contractual obligations.
Based on current operating plans, assuming successful completion of the Business Combination, availability of short-term and long-term debt financing arrangements and financial support from existing Polestar shareholders, who may provide Polestar Group additional equity financing in the case Polestar Group is not able to meet financial liabilities, Polestar Group believes that it has resources to fund its operations for at least the next twelve months, but may require further funds to finance its activities thereafter. Polestar Group may also consider potential financing options with banks or other third parties. In the event the Business Combination is not completed as expected, Polestar Group may need to consider alternative arrangements and such arrangements could have a potentially significant negative impact on its ability to continue its operations.
Polestar depends on revenue generated from a limited number of models and expects this to continue in the foreseeable future.
Polestar currently depends on revenue generated from two vehicle models, Polestar 1 and Polestar 2, and in the foreseeable future will be significantly dependent on a limited number of models. Although Polestar has other vehicle models on its product pipeline, it currently does not expect to introduce another vehicle model for sale until 2023. Polestar expects to rely on sales from Polestar 1 and Polestar 2, among other sources of financing, for the capital that will be required to develop and commercialize those subsequent models (see Risks Related to Financing and Strategic TransactionsPolestar will require additional capital to support business growth, and this capital might not be available on commercially reasonable terms, or at all.). To the extent that production of Polestars vehicles is delayed or reduced, or if the vehicles are not well-received by the market for any reason, Polestars revenues and cash flow would be adversely affected and it may need to seek additional financing earlier than it expects, and such financing may not be available to it on commercially reasonable terms, or at all.
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Polestar relies on its partnerships with vehicle charging networks to provide charging solutions for its vehicles.
Demand for Polestars vehicles will also depend in part on the availability of charging infrastructure. While the prevalence of charging stations has been increasing, charging station locations are significantly less widespread than gas stations. Some potential customers may choose not to purchase an electric vehicle because of the lack of a more widespread service network or charging infrastructure at the time of sale. Polestars ability to generate customer loyalty and grow its business could be impaired by a lack of satisfactory access to charging infrastructure. To the extent Polestar is unable to meet user expectations or experiences difficulties in providing charging solutions, demand for its vehicles may suffer, and Polestars reputation and business may be materially and adversely affected.
Polestar relies on its strategic partners for servicing its vehicles and on their systems, such as Dealer Management Systems and diagnostic tools. If Polestar or its strategic partners are unable to adequately address the service requirements of its customers, Polestars business, prospects, financial condition and results of operations may be materially and adversely affected.
Polestars strategic partners have limited experience servicing or repairing Polestar vehicles. This risk is enhanced by Polestars limited operating history and its limited data regarding its vehicles real-world reliability and service requirements. Servicing electric vehicles is different than servicing vehicles with internal combustion engines and requires specialized skills, including high voltage training and servicing techniques. As such, there can be no assurance that Polestars service arrangements adequately address the service requirements of its customers to their satisfaction, or that Polestar and its servicing partners have sufficient resources, experience or inventory to meet these service requirements in a timely manner as the volume of vehicles Polestar delivers increases. In addition, if Polestar is unable establish a widespread service network that provides satisfactory customer service, its customer loyalty, brand and reputation could be adversely affected, which in turn could materially and adversely affect its sales, results of operations, prospects and financial condition.
In addition, the motor vehicle industry laws in many jurisdictions require that service facilities be available to service vehicles physically sold from locations in the state. While Polestar anticipates developing a service program that would satisfy regulatory requirements in these circumstances, the specifics of its service program are still in development, and at some point may need to be restructured to comply with state law, which may impact Polestars business, financial condition, results of operations and prospects.
Furthermore, in some jurisdictions, Polestar may be regarded as a competitor of its strategic partners in relation to servicing vehicles pursuant to applicable competition laws. Therefore, Polestar and its strategic partners sales units in those markets will be subject to strict controls over the sharing of commercially sensitive information and anti-cartel requirements that can result in reduced coordination with respect to providing servicing to customers, which in turn could have a material and adverse effect on Polestars sales, results of operations, prospects and financial condition.
Polestars customers will also depend on Polestars customer support team to resolve technical and operational issues relating to the integrated software underlying its vehicles. As Polestar grows, additional pressure may be placed on its customer support team or partners, and Polestar may be unable to respond quickly enough to accommodate short-term increases in customer demand for technical support. Polestar also may be unable to modify the future scope and delivery of its technical support to compete with changes in the technical support provided by its competitors. Increased customer demand for support, without corresponding revenue, could increase costs and negatively affect Polestars results of operations. If Polestar is unable to successfully address the service requirements of its customers, or if it establishes a market perception that it does not maintain high-quality support, its brand and reputation could be adversely affected, and it may be subject to claims from its customers, which could result in loss of revenue or damages, and its business, results of operations, prospects and financial condition could be materially and adversely affected.
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If Polestars vehicles fail to perform as expected, its ability to develop, market and sell or lease its products could be harmed.
Polestars vehicles may contain defects in components, software, design or manufacture that may cause them not to perform as expected or that may require repairs, recalls and design changes, any of which would require significant financial and other resources to successfully navigate and resolve. Polestars vehicles use a substantial amount of software code to operate, and software products are inherently complex and may contain defects and errors. If Polestars vehicles contain defects in design and manufacture that cause them not to perform as expected or that require repair, or certain features of Polestars vehicles take longer than expected to become available, are legally restricted or become subject to additional regulation, Polestars ability to develop, market and sell its products and services could be harmed. Efforts to remedy any issues Polestar observes in its products could significantly distract managements attention from other important business objectives, may not be timely, may hamper production or may not be to the satisfaction of its customers. Further, Polestars limited operating history and limited field data reduce its ability to evaluate and predict the long-term quality, reliability, durability and performance characteristics of its battery packs, powertrains and vehicles. There can be no assurance that Polestar will be able to detect and fix any defects in its products prior to their sale or lease to customers.
Any defects, delays or legal restrictions on vehicle features, or other failure of Polestars vehicles to perform as expected, could harm Polestars reputation and result in delivery delays, product recalls, product liability claims, breach of warranty claims and significant warranty and other expenses, and could have a material and adverse impact on Polestars business, results of operations, prospects and financial condition. As a newer entrant to the industry attempting to build customer relationships and earn trust, these effects could be significantly detrimental to Polestar. Additionally, problems and defects experienced by other electric consumer vehicles could by association have a negative impact on perception and customer demand for Polestars vehicles.
In addition, even if its vehicles function as designed, Polestar expects that the battery efficiency, and hence the range, of its electric vehicles, like other electric vehicles that use current battery technology, will decline over time. Other factors, such as usage, time and stress patterns, may also impact the batterys ability to hold a charge, or could require Polestar to limit vehicles battery charging capacity, including via over-the-air or other software updates, for safety reasons or to protect battery capacity, which could further decrease Polestars vehicles range between charges. Such decreases in or limitations of battery capacity and therefore range, whether imposed by deterioration, software limitations or otherwise, could also lead to consumer complaints or warranty claims, including claims that prior knowledge of such decreases or limitations would have affected consumers purchasing decisions. There can be no assurance that Polestar will be able to improve the performance of its battery packs, or increase its vehicles range, in the future. Any such battery deterioration or capacity limitations and related decreases in range may negatively influence potential customers willingness to purchase Polestars vehicles and negatively impact its brand and reputation, which could adversely affect Polestars business, prospects, results of operations and financial condition.
Polestar must develop complex software and technology systems, including in coordination with its strategic partners, vendors and suppliers, in order to produce its electric vehicles, and there can be no assurance such systems will be successfully developed.
Polestars vehicles use a substantial amount of externally developed and in-house software and complex technological hardware to operate, some of which is still subject to further development and testing. The development and implementation of such advanced technologies is inherently complex, and Polestar will need to coordinate with its vendors and suppliers in order to integrate such technology into its electric vehicles and ensure it interoperates with other complex technology as designed and as expected. Polestar may fail to detect defects and errors that are subsequently revealed, and its control over the performance of other parties services and systems may be limited. Any defects or errors in, or which are attributed to, Polestars technology, could result in, among other things:
| delayed production and delivery of Polestars vehicles; |
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| delayed market acceptance of Polestars vehicles; |
| loss of customers or the inability to attract new customers; |
| diversion of engineering or other resources for remedying the defect or error; |
| damage to Polestars brand or reputation; |
| increased service and warranty costs; |
| legal action by customers or third parties, including product liability claims; and |
| penalties imposed by regulatory authorities. |
In addition, if Polestar is unable to develop the software and technology systems necessary to operate its vehicles, Polestars competitive position will be harmed. Polestar relies on its strategic partners and suppliers to develop a number of technologies for use in its products, including Google Android Automotive Services for the infotainment system installed in Polestar vehicles and independent developers developing third-party apps for Polestar vehicles. There can be no assurances that Polestars strategic partners and suppliers will be able to meet the technological requirements, production timing and volume requirements to support Polestars business plan. In addition, such technology may not satisfy the cost, performance useful life and warranty characteristics Polestar anticipates in its business plan, which could materially and adversely affect Polestars business, prospects and results of operations.
Polestars vehicle production relies heavily on complex machinery and involves a significant degree of risk and uncertainty in terms of operational performance and costs.
Polestars vehicle production relies heavily on complex machinery and involves a significant degree of uncertainty and risk in terms of operational performance and costs. The manufacturing plants for Polestars vehicles consist of large-scale machinery combining many components. These manufacturing plant components are likely to suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed.
Unexpected malfunctions of the manufacturing plant components may significantly affect the intended operational efficiency of Polestar. Operational performance and costs can be difficult to predict and are often influenced by factors outside of Polestars control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, pandemics, fire, seismic activity and natural disasters. Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material and adverse effect on Polestars business, results of operations, cash flows, financial condition or prospects.
Polestar relies on its partners to manufacture vehicles and these partners have limited experience in producing electric vehicles. Further, Polestar relies on sufficient production capacity being available and/or allocated to it by its partners in order to manufacture its vehicles. Delays in the timing of expected business milestones and commercial launches, including Polestars ability to mass produce its electric vehicles and/or complete and/or expand its manufacturing capabilities, could materially and adversely affect Polestars business, financial condition, results of operations and prospects.
Although Polestar currently has manufacturing facilities that manufacture Polestar 1, Polestar intends to rely solely on its contract manufacturing arrangements with its partners to manufacture future Polestar models. Polestar cannot provide any assurance as to whether its partners will be able to develop efficient, automated,
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low-cost production capabilities and processes and reliable sources of component supply that will enable Polestar to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market its vehicles. Even if Polestars partners are successful in developing high volume production capabilities and processes and reliably source their component supplies, no assurance can be given as to whether they will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond their and Polestars control such as problems with suppliers and vendors, or force majeure events, or in time to meet Polestars commercialization schedules or to satisfy the requirements of customers and potential customers. Any failure to develop such production processes and capabilities within Polestars projected costs and timelines could have a material and adverse effect on its business, results of operations, prospects and financial condition. Bottlenecks and other unexpected challenges may also arise as Polestar ramps production, and it will be important that Polestar address these challenges promptly while continuing to control its manufacturing costs. If Polestar is not successful in doing so, or if it experiences issues with its manufacturing process improvements, it could face delays in establishing and/or sustaining its production ramps or be unable to meet its related cost and profitability targets.
Polestar faces risks associated with international operations, including tariffs and unfavorable regulatory, political, tax and labor conditions, which could materially and adversely affect its business, financial condition, results of operations and prospects.
Polestar has operations and subsidiaries in Europe, North America and Asia that are subject to the legal, political, regulatory and social requirements and economic conditions in these jurisdictions. Additionally, as part of its growth strategy, Polestar intends to expand its sales, maintenance and repair services and manufacturing activities to new countries in the coming years. However, Polestar has limited experience to date manufacturing, selling or servicing its vehicles, and such expansion would require it to make significant expenditures, including the hiring of local employees, in advance of generating any revenue. Polestar is subject to a number of risks associated with international business activities that may increase its costs, impact its ability to sell, service and manufacture its vehicles and require significant management attention. These risks include:
| conforming Polestars vehicles to various international regulatory requirements where its vehicles are sold, or homologation; |
| establishing localized supply chains and managing international supply chain and logistics costs; |
| establishing sufficient charging points for Polestars customers in those jurisdictions, via partnerships or, if necessary, via development of its own charging networks; |
| difficulty in staffing and managing foreign operations; |
| difficulties attracting customers in new jurisdictions; |
| difficulties establishing international manufacturing operations, including difficulties establishing relationships with or establishing localized supplier bases and developing cost-effective and reliable supply chains for such manufacturing operations; |
| taxes, regulations and permit requirements, including taxes imposed by one taxing jurisdiction that Polestar may not be able to offset against taxes imposed upon it in another relevant jurisdiction, and foreign tax and other laws limiting its ability to repatriate funds to another relevant jurisdiction; |
| fluctuations in foreign currency exchange rates and interest rates, including risks related to any forward currency contracts, interest rate swaps or other hedging activities Polestar undertakes; |
| United States and foreign government trade restrictions, tariffs and price or exchange controls; |
| foreign labor laws, regulations and restrictions; |
| changes in diplomatic and trade relationships, including political risk and customer perceptions based on such changes and risks; |
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| political instability, natural disasters, pandemics (including the ongoing COVID-19 pandemic), war or events of terrorism; and |
| the strength of international economies. |
If Polestar fails to successfully address these risks, its business, prospects, results of operations and financial condition could be materially harmed.
Polestar relies heavily on manufacturing facilities based in China and its growth strategy will depend on growing its business in China. This subjects Polestar to economic, operational, regulatory and legal risks specific to China.
Polestar relies heavily on manufacturing facilities based in China for the manufacture of its vehicles, including facilities of the Volvo Cars, Geely and its other contract partners, as well as its own manufacturing facilities in China. Polestar intends to rely solely on arrangements with its contract manufacturers, including Volvo Cars and Geely, for future Polestar models, many of which will be based in China, and its growth strategy will depend on growing its business based in China. This growing presence increases Polestars sensitivity to the economic, operational and legal risks specific to China. For example, Chinas economy differs from the economies of most developed countries in many aspects, including, but not limited to, the degree of government involvement, level of corruption, control of capital investment, reinvestment control of foreign exchange, control of intellectual property, allocation of resources, growth rate and development level. Although the Chinese government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, including the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, which are generally viewed as a positive development for foreign business investment, a substantial portion of productive assets in China is still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over economic growth in China through allocating resources, controlling payments of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.
While Chinas economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and the rate of growth has been slowing down, particularly in view of the effects of government actions to address the effects of the COVID-19 pandemic, which resulted in significant closures of businesses during a significant portion of 2020. Some of the governmental measures may benefit the overall Chinese economy, but may have a negative effect on Polestar. For example, Polestars financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. Higher inflation could adversely affect Polestars results of operations and financial condition. Furthermore, certain operating costs and expenses, such as employee compensation and office operating expenses, may increase as a result of higher inflation. In addition, the Chinese government has implemented in the past certain measures to control the pace of economic growth. These measures may cause decreased economic activity, which in turn could lead to a reduction in demand for Polestars products and services, and consequently have a material and adverse effect on Polestars businesses, financial condition and results of operations.
It is unclear whether and how Polestars current or future business, prospects, financial condition or results of operations may be affected by changes in Chinas economic, political and social conditions and in its laws, regulations and policies. In addition, many of the economic reforms carried out by the Chinese government are unprecedented or experimental and are expected to be refined and improved over time. This refining and improving process may not necessarily have a positive effect on Polestars operations and business development.
Additionally, the legal system in China is not fully developed and there are inherent uncertainties that may affect the protection afforded to Polestar for its business and activities in China that are governed by the Chinese laws
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and regulations. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since administrative and court authorities in China have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection for Polestar than in more developed legal systems. These uncertainties may impede Polestars ability to enforce contracts and could materially and adversely affect Polestars business, financial condition and results of operations.
The Chinese government may intervene in or influence Polestars and Polestars partners operations in China at any time, which could result in a material change in Polestars operations and ability to produce vehicles and significantly and adversely impact the value of Polestars securities.
The Chinese government exerts substantial influence, discretion, oversight and control over the manner in which companies incorporated under the laws and regulations of China must conduct their business activities, including activities relating to overseas offerings of securities and/or foreign investments in such companies. Polestar is incorporated under the laws of England and Wales with headquarters in Sweden, and has subsidiaries with operations in mainland China. Accordingly, Polestar is not subject to the permissions requirements of the China Securities Regulatory Commission with respect to the issuance of securities by Polestar to investors. However, Polestar cannot guarantee that the Chinese government will not seek to intervene or influence any of Polestars or its partners operations or securities offerings at any time. If Polestar or its partners were to become subject to such direct influence, intervention, discretion, oversight or control, including those over overseas offerings of securities (including foreign investments), it may result in a material adverse change in Polestars and its partners operations and cause the value of Polestars securities to significantly decline or be worthless.
The Chinese government has recently published new policies that significantly affected certain industries such as the education and internet industries, and Polestar, albeit not engaging in such industries, cannot rule out the possibility that the Chinese government will in the future release regulations or policies regarding Polestars industry that could require Polestar and its partners to seek permission from Chinese authorities to continue operating, which may adversely affect Polestars business, financial condition and results of operations.
Changes in Chinese policies, regulations and rules may be quick with little advance notice and the enforcement of laws of the Chinese government is uncertain and could have a significant impact upon Polestars and its partners ability to operate profitably.
Polestar relies on its and its partners operations and facilities located in China. Accordingly, economic, political and legal developments in China will significantly affect Polestars business, financial condition, results of operations and prospects. Policies, regulations, rules and the enforcement of laws of the Chinese government can have significant effects on economic conditions in China and the ability of businesses to operate profitably. Polestars ability to operate profitably may be adversely affected by rapid and unexpected changes in policies by the Chinese government, including changes in laws, regulations, their interpretation and their enforcement.
Compliance with Chinas new Data Security Law, Cybersecurity Review Measures (revised draft for public consultation), Personal Information Protection Law, regulations and guidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and could materially affect Polestars business.
China has implemented new rules relating to data protection, and the new Data Security Law took effect in September 2021. The Data Security Law provides that the data processing activities must be conducted based on data classification and hierarchical protection system for the purpose of data protection and prohibits entities in China from transferring data stored in China to foreign law enforcement agencies or judicial authorities without prior approval by the Chinese government.
Additionally, Chinas Cyber Security Law requires companies to take certain organizational, technical and administrative measures and other necessary measures to ensure the security of their networks and data stored on
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their networks. Specifically, the Cyber Security Law provides that China adopt a multi-level protection scheme (MLPS), under which network operators are required to perform obligations of security protection to ensure that the network is free from interference, disruption or unauthorized access, and prevent network data from being disclosed, stolen or tampered. Under the MLPS, entities operating information systems must have a thorough assessment of the risks and the conditions of their information and network systems to determine the level to which the entitys information and network systems belong-from the lowest Level 1 to the highest Level 5 pursuant to a series of national standards on the grading and implementation of the classified protection of cyber security. The grading result will determine the set of security protection obligations that entities must comply with. Entities classified as Level 2 or above should report the grade to the relevant government authority for examination and approval.
Recently, the Cyberspace Administration of China (the CAC) has taken action against several Chinese Internet companies in connection with their initial public offerings on U.S. securities exchanges, for alleged national security risks and improper collection and use of the personal information of Chinese data subjects. According to the official announcement, the action was initiated based on the National Security Law, the Cyber Security Law and Cybersecurity Review Measures, which are aimed at preventing national data security risks, maintaining national security and safeguarding public interests. On July 10, 2021, the CAC published a revised draft of the Cybersecurity Review Measures, expanding the cybersecurity review to data processing operators in possession of personal information of over 1 million users if the operators intend to list their securities in a foreign country. On November 14, 2021, the CAC published the draft Network Data Security Management Regulation for public comments, which reiterates the requirement that data processors processing more than 1 million individuals information should apply for a cybersecurity review with the CAC, if the processors intend to list their securities in a foreign country.
It is unclear at the present time how widespread the cybersecurity review requirement and the enforcement action will be and what effect they will have on Polestar in particular. Chinas regulators may impose penalties for non-compliance ranging from fines or suspension of operations, and this could lead to us delisting from the U.S. stock market.
Also, on August 20, 2021, the Standing Committee of Chinas National Peoples Congress (NPC) passed the Personal Information Protection Law, which became effective on November 1, 2021. The Personal Information Protection Law provides a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in China, and the processing of personal information of persons in China outside of China if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in China. The Personal Information Protection Law also provides that critical information infrastructure operators and personal information processing entities who process personal information meeting a volume threshold to be set by the CAC are also required to store in China personal information generated or collected in China, and to pass a security assessment administered by the CAC for any export of such personal information. On October 29, 2021, the CAC issued the draft Cross-border Data Transfer Security Assessment Measures for public comments, which require personal information processors who process more than 1 million individuals personal information to apply and pass the security assessment organized by the CAC before any export of personal information.. Lastly, the Personal Information Protection Law contains proposals for significant fines for serious violations of up to RMB 50 million or 5% of annual revenues from the prior year and may also be ordered to suspend any related activity by competent authorities.
Other than personal information, the Automobile Data Security Management Measures (for Trial Implementation) jointly issued by the National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security and Ministry of Transport on August 16, 2021 impose strict regulation on important data, which includes more than 100,000 individuals personal information. The Automobile Data Security Management Measures (for Trial Implementation) provide that important data should
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be stored within the territory of China in accordance with the law, and if it is really necessary to export such data due to business needs, a security assessment organized by the CAC must be passed.
Polestar uses global information systems to support its worldwide operation, but the information systems might not have servers in China and the personal information collected by Polestar in China may be constantly exported outside China to countries hosting the information systems servers. Polestar also relies on certain information systems maintained by Volvo Cars to process certain personal information, which similarly exports personal information outside China on a regular basis. Personal information processed by information systems with servers in China is stored in China, unless Polestars operations necessitate exporting such personal information.
Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation, amendments to existing legislation or changes in enforcement. Compliance with the Cyber Security Law, the Data Security Law, the Personal Information Protection Law and/or related implementing regulations could significantly increase the cost to Polestar of producing and selling vehicles, require significant changes to Polestars operations or even prevent Polestar from providing certain service offerings in jurisdictions in which Polestar currently operates or in which Polestar may operate in the future. Despite Polestars efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security, it is possible that Polestars practices or offerings could fail to meet all of the requirements imposed on Polestar by the Cyber Security Law, the Data Security Law, the Personal Information Protection Law and/or related implementing regulations. Any failure on Polestars part to comply with such law or regulations or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in unauthorized access, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage Polestars reputation, discourage new and existing counterparties from contracting with Polestar or result in investigations, fines, suspension or other penalties by Chinese government authorities and private claims or litigation, any of which could materially adversely affect Polestars business, financial condition and results of operations. Even if Polestars practices are not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm Polestars reputation and adversely affect Polestars business, financial condition and results of operations (See Data privacy concerns are generally increasing, which could result in new legislation, in negative public perception of Polestars current data collection practices and certain of its services or technologies and/or in changing user behaviors that negatively affect Polestars business and product development plans.). Moreover, the legal uncertainty created by the Data Security Law and the recent Chinese government actions could materially adversely affect Polestars ability, on favorable terms, to raise capital; including engaging in follow-on offerings of its securities in the U.S. market.
Polestar and its subsidiaries (i) may not receive or maintain permissions or approvals from the CAC or other relevant authorities to operate in China, (ii) may inadvertently conclude that such permissions or approvals are not required, or (iii) may be required to obtain new permissions or approvals in the future due to changes in applicable laws, regulations, or interpretations related thereto.
Polestar and its subsidiaries in China are not classified as a critical information infrastructure operators or network platform operators under the Cybersecurity Review Measures, nor have Polestar and its subsidiaries received any notice from the CAC defining them as the foregoing operator, which would require Polestar or its subsidiaries to apply for a cybersecurity review with the CAC. See Compliance with Chinas new Data Security Law, Cybersecurity Review Measures (revised draft for public consultation), Personal Information Protection Law, regulations and guidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and could materially affect Polestars business. However, if it is determined in the future that approvals or permissions from the CAC or other regulatory authorities are required, these regulatory authorities may impose fines, suspend Polestars relevant businesses or halt operations, revoke relevant business permits or operational license, limit Polestars ability to pay dividends outside of China, limit Polestars operating privileges in China, or take other actions that could materially and adversely affect Polestars business, financial condition, results of operations, and prospects, as well as the trading price of ADSs
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and ADWs. The CAC or other relevant authorities may also take actions requiring Polestar, or making it advisable for Polestar, to halt operations before settlement and delivery of the securities offered with this proxy statement/prospectus. In addition, if the CAC or other regulatory authorities later promulgate new rules or explanations requiring that Polestar or its subsidiaries obtain their approvals or accomplish any required filing or other regulatory procedures, Polestar may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirements could materially and adversely affect Polestars business, prospects, financial condition, reputation, and the trading price of ADSs and ADWs.
Polestar may be adversely affected by the complexity, uncertainties and changes in the regulations on internet-related business, automotive businesses and other business carried out by Polestars operating entities in China.
The Chinese government extensively regulates the internet and automotive industries and other business carried out by Polestars operating entities in China. Such laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations.
Several regulatory authorities in China, such as the State Administration for Market Regulation, the National Development and Reform Commission, the Ministry of Industry and Information Technology and the Ministry of Commerce, oversee different aspects of the electric vehicle business, and Polestars operating entities in China are required to obtain a wide range of government approvals, licenses, permits and registrations in connection with their operations in China. For example, certain filings must be made by automobile dealers through the information system for the national automobile circulation operated by the relevant commerce department within 90 days after the receipt of a business license. Furthermore, the electric vehicle industry is relatively immature in China, and the government has not adopted a clear regulatory framework to regulate the industry.
There are substantial uncertainties regarding the interpretation and application of the existing laws, regulations and policies and possible new laws, regulations or policies in China relating to internet-related businesses as well as automotive businesses and companies. There is no assurance that Polestar will be able to obtain all the permits or licenses related to its business in China, or will be able to maintain its existing permits and licenses or obtain new ones. In the event that the Chinese government considers that Polestar was or is operating without the proper approvals, licenses or permits, promulgates new laws and regulations that require additional approvals or licenses, or imposes additional restrictions on the operation of any part of Polestars business, the Chinese government has the power, among other things, to levy fines, confiscate Polestars income, revoke its business licenses and require Polestar to discontinue the relevant business or impose restrictions on the affected portion of its business. Any of these actions by the Chinese government may have a material and adverse effect on Polestars business, prospects, financial condition and results of operations.
If Polestar updates or discontinues the use of its manufacturing equipment more quickly than expected, it may have to shorten the useful lives of any equipment to be retired as a result of any such update, and the resulting acceleration in Polestars depreciation could negatively affect its financial results.
Polestar has invested and expects to continue to invest significantly in what it believes is state of the art tooling, machinery and other manufacturing equipment, and Polestar depreciates the cost of such equipment over its expected useful lives. However, manufacturing technology may evolve rapidly, and Polestar may decide to update its manufacturing processes more quickly than expected. Moreover, as Polestar ramps the commercial production of its vehicles, Polestars experience may cause it to discontinue the use of already installed equipment in favor of different or additional equipment. The useful life of any equipment that would be retired early as a result would be shortened, causing the depreciation on such equipment to be accelerated, and Polestars results of operations could be negatively impacted.
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Polestars operating and financial results forecasts and projections rely in large part upon assumptions and analyses developed by it. If the assumptions or analyses that Polestar made in connection with its projections and forecasts prove to be incorrect, Polestars actual results of operations may be materially different from its forecasted results.
The projections, including the ListCo Projections appearing elsewhere in this proxy statement/prospectus, reflect Polestars estimates of future performance as of September 2021, incorporating certain financial and operational assumptions based on information available at the time the forecasts were made and should not be regarded as an indication that Polestar or any other recipient of this information considered, or now considers, it to be predictive of actual future results. In addition, such projections incorporate assumptions relating to (a) sales volumes and revenues, which could be significantly impacted by economic events and consumer demand for Polestars vehicles, (b) Polestars expectation to sell vehicles internationally, which could be impacted by trade policies, regulatory constraints and other factors, (c) projected growth in the premium vehicle market; and (d) Polestars ability to start and scale production of its electric vehicles, and introduce new models, on the timeline and at the quantities planned.
In addition, the projected financial and operating information incorporates assumptions about Polestars ability to maintain an effective cost structure, which could be impacted by the prices of commodities and other inputs, wage inflation, logistics costs, infrastructure and utilities costs, the costs of specialized equipment and tooling, research and development costs, facilities costs and numerous other factors. These assumptions were preliminary and there can be no assurance that the actual results upon which Polestars assumptions were based will be in line with its expectations at the time the forecasts were made. As an early-stage company in a rapidly evolving industry, Polestar has limited data on which to base its projections of its future performance and has limited experience forecasting revenues and volumes. The projections, including the ListCo Projections, also reflect assumptions as to certain business strategies or plans that are subject to change. As a result, the inclusion of such forecasts in this proxy statement/prospectus should not be relied on as guidance or otherwise predictive of actual future events, and actual results may differ materially from the projections, including the ListCo Projections. Whether actual operating and financial results and business developments will be consistent with the expectations and assumptions reflected in the projections, including the ListCo Projections, depend on a number of factors, many of which are outside of Polestars control, including, but not limited to, the risks and uncertainties described elsewhere in this section. If Polestar fails to meet its own financial or operating forecasts, including those relating to volumes and revenues, or those of securities analysts, the value of the Post-Combination Companys securities could be significantly and adversely affected.
Polestars main distribution approach is different from the currently predominant distribution model for automakers, and its long-term viability is unproven. Polestar will not have a third-party retail product distribution network in all of the countries in which it operates, and Polestar may face regulatory challenges to or limitations on its ability to sell vehicles directly.
Polestars main distribution approach is not common in the automotive industry today. Polestar vehicles are sold either directly to users (rather than through dealerships), or, in certain countries, through third parties via a franchising model. In North America, for example, all sales are conducted through trusted representatives. Polestars direct to consumer approach of vehicle distribution is relatively new and has a shorter track record to prove long-term effectiveness. It thus subjects Polestar to risks as it requires, in the aggregate, significant expenditures and may provide for slower expansion of Polestars distribution and sales systems than the traditional dealership system. For example, Polestar does not utilize long established sales channels developed through a dealership system to increase its sales volume. However, Polestar does leverage the existing Volvo Cars network of dealers as a pipeline of potential operators of Polestar Locations or distributors (depending on the distribution approach in each country). Moreover, Polestar competes with automakers with well-established distribution channels. If Polestars lack of a traditional dealer distribution network results in lost opportunities to generate sales, it could limit Polestars ability to grow. Polestars expansion of its network of retail locations and service points may not fully meet users expectations. Polestars success will depend in large part on its ability to effectively develop its own sales channels and marketing strategies. Implementing its business model is subject
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to numerous challenges, including obtaining permits and approvals from government authorities, and Polestar may not be successful in addressing these challenges.
Polestars experience distributing directly to consumers only started in 2019 with the launch of Polestar 1 and at a larger scale in 2020 with the launch of Polestar 2. Therefore, Polestar expects that the building of an in-house sales and marketing function will be expensive and time consuming. To the extent Polestar is unable to successfully execute on its current direct distribution plans, it may be required to change such plans, which may prove costly, time-consuming or ineffective. If Polestars use of an in-house sales and marketing team is not effective, Polestars results of operations and financial conditions could be adversely affected.
Insufficient reserves to cover future warranty or part replacement needs or other vehicle repair requirements, including any potential software upgrades, could have a material and adverse effect on Polestars business, prospects, financial condition and results of operations.
Polestar provides a manufacturers warranty on all vehicles, components and systems it sells. Polestar needs to maintain reserves to cover part replacement and other vehicle repair needs, including any potential software upgrades or warranty claims. In addition, Polestar provides additional warranties on installation workmanship or performance guarantees. Warranty reserves will include Polestars management teams best estimate of the
projected costs to repair or to replace items under warranty. Such estimates are inherently uncertain, particularly in light of Polestars limited operating history and the limited field data available to it, and changes to such estimates based on real-world observations may cause material changes to Polestars warranty reserves in the future. If Polestars reserves are inadequate to cover future maintenance requirements on its vehicles, its business, prospects, financial condition and results of operations could be materially and adversely affected. Polestar may become subject to significant and unexpected expenses as well as claims from its customers, including loss of revenue or damages. There can be no assurances that then-existing reserves will be sufficient to cover all claims. In addition, if future laws or regulations impose additional warranty obligations on Polestar that go beyond Polestars manufacturers warranty, Polestar may be exposed to materially higher warranty, parts replacement and repair expenses than it expects, and its reserves may be insufficient to cover such expenses.
Polestar may be unable to offer attractive leasing and financing options for its current vehicle models and future vehicles, which would adversely affect consumer demand for its vehicles.
Polestar offers leasing and financing of its vehicles to potential customers through financing partners and currently has 18 agreements in place with such partners. Polestar believes that the ability to offer attractive leasing and financing options is particularly relevant to customers in the premium vehicle segments in which it competes, and if Polestar is unable to offer its customers an attractive option to finance the purchase or lease of its vehicles, such failure could substantially reduce the population of potential customers and decrease demand for Polestars vehicles.
Polestar is subject to risks associated with advanced driver assistance system technology. Polestar is also working on adding autonomous driving technology to its vehicles and expects to be subject to the risks associated with this technology. Polestar cannot guarantee that its vehicles will achieve its targeted assisted or autonomous driving functionality within its projected timeframe, or ever.
Polestars vehicles are designed with the advanced driver assistance system (ADAS) hardware, and Polestar expects to launch automation functionalities and additional capabilities, including autonomous driving (AD), over time. ADAS/AD technologies are emerging and subject to known and unknown risks, and there have been accidents and fatalities associated with such technologies. The safety of such technologies depends in part on user interaction, and users, as well as other drivers on the roadways, may not be accustomed to using or adapting to such technologies. In addition, self-driving technologies are the subject of intense public scrutiny and interest, and previous accidents involving autonomous driving features in other vehicles, including alleged failures or misuse of such features, have generated significant negative media attention and government investigations. To
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the extent accidents associated with Polestars ADAS or AD technologies occur, Polestar could be subject to significant liability, negative publicity, government scrutiny and further regulation. Any of the foregoing could materially and adversely affect Polestars results of operations, financial condition and growth prospects.
In addition, Polestar faces substantial competition in the development and deployment of ADAS/AD technologies. Many of Polestars competitors, including Tesla, established automakers such as Mercedes-Benz, Audi and General Motors (including via its investments in Cruise Automation), and technology companies including Waymo (owned by Alphabet), Zoox.ai (owned by Amazon), Aurora (which recently announced a business combination with Ubers subsidiary focused on self-driving technologies), Argo AI (jointly owned by Ford and Volkswagen), Mobileye (a subsidiary of Intel), Aptiv, Baidu, Nuro and Ghost.ai, have devoted significant time and resources to developing ADAS/AD technologies. If Polestar is unable to develop competitive or more advanced ADAS/AD technologies in-house or acquire access to such technology via partnerships or investments in other companies or assets, it may be unable to equip its vehicles with competitive ADAS/AD features, which could damage its brand, reduce consumer demand for its vehicles or trigger cancellations of reservations and could have a material and adverse effect on its business, results of operations, prospects and financial condition. ADAS/AD technologies are also subject to considerable regulatory uncertainty, which exposes Polestar to additional risks.
Uninsured losses, including losses resulting from product liability, accidents, acts of God and other claims against Polestar, could result in payment of substantial damages, which would decrease Polestars cash reserves and could harm its cash flow and financial condition.
In the ordinary course of business, Polestar may be subject to losses resulting from product liability, accidents, acts of God and other claims against it, for which it may have no insurance coverage. While Polestar currently carries commercial general liability, commercial automobile liability, excess liability, product liability, crime, cargo stock throughput, property, workers compensation, employment practices, production and directors and officers insurance policies, it may not maintain as much insurance coverage as other companies do, and in some cases, it may not maintain any at all. Additionally, the policies it does have may include significant deductibles, and it cannot be certain that its insurance coverage will be sufficient to cover all or any future claims against it. A loss that is uninsured or exceeds policy limits may require Polestar to pay substantial amounts, which could adversely affect its financial condition and results of operations. Further, insurance coverage may not continue to be available to Polestar or, if available, may be at a significantly higher cost, especially if insurance providers perceive any increase in Polestars risk profile in the future.
Polestars vehicles will make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.
The battery packs within Polestars vehicles make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. Any such events or failures of Polestars vehicles, battery packs or warning systems could subject Polestar to lawsuits, product recalls, or redesign efforts, all of which would be time consuming and expensive. Also, negative public perceptions regarding the suitability of lithium-ion cells for automotive applications or any future incident involving lithium-ion cells, such as a vehicle or other fire, even if such incident does not involve Polestars vehicles, could seriously harm Polestars business and reputation.
Moreover, any failure of a competitors electric vehicle or energy storage product, as well as the mishandling of battery cells or a safety issue or fire or related to the cells at partners manufacturing facilities, may cause indirect adverse publicity for Polestar and its products. Such adverse publicity could negatively affect Polestars brand and harm its business, prospects, results of operations and financial condition.
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Polestars ability to generate meaningful product revenue will depend on consumer adoption of electric vehicles. However, the market for electric vehicles is still evolving and changes in governmental programs incentivizing consumers to purchase electric vehicles, fluctuations in energy prices, the sustainability of electric vehicles and other regulatory changes might negatively impact adoption of electric vehicles by consumers. If the pace and depth of electric vehicle adoption develops more slowly than Polestar expects, its revenue may decline or fail to grow, and Polestar may be materially and adversely affected.
Polestar is only developing electric vehicles and, accordingly, its ability to generate meaningful product revenue will highly depend on sustained consumer demand for alternative fuel vehicles in general and electric vehicles in particular. If the market for electric vehicles does not develop as Polestar expects or develops more slowly than it expects, or if there is a decrease in consumer demand for electric vehicles, Polestars business, prospects, financial condition and results of operations will be harmed. The market for electric and other alternative fuel vehicles is relatively new and rapidly evolving and is characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulations (including government incentives and subsidies) and industry standards, frequent new vehicle announcements and changing consumer demands and behaviors. Any number of changes in the industry could negatively affect consumer demand for electric vehicles in general and Polestars electric vehicles in particular.
In addition, demand for electric vehicles may be affected by factors directly impacting automobile prices or the cost of purchasing and operating automobiles such as sales and financing incentives like tax credits, prices of raw materials and parts and components, cost of fuel or electricity, availability of consumer credit and governmental regulations, including tariffs, import regulation and other taxes. Volatility in demand may lead to lower vehicle unit sales, which may result in downward price pressure and adversely affect Polestars business, prospects, financial condition and results of operations. Further, sales of vehicles in the automotive industry tend to be cyclical in many markets, which may expose Polestar to increased volatility, especially as it expands and adjusts its operations and retail strategies. Specifically, it is uncertain how such macroeconomic factors will impact Polestar as a newer entrant in an industry that has globally been experiencing a recent decline in sales.
Other factors that may influence the adoption of electric vehicles include:
| perceptions about electric vehicle quality, safety, design, performance and cost; |
| perceptions about the limited range over which electric vehicles may be driven on a single battery charge; |
| perceptions about the total cost of ownership of electric vehicles, including the initial purchase price and operating and maintenance costs, both including and excluding the effect of government and other subsidies and incentives designed to promote the purchase of electric vehicles; |
| concerns about electric grid capacity and reliability; |
| perceptions about the sustainability and environmental impact of electric vehicles, including with respect to both the sourcing and disposal of materials for electric vehicle batteries and the generation of electricity provided in the electric grid; |
| the availability of other alternative fuel vehicles, including plug-in hybrid electric vehicles; |
| improvements in the fuel economy of the internal combustion engine; |
| the quality and availability of service for electric vehicles, especially in international markets; |
| volatility in the cost of oil, gasoline and electricity; |
| government regulations and economic incentives promoting fuel efficiency and alternative forms of energy; |
| access to charging stations and the cost to charge an electric vehicle, especially in international markets, and related infrastructure costs and standardization; |
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| the availability of tax and other governmental incentives to purchase and operate electric vehicles or future regulation requiring increased use of nonpolluting vehicles; and |
| macroeconomic factors. |
The influence of any of the factors described above or any other factors may cause a general reduction in consumer demand for electric vehicles or Polestars electric vehicles in particular, either of which would materially and adversely affect Polestars business, results of operations, financial condition and prospects.
Developments in electric vehicle or alternative fuel technology or improvements in the internal combustion engine may adversely affect the demand for Polestars vehicles.
Polestar may be unable to keep up with changes in electric vehicle technology or alternatives to electricity as a fuel source and, as a result, its competitiveness may suffer. Significant developments in alternative technologies, such as alternative battery cell technologies, hydrogen fuel cell technology, advanced gasoline, ethanol or natural gas or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect Polestars business and prospects in ways it does not currently anticipate. Existing and other battery cell technologies, fuels or sources of energy may emerge as customers preferred alternative to the technologies in Polestars electric vehicles. Any failure by Polestar to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay its development and introduction of new and enhanced electric vehicles, which could result in the loss of competitiveness of its vehicles, decreased revenues and a loss of market share to competitors. In addition, Polestar expects to compete in part on the basis of its vehicles range, efficiency, charging speeds and performance, and improvements in the technology offered by competitors could reduce demand for Polestars vehicles. As technologies change, Polestar plans to upgrade or adapt its vehicles and introduce new models that reflect such technological developments, but its vehicles may become obsolete, and its research and development efforts may not be sufficient to adapt to changes in alternative fuel and electric vehicle technology. Additionally, as new companies and larger, existing vehicle manufacturers continue to enter the electric vehicle space, Polestar may lose any technological advantage it may have and suffer a decline in its competitive position. Any failure by Polestar to successfully react to changes in existing technologies or the development of new technologies could materially harm its competitive position and growth prospects.
The global COVID-19 outbreak and the global response could continue to affect Polestars business and operations.
The ongoing COVID-19 pandemic poses risks to Polestars business, including through its impact on general economic conditions; manufacturing and supply chain operations; stay-at-home orders; and global financial markets. The pandemics impact on economic conditions has led to a global decrease in vehicle sales in markets around the world. Its continued impact on the economy, even after the pandemic has subsided, could lead consumers to further reduce spending, delay purchases of Polestars vehicles or cancel their orders for Polestars vehicles. Because of Polestars premium brand positioning and pricing, an economic downturn is likely to have a heightened adverse effect on it, compared to many of its electric vehicle and traditional automotive industry competitors, to the extent that consumer demand for luxury goods is reduced in favor of lower-priced alternatives. Any economic recession or other downturn could also cause logistical challenges and other operational risks if any of Polestars suppliers, sub-suppliers or partners becomes insolvent or is otherwise unable to continue its operations. Further, the immediate or prolonged effects of the COVID-19 pandemic could significantly affect government finances and, accordingly, the continued availability of incentives related to electric vehicle purchases and other governmental support programs.
The spread of COVID-19 has also periodically disrupted the manufacturing operations of other vehicle manufacturers and their suppliers. Any such disruptions to Polestar or to its suppliers could result in delays and could negatively affect its production volume.
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The pandemic has resulted in the imposition of travel bans and restrictions, quarantines, shelter-in-place and stay-at-home orders and business shutdowns. These measures pose numerous operational risks and logistical challenges to Polestars business. In addition, regional, national and international travel restrictions may result in adverse impacts to Polestars supply chain. Further, Polestars sales and marketing activities have been, and may in the future be, adversely affected due to the cancellation or reduction of in-person sales activities, meetings, events and conferences. The transition of Polestars personnel to a mostly remote workforce has also increased demand on its information technology resources and systems and increased data privacy and cybersecurity risks. These restrictive measures could be in place for a significant period of time and may be reinstituted or replaced with more burdensome restrictions if conditions deteriorate, which could adversely affect Polestars manufacturing and sales and distribution plans and timelines.
In addition, the COVID-19 pandemic has resulted in extreme volatility in the global financial markets, which could increase Polestars cost of capital or limit its ability to access financing when needed.
The severity, magnitude and duration of the COVID-19 pandemic and its economic and regulatory consequences are rapidly changing and uncertain. Accordingly, Polestar cannot predict the ultimate impact of the COVID-19 pandemic on its business, financial condition and results of operations.
Polestars facilities or operations could be and have been adversely affected by events outside of its control, such as natural disasters, wars, health epidemics or pandemics or security incidents.
Polestar may be impacted by natural disasters, wars, health epidemics or pandemics or other events outside of its control. For example, flooding impacted Polestars manufacturing facility in July 2019 and stopped production for one half of a day. Further, if major disasters such as earthquakes, wildfires, tornadoes or other events occur, or if Polestars information system or communications network breaks down or operates improperly, Polestars facilities and manufacturing may be seriously damaged or affected, or Polestar may have to stop or delay production and shipment of its products. In addition, the ongoing COVID-19 pandemic has impacted economic markets, manufacturing operations, supply chains, employment and consumer behavior in nearly every geographic region and industry across the world, and Polestar has been, and may in the future be, adversely affected as a result. Furthermore, Polestar could be impacted by physical security incidents at its facilities, which could result in significant damage to such facilities that could require Polestar to delay or discontinue production of its vehicles. Polestar may incur significant expenses or delays relating to such events outside of its control, which could have a material adverse impact on its business, results of operations and financial condition.
The conflict between Russia and Ukraine has, and is likely to continue to, generate uncertain geopolitical conditions, including sanctions that could adversely affect Polestars business prospects and results of operations.
Russia and Ukraine are not Polestar markets, and there are no plans to launch in either market in the near future. Nevertheless, the uncertain geopolitical conditions, sanctions, and other potential impacts on the global economic environment resulting from Russias invasion of Ukraine may weaken demand for Polestars vehicles, which could make it difficult for Polestar to forecast its financial results and manage its inventory levels. The uncertainty surrounding these conditions and the current, and potentially expanded, scope of international sanctions against Russia may cause unanticipated changes in customers buying patterns, adversely impact operations of our suppliers, or interrupt Polestars ability to source products from this region.
Polestar vehicles are manufactured at facilities owned and operated by Volvo Cars. While we understand that Volvo Cars does not have any Tier 1 suppliers from Russia, car production is a complex process, with thousands of components sourced from all over the world. There can be no assurance, therefore, that there will not be some components sourced from suppliers subject to sanctions against Russia nor that the resulting disruption to the supply chain will not have an adverse impact on our business and results of operations.
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In the event geopolitical tensions deteriorate further or fail to abate, additional governmental sanctions may be enacted that could adversely impact the global economy, banking and monetary systems, markets, and the operations of Polestar and its suppliers.
If vehicle owners customize Polestar vehicles or change the charging infrastructure with aftermarket products, the vehicle may not operate properly, which may create negative publicity and could harm Polestars business.
Automobile enthusiasts may seek to alter Polestars vehicles to modify their performance, which could compromise vehicle safety systems. Also, customers may customize their vehicles with after-market parts that can compromise driver safety. Polestar does not test, nor does it endorse, such changes or products. In addition, the use of improper external cabling or unsafe charging outlets can expose customers to injury from high voltage electricity. Such unauthorized modifications could reduce the safety of Polestars vehicles and any injuries resulting from such modifications could result in adverse publicity that would negatively affect Polestars brand and harm its business, prospects, financial condition and operating results.
Risks Related to Cybersecurity and Data Privacy
Polestar relies on its and Volvo Carss IT systems and any material disruption to its or Volvo Carss IT systems could have a material and adverse effect on Polestar.
The availability and effectiveness of Polestars services depend on the continued operation of its information technology and communications systems. Polestar relies on its and Volvo Carss IT systems, and such systems are vulnerable to damage or interruption from, among other adverse effects, fire, terrorist attacks, natural disasters, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm its systems. Polestars products and services are also highly technical and complex and may contain errors or vulnerabilities that could result in interruptions in its services or the failure of its systems or the systems on which it relies. For more information on the data breach Volvo Cars announced on December 10, 2021 and that involved a Volvo Cars server that shared information relevant to Polestar, please see Information Related to PolestarRelated Party Agreements with Volvo Cars and Geely.
Any unauthorized control or manipulation of Polestars products, digital sales tools and systems could result in loss of confidence in Polestar and its products.
Polestars products contain complex information technology systems. Polestar expects to collect, store, transmit and otherwise process data from vehicles, customers, employees and other third parties as part of its business operations, which may include personal data or confidential or proprietary information. Polestar also works with third parties that collect, store and process such data on its behalf and also uses digital tools to sell vehicles to its customers. Polestar has created a foundation of security polices and an information security directive and is in the process of creating and testing information security policies to deployed systems. Polestar is creating measures to implement such policies, including encryption technologies, to prevent unauthorized access and plans to continue deploying additional security measures as it grows. Polestars third-party service providers and vendors will also be obliged to take steps to protect the security and integrity of Polestars and their information technology systems and Polestars and their customers information. However, there can be no assurance that such systems and measures will not be compromised as a result of intentional misconduct, including by employees, contractors or vendors, as well as by software bugs, human error or technical malfunctions.
Furthermore, hackers may in the future attempt to gain unauthorized access to, modify, alter and use Polestars vehicles, products, digital sales tools and systems to (i) gain control of, (ii) change the functionality, user interface and performance characteristics of or (iii) gain access to data stored in or generated by, Polestars vehicles, products, digital sales tools and systems. Advances in technology, an increased level of sophistication and diversity of Polestars products, digital sales tools and services, an increased level of expertise of hackers and new discoveries in the field of cryptography could lead to a compromise or breach of the measures that Polestar
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or its service providers uses. Polestar and its service providers systems have in the past and may in the future be affected by security incidents. Polestars systems are also vulnerable to damage or interruption from, among other things, physical theft, fire, terrorist attacks, natural disasters, power loss, war, telecommunications failures, computer viruses, computer denial or degradation of service attacks, ransomware, social engineering schemes, domain name spoofing, insider theft or misuse or other attempts to harm its products and systems. Polestars and its service providers or vendors data centers could be subject to break-ins, sabotage and intentional acts of vandalism causing potential disruptions. Some of Polestars systems will not be fully redundant. Further, its disaster recovery planning is not yet fully developed and cannot account for all eventualities. Any problems at Polestars or its service providers or vendors data centers could result in lengthy interruptions in Polestars service. There can be no assurance that any security or other operational measures that Polestar or its service providers or vendors have implemented will be effective against any of the foregoing threats or issues.
If Polestar is unable to protect its products, digital sales tools and systems (and the information stored on such platforms) from unauthorized access, use, disclosure, disruption, modification, destruction or other breach, such problems or security breaches could have negative consequences for its business and future prospects, subjecting Polestar to substantial fines, penalties, damages and other liabilities under applicable laws and regulations, incurring substantial costs to respond to, investigate and remedy such incidents, reducing customer demand for Polestars products, harming its reputation and brand and compromising or leading to a loss of protection of its intellectual property or trade secrets. In addition, regardless of their veracity, reports of unauthorized access to Polestars vehicles, systems or data, as well as other factors that may result in the perception that its vehicles, systems or data are capable of being hacked, could negatively affect Polestars brand. In addition, some members of the U.S. federal government, including certain members of Congress and the National Highway Traffic Safety Administration (NHTSA), have recently focused attention on automotive cybersecurity issues and may in the future propose or implement regulations specific to automotive cybersecurity. In addition, the United Nations Economic Commission for Europe has introduced new regulations governing connected vehicle cybersecurity, which became effective in January 2021 and are expected to apply in the European Union to all new vehicle types beginning in July 2022 and to all new vehicles produced from July 2024. Such regulations are also in effect, or expected to come into effect, in certain other international jurisdictions. These and other regulations could adversely affect Polestars business in Europe and other markets, and if such regulations or other future regulations are inconsistent with Polestars approach to automotive cybersecurity, Polestar would be required to modify its systems to comply with such regulations, which would impose additional costs and delays and could expose Polestar to potential liability to the extent its automotive cybersecurity systems and practices are inconsistent with such regulation.
In addition, Polestars vehicles depend on the ability of software and hardware to store, retrieve, process and manage immense amounts of data. Polestars software and hardware, including any over-the-air or other updates, may contain, errors, bugs, design defects or vulnerabilities, and its systems may be subject to technical limitations that may compromise its ability to meet its objectives. Some errors, bugs or vulnerabilities may be inherently difficult to detect and may only be discovered after code has been released for external or internal use. Although Polestar will attempt to remedy any issues it observes in its vehicles as effectively and rapidly as possible, such efforts may not be timely, may hamper production or may not be to the satisfaction of its customers. Additionally, if Polestar is able to deploy updates to the software addressing any issues, but its over-the-air update procedures fail to properly update the software, Polestars customers would then need to arrange for installing such updates to the software, and their software may be subject to deficiencies and vulnerabilities until they do so. Any compromise of Polestars intellectual property, proprietary information, systems or vehicles or inability to prevent or effectively remedy errors, bugs, vulnerabilities or defects in Polestars software and hardware may cause Polestar to suffer lengthy interruptions to its ability to operate its business and its customers ability to operate their vehicles, damage to Polestars reputation, loss of customers, loss of revenue, governmental fines, investigations or litigation or liability for damages, any of which could materially and adversely affect its business, results of operations, prospects and financial condition.
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Data privacy concerns are generally increasing, which could result in new legislation, in negative public perception of Polestars current data collection practices and certain of its services or technologies and/or in changing user behaviors that negatively affect Polestars business and product development plans.
In the course of its operations, Polestar collects, uses, stores, discloses, transfers and otherwise processes personal information from its customers, employees and third parties with whom it conducts business, including names, accounts, user IDs and passwords and payment or transaction related information. Additionally, Polestar uses its vehicles electronic systems to log information about vehicle use, such as charge time, battery usage, mileage and driving behavior, in order to aid it in vehicle diagnostics, repair and maintenance, as well as to help it customize and improve the driving experience.
Data privacy concerns of consumers are generally increasing, which could result in new legislation, in negative public perception of Polestars current data collection practices and certain of its services or technologies and/or in changing user behaviors that negatively affect Polestars business and product development plans.
Polestar is subject to evolving laws, regulations, standards, policies and contractual obligations related to data privacy, security and consumer protection, and any actual or perceived failure to comply with such obligations could harm Polestars reputation and brand, subject Polestar to significant fines and liability, or otherwise adversely affect its business.
Due to Polestars data collection practices, products, services and technologies, Polestar is subject to or affected by a number of federal, state, local and international laws and regulations, as well as contractual obligations and industry standards, that impose certain obligations and restrictions with respect to data privacy and security and govern its collection, storage, retention, protection, use, processing, transmission, sharing and disclosure of personal information including that of Polestars employees, customers and other third parties with whom Polestar conducts business. These laws, regulations and standards may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material and adverse impact on Polestars business, financial condition and results of operations.
The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. Polestar may not be able to monitor and react to all developments in a timely manner. The European Union adopted the General Data Protection Regulation (GDPR), which became effective on May 25, 2018, and California adopted the California Consumer Privacy Act of 2018 (CCPA), which became effective in January 2020. Both the GDPR and the CCPA impose additional obligations on companies regarding the handling of personal data and provides certain privacy rights to individual persons whose data is collected. Compliance with existing, proposed and recently enacted laws and regulations (including implementation of the privacy and process enhancements called for under the GDPR and CCPA) can be costly, and any failure to comply with these regulatory standards could subject Polestar to legal and reputational risks.
Specifically, the CCPA establishes a privacy framework for covered businesses, including an expansive definition of personal information and data privacy rights for California residents. The CCPA includes a framework with potentially severe statutory damages for violations and a private right of action for certain data breaches. The CCPA requires covered businesses to provide California residents with new privacy-related disclosures and new ways to opt-out of certain uses and disclosures of personal information. As Polestar expands its operations, the CCPA may increase its compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States. Additionally, effective in most respects starting on January 1, 2023, the California Privacy Rights Act (CPRA) will significantly modify the CCPA, including by expanding California residents rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA.
Other jurisdictions have begun to propose similar laws. Compliance with applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and Polestar may be required to put in place
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additional mechanisms to comply with such laws and regulations, which could cause Polestar to incur substantial costs or require Polestar to change its business practices, including its data practices, in a manner adverse to its business. In particular, certain emerging privacy laws are still subject to a high degree of uncertainty as to their interpretation and application. Failure to comply with applicable laws or regulations or to secure personal information could result in investigations, enforcement actions and other proceedings against Polestar, which could result in substantial fines, damages and other liability as well as damage to Polestars reputation and credibility, which could have a negative impact on revenues and profits.
There are also ongoing complex, uncertain, rapid development and changes of data privacy and security related laws in China. Polestar and its business partners in China could be affected by intervention by the Chinese government relating to, for example, information-sharing and cybersecurity matters. The risk of such interventions could be heightened in connection with a listing of shares of Polestar or any of its business partners, and could result in prohibitions of the sale and/or marketing of certain products. For example, on July 10, 2021, the Cybersecurity Review Office (CRO) promulgated a draft Cybersecurity Review Measure (Review Measure). If the Review Measure enters into force with the current wording, it will require data processors in China who hold more than one million users personal information and plan to list on a stock exchange in a foreign country to apply for cybersecurity review. Polestar has not exceeded this threshold as of the date of this proxy statement/prospectus. However, under the proposed Review Measure, the CRO could also initiate cybersecurity review under certain situations, for example, if the CRO believes a network product or service, data processing activity or stock exchange listing activity outside of China impacts or might impact Chinese national security. Furthermore, the CRO promulgated another draft of Data Cross-border Security Assessment Measure (Assessment Measure) on October 29, 2021. As of the date of this proxy statement/prospectus, the Assessment Measure is subject to further comments from the public and has not come into force yet. If the Assessment Measure is adopted eventually with the proposed requirements, data processors in China who (i) transfer important data outside of China, (ii) process personal information of 1 million individuals or (iii) provide more than 100,000 individuals personal information or more than 10,000 individuals sensitive information outside of China would be required to submit a cross-border security assessment at provincial CRO for review. As of the date of this proxy statement/prospectus, no final proposal has been presented and Polestar has not been able to apply for a cybersecurity review. If the Review Measure would become effective and if Polestar would be subject to such review and be found to be non-compliant with applicable data protection laws, Polestar may face administrative fines up to CNY 10 million. Additionally, significant restrictions may be imposed on Polestars operation in China, or relevant Chinese licenses may be completely or partially revoked. Also, other Chinese regulatory agencies might examine Polestar with regulatory scrutiny and enact sanctions. Finally, Polestar may suffer significant public opinion damage, and there is a risk that its reputation may be materially harmed. Any of these events could have a material and adverse effect on Polestars results of operation and financial position as well as on its possibilities to carry out business in China.
Polestar posts public privacy policies on its websites and provides privacy notices to the categories of persons whose personal information it collects, processes, uses or discloses. Although Polestar endeavors to comply with its published policies and other documentation, Polestar may at times fail to do so or may be perceived to have failed to do so. Moreover, despite its efforts, Polestar may not be successful in achieving compliance if its employees, contractors, service providers, vendors or other third parties fail to comply with its published policies and documentation. Such failures could carry similar consequences or subject Polestar to potential local, state and federal action if they are found to be deceptive, unfair or misrepresentative of Polestars actual practices. Claims that Polestar has violated individuals privacy rights or failed to comply with data protection laws or applicable privacy notices could, even if Polestar is not found liable, be expensive and time-consuming to defend and could result in adverse publicity that could harm its business.
Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities and other third parties of security breaches involving certain types of data. Such laws may be inconsistent or may change or additional laws may be adopted. In addition, Polestars agreements with certain customers may require it to notify them in the event of a security breach. Such mandatory disclosures are costly, could lead to negative
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publicity, penalties or fines, litigation and Polestars customers losing confidence in the effectiveness of its security measures, and could require it to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security breach. Any of the foregoing could materially and adversely affect Polestars business, prospects, results of operations and financial condition.
Risks Related to Polestars Employees and Human Resources
Polestars ability to effectively manage its growth relies on the performance of highly skilled personnel, including its Chief Executive Officer Thomas Ingenlath, its senior management team and other key employees, and Polestars ability to recruit and retain key employees. The loss of key personnel or an inability to attract, retain and motivate qualified personnel may impair Polestars ability to expand its business.
Polestars success is substantially dependent upon the continued service and performance of its senior management team and key personnel with digital, technical and automotive expertise. Although Polestar anticipates that its management and key personnel will remain in place following the Business Combination, it is possible that Polestar could lose some key personnel. For example, Polestar is highly dependent on the services of Thomas Ingenlath, its Chief Executive Officer. Mr. Ingenlath has a significant influence on and is a driver of Polestars business plan and business, design and technology development. If Mr. Ingenlath were to discontinue his service to Polestar, Polestar would be significantly disadvantaged. The replacement of any members of Polestars senior management team or other key personnel likely would involve significant time and costs and may significantly delay or prevent the achievement of Polestars business objectives. Polestars future success also depends, in part, on its ability to continue to attract, integrate and retain highly skilled personnel. Competition for highly skilled personnel is frequently intense. As with any company, there can be no guarantee that Polestar will be able to attract such individuals or that the presence of such individuals will necessarily translate into Polestars profitability. Because Polestar operates in a newly emerging industry, there may also be limited personnel available with relevant business experience, and such individuals may be subject to non-competition and other agreements that restrict their ability to work for Polestar. Polestars inability to attract and retain key personnel may materially and adversely affect Polestars business operations. Any failure by Polestars management to effectively anticipate, implement and manage the changes required to sustain Polestars growth would have a material and adverse effect on its business, financial condition and results of operations.
Polestars manufacturing partners will need to hire and train a significant number of employees to engage in full-scale operational and commercial operations, and Polestars business could be adversely affected by labor and union activities.
Polestars manufacturing partners will need to hire and train a significant number of employees to engage in full-scale operational and commercial operations. There are various risks and challenges associated with hiring, training and managing a large workforce. If Polestars manufacturing partners are unsuccessful in hiring and training a workforce in a timely and cost-effective manner, Polestars business, financial condition and results of operations could be adversely affected.
Furthermore, it is common throughout the automobile industry generally for many employees at automobile companies to belong to a union, which can result in higher employee costs and increased risk of work stoppages. Moreover, regulations in some jurisdictions outside of the U.S. mandate employee participation in industrial collective bargaining agreements and work councils with certain consultation rights with respect to the relevant companies operations. Approximately 40% of Polestars workforce is covered by collective bargaining agreements in Austria, Finland, the Netherlands and Sweden. Labor unions or labor organizations could also seek to organize some or all of Polestars non-unionized workforce. Future negotiations with the union or other certified bargaining representatives could divert management attention and disrupt operations, which may result in increased operating expenses and lower net income. Additionally, if Polestar is unable to reach labor agreements with any current or future unionized work groups, it may be subject to work interruptions or stoppages, which may adversely affect its ability to conduct its operations. Moreover, future agreements with
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unionized and non-unionized employees may be on terms that are not as attractive as Polestars current agreements or comparable to agreements entered into by Polestars competitors. Furthermore, Polestar may be directly or indirectly dependent upon companies, such as parts suppliers and trucking and freight companies, with unionized work forces, and work stoppages or strikes organized by such unions could have a material adverse impact on Polestars business, financial condition or results of operations. If a work stoppage occurs, it could delay the manufacture and sale of Polestars products and have a material and adverse effect on its business, prospects, results of operations or financial condition.
Misconduct by Polestars employees and independent contractors during and before their employment with Polestar could expose Polestar to potentially significant legal liabilities, reputational harm and/or other damages to its business.
Many of Polestars employees play critical roles in ensuring the safety and reliability of its vehicles and/or its compliance with relevant laws and regulations. Certain of Polestars employees have access to sensitive information and/or proprietary technologies and know-how. While Polestar has adopted codes of conduct for all of its employees and implemented policies relating to intellectual property, confidentiality and the protection of company assets, Polestar cannot assure you that its employees will always abide by these codes, policies and procedures, nor that the precautions Polestar takes to detect and prevent employee misconduct will always be effective. If any of Polestars employees engages in any misconduct, illegal or suspicious activities, including but not limited to misappropriation or leakage of sensitive customer information or proprietary information, Polestar and such employees could be subject to legal claims and liabilities and Polestars reputation and business could be adversely affected as a result.
In addition, while Polestar has screening procedures during the recruitment process, Polestar cannot assure you that it will be able to uncover misconduct of job applicants that occurred before Polestar offered them employment, or that Polestar will not be affected by legal proceedings against its existing or former employees as a result of their actual or alleged misconduct. Any negative publicity surrounding such cases, especially in the event that any of Polestars employees is found to have committed any wrongdoing, could negatively affect Polestars reputation and may have an adverse impact on its business.
Furthermore, Polestar faces the risk that its employees and independent contractors may engage in other types of misconduct or other illegal activity, such as intentional, reckless or negligent conduct that violates production standards, workplace health and safety regulations, fraud, abuse or consumer protection laws, other similar non-U.S. laws or laws that require the true, complete and accurate reporting of financial information or data. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions Polestar takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting Polestar from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. In addition, Polestar is subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against Polestar and Polestar is not successful in defending itself or asserting its rights, those actions could have a significant impact on Polestars business, prospects, financial condition and results of operations, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of Polestars operations, any of which could adversely affect its business, prospects, financial condition and results of operations.
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Risks Related to Litigation and Regulation
Polestar is subject to evolving laws and regulations that could impose substantial costs, legal prohibitions or unfavorable changes upon its operations or products, and any failure to comply with these laws and regulations, including as they evolve, could result in litigation and substantially harm its business and results of operations.
Polestar is or will be subject to complex environmental, manufacturing, health and safety laws and regulations at numerous jurisdictional levels, including laws relating to the use, handling, storage, recycling, disposal and human exposure to hazardous materials and with respect to constructing, expanding and maintaining its facilities. For example, Polestar is subject to laws, regulations and regulatory agencies like EU Regulation 2018/858 in the EU, the EPA and NHTSA in the United States and the Provisions on the Administration of Investments in the Automotive Industry in China. The costs of compliance, including remediating contamination if any is found on Polestars properties and any changes to Polestars operations mandated by new or amended laws, may be significant. Polestar may also face unexpected delays in obtaining permits and approvals required by such laws in connection with the manufacturing and sale of its vehicles, which would hinder its ability to conduct its operations. Such costs and delays may adversely impact its business prospects and results of operations. Furthermore, any violations of these laws may result in litigation, substantial fines and penalties, remediation costs, third party damages or a suspension or cessation of Polestars operations.
In addition, motor vehicles are subject to substantial regulation under international, federal, state and local laws. Polestar has incurred, and expects to continue to incur, significant costs in complying with these regulations. Any failures to comply could result in litigation, significant expenses, delays or fines. Generally, vehicles must meet or exceed mandated motor vehicle safety standards to be certified under applicable regulations. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving certification. Any future vehicles will be subject to substantial regulation under federal, state and local laws and standards. These regulations include those promulgated by the EPA, NHTSA, other federal agencies, various state agencies and various state boards (including the California Air Resources Board), and compliance certification is required for each new model year and changes to the model within a model year. These laws and standards are subject to change from time to time, and Polestar could become subject to additional regulations in the future, which would increase the effort and expense of compliance. In addition, federal, state and local laws and industrial standards for electric vehicles are still developing, and Polestar faces risks associated with changes to these regulations, which could have an impact on the acceptance of its electric vehicles, and increased sensitivity by regulators to the needs of established automobile manufacturers with large employment bases, high fixed costs and business models based on the internal combustion engine, which could lead them to pass regulations that could reduce the compliance costs of such established manufacturers or mitigate the effects of government efforts to promote electric vehicles. Compliance with these regulations is challenging, burdensome, time consuming and expensive. If compliance results in litigation, delays or substantial expenses, Polestars business could be adversely affected.
Polestar is also subject to laws and regulations applicable to the supply, manufacture, import, sale and service of automobiles internationally, including in Europe, North America and Asia Pacific. Regulations such as standards relating to vehicle safety, fuel economy and emissions, among other things, often vary materially from country to country and compliance with such regulations will therefore require additional time, effort and expense to ensure regulatory compliance in those countries. This process may include official review and certification of Polestars vehicles by foreign regulatory agencies prior to market entry, as well as compliance with foreign reporting and recall management systems requirements. The costs of achieving international regulatory compliance or the failure to achieve international regulatory compliance could harm Polestars business, prospects, results of operations and financial condition.
Polestar may face regulatory limitations on its ability to sell vehicles directly, which requires Polestar to implement alternative consumer approaches through dealers or importers.
Polestars business model includes the direct sale of vehicles to retail consumers. The laws governing licensing of dealers and sales of motor vehicles vary from country to country and, within a country, from state to state, and
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the application of these local laws to Polestars operations can be difficult to predict. Certain jurisdictions require a dealer license to sell new motor vehicles within the country or state. Where required, Polestar anticipates that it can become a licensed dealer in certain countries.
In countries where Polestar is required to resort to dealers, other challenges may arise. In the United States, for example, some automobile dealers have brought a claim before the Illinois Motor Vehicle Review Board claiming that they have a right to sell Polestar vehicles because of their franchise with Volvo Cars and in accordance with the Illinois Motor Vehicle Franchise Act. Further, even in jurisdictions where Polestar believes applicable laws and regulations do not currently prohibit its direct sales model, legislatures may impose additional requirements. Because the laws vary from country to country, and within a country, from state to state, Polestars distribution model and its sales and service processes is continually monitored and adapted for compliance with the various jurisdictional requirements and may change from time to time. Regulatory compliance and likely challenges to the distribution model may add to the cost of Polestars business.
Polestar has undertaken, and in the future may choose to or be compelled to undertake, product recalls or to take other actions that could result in litigation and adversely affect its business, prospects, results of operations, reputation and financial condition.
As of the date of this proxy statement/prospectus, Polestar has issued 5 recalls of its vehicles. These recalls were due to (i) the mal-production of seatbelts which could result in the early activation of the locking feature used to tightly secure a child restraint system, (ii) the too high adjustment of headlamps which could result in excessive glare for oncoming traffic, (iii) a software error causing an internal reset in the Battery Energy Control Module, resulting in the control unit opening the high voltage connectors during driving (which caused two recalls) and (iv) a supplier design issue known as tin whiskers, which caused a short circuit inside the front and rear inverters. Product recalls in the future may result in litigation and adverse publicity and may damage Polestars reputation and adversely affect its business, prospects, results of operations and financial condition. In the future, Polestar may, voluntarily or involuntarily, initiate a recall if any of its electric vehicles or components (including its battery cells) prove to be defective or noncompliant with applicable federal motor vehicle safety standards. If a large number of vehicles are the subject of a recall or if needed replacement parts are not in adequate supply, Polestar may be unable to service and repair recalled vehicles for a significant period of time. These types of disruptions could jeopardize Polestars ability to fulfill existing contractual commitments or satisfy demand for its electric vehicles and could also result in the loss of business to its competitors. Such recalls, whether caused by systems or components engineered or manufactured by Polestar or its suppliers, would involve significant expense and diversion of managements attention and other resources, which could adversely affect Polestars brand image in its target market and its business, prospects, results of operations and financial condition.
Polestar may in the future be subject to legal proceedings, regulatory disputes and governmental inquiries that could cause it to incur significant expenses, divert its managements attention and materially harm its business, results of operations, cash flows and financial condition.
From time to time, Polestar may be subject to claims, lawsuits, government investigations and other proceedings involving product liability, consumer protection, competition and antitrust, intellectual property, privacy, securities, tax, labor and employment, health and safety, its direct distribution model, environmental claims, commercial disputes, corporate and other matters that could adversely affect its business, results of operations, cash flows and financial condition. In the ordinary course of business, Polestar has been the subject of complaints or litigation, including claims related to consumer complaints and intellectual property matters. Furthermore, for example, Polestar Singapore failed to hold an annual general meeting for approving the audited report and the annual return for lodgment in Accounting and Corporate Regulatory Authority (ACRA) in Singapore and will be subject to enforcement actions by ACRA.
Litigation and regulatory proceedings may be protracted and expensive, and the results are difficult to predict. Additionally, Polestars litigation costs could be significant, even if it achieves favorable outcomes. Adverse
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outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or require Polestar to modify, make temporarily unavailable or stop manufacturing or selling its vehicles in some or all markets, all of which could negatively affect its sales and revenue growth and adversely affect its business, prospects, results of operations, cash flows and financial condition.
The results of litigation, investigations, claims and regulatory proceedings cannot be predicted with certainty, and determining reserves for pending litigation and other legal and regulatory matters requires significant judgment. There can be no assurances that Polestars expectations will prove correct, and even if these matters are resolved in Polestars favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm Polestars business, results of operations, cash flows and financial condition. In addition, the threat or announcement of litigation or investigations by governmental authorities or other parties, irrespective of the merits of the underlying claims, may itself have an adverse impact on the trading price of ListCos securities.
Polestar may become subject to product liability claims, which could harm its financial condition and liquidity if it is not able to successfully defend or insure against such claims.
Polestar may become subject to product liability claims, which could harm its business, prospects, results of operations and financial condition. The automotive industry experiences significant product liability claims, and Polestar faces inherent risks of exposure to claims in the event its vehicles do not perform or are claimed not to perform as expected or malfunction, resulting in property damage, personal injury or death. Polestar also expects that, as is true for other automakers, Polestars vehicles will be involved in crashes resulting in death or personal injury, and even if not caused by the failure of its vehicles, Polestar may face product liability claims and adverse publicity in connection with such incidents. In addition, Polestar may face claims arising from or related to failures, claimed failures or misuse of new technologies that Polestar expects to offer, including ADAS/AD features and future upgrades in its vehicles. In addition, the battery packs that Polestar utilizes make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells (see Risks Related to Polestars Business and IndustryPolestars vehicles will make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.). Any such events or failures of Polestars vehicles, battery packs or warning systems could subject it to lawsuits, product recalls or redesign efforts, all of which would be time consuming and expensive.
A successful product liability claim against Polestar could require it to pay a substantial monetary award. Moreover, a product liability claim against Polestar or its competitors could generate substantial negative publicity about its vehicles and business and inhibit or prevent commercialization of its future vehicles, which would have material and adverse effects on its brand, business, prospects and results of operations. Polestars insurance coverage might not be sufficient to cover all potential product liability claims, and insurance coverage may not continue to be available to Polestar or, if available, may be at a significantly higher cost. Any lawsuit seeking significant monetary damages or other product liability claims may have a material and adverse effect on Polestars reputation, business and financial condition.
Polestars manufacturing partners may be exposed to delays, limitations and risks related to the environmental permits and other operating permits required to operate manufacturing facilities for its vehicles.
Operation of an automobile manufacturing facility requires land use and environmental permits and other operating permits from federal, state and local government entities. Polestar plans to expand its manufacturing capacities by entering into into additional agreements with its manufacturing partners over time to achieve a future target production capacity and will be required to apply for and secure various environmental, wastewater and land use permits and certificates of occupancy necessary for the commercial operation of such expanded and
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additional facilities and will also rely on its partners ability to apply for and secure various environmental, wastewater and land use permits and certificates of occupancy necessary for the commercial operation of such expanded and additional facilities. Delays, denials or restrictions on any of the applications for or assignment of the permits to operate Polestars manufacturing facilities could adversely affect its ability to execute on its business plans and objectives based on its current target production capacity or its future target production capacity.
Polestar is subject to various environmental, health and safety laws and regulations that could impose substantial costs on it and cause delays in expanding its production capabilities.
Polestars manufacturing partners operations are subject to federal, state and local environmental laws and regulations in different jurisdictions and will be subject to international environmental laws, including laws relating to the use, handling, storage, disposal of and human exposure to hazardous materials. Environmental, health and safety laws and regulations are complex, and Polestar has limited experience complying with them. Moreover, Polestar may be affected by future amendments to such laws or other new environmental, health and safety laws and regulations which may require it to change its operations, potentially resulting in a material and adverse effect on its business, prospects, results of operations and financial condition. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury, fines and penalties. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations could result in litigation and substantial fines and penalties, third-party damages, suspension of production or a cessation of operations.
Polestar is planning to introduce ADAS/AD technology, which is subject to uncertain and evolving regulations.
Polestar currently has and expects to introduce new ADAS/AD technologies into its vehicles over time. ADAS/AD technology is subject to considerable regulatory uncertainty as the law in different jurisdictions evolves to catch up with the rapidly evolving nature of the technology itself, all of which is beyond Polestars control. There is a variety of international, federal and state regulations that may apply to self-driving and driver-assisted vehicles, which include many existing vehicle standards that were not originally intended to apply to vehicles that may not have a driver. There are currently no federal U.S. regulations pertaining to the safety of self-driving vehicles; however, NHTSA has established recommended guidelines. Certain states have legal restrictions on self-driving vehicles, and many other states are considering them. In Europe, certain vehicle safety regulations apply to self-driving braking and steering systems, and certain treaties also restrict the legality of certain higher levels of self-driving vehicles. Self-driving laws and regulations are expected to continue to evolve in numerous jurisdictions in the U.S. and foreign countries, which increases the likelihood of a patchwork of complex or conflicting regulations that may delay products or restrict self-driving features and availability, which could adversely affect Polestars business. Polestars vehicles may not achieve the requisite level of autonomy that may be required in some countries or jurisdictions for certification and rollout to consumers or may not satisfy changing regulatory requirements which could require Polestar to redesign, modify or update its ADAS/AD hardware and related software systems. Any such requirements or limitations could impose significant expense or delays and could harm its competitive position, which could adversely affect Polestars business, prospects, results of operations and financial condition.
Polestar is subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and noncompliance with such laws can subject Polestar to administrative, civil and criminal penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect its business, results of operations, financial condition and reputation.
Polestar is subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions, and similar laws and regulations in various jurisdictions in which it conducts activities, including the U.S. Foreign Corrupt Practices Act (FCPA), the United Kingdom Bribery Act 2010 (Bribery Act) and other applicable
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anti-corruption laws and regulations. These applicable anti-corruption laws and regulations prohibit Polestar and its officers, directors, employees and relevant other persons acting on its behalf, from corruptly offering, promising, authorizing or providing anything of value to a foreign official for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. Similarly, the Bribery Act also requires companies to implement adequate procedures designed to ensure compliance with the provisions of the Bribery Act. A violation of these laws or regulations could adversely affect Polestars business, reputation, financial condition and results of operations.
Polestar has direct or indirect interactions with officials and employees of government agencies and state-owned affiliated entities in the ordinary course of business. It also has business collaborations with government agencies and state-owned affiliated entities. These interactions subject Polestar to an increasing level of compliance-related concerns. Polestar has implemented policies and procedures designed to ensure compliance by Polestar and its directors, officers, employees, representatives, consultants, agents and business partners with applicable anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations, including the FCPA and the Bribery Act. However, its policies and procedures may not be sufficient and its directors, officers, employees and relevant other persons acting on its behalf could engage in improper conduct for which Polestar may be held responsible.
Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject Polestar to whistleblower complaints, adverse media coverage, investigations and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect Polestars business, reputation, financial condition and results of operations.
The unavailability, reduction, elimination or the conditionality of certain government and economic programs could have a material and adverse effect on Polestars business, prospects, financial condition and results of operations.
Polestar has benefited from government subsidies, economic incentives and government policies that support the growth of electric vehicles. These government and economic programs are subject to certain limits as well as changes that are beyond Polestars control, and Polestar cannot assure you that future changes, if any, would be favorable to its business and could result in margin pressures. For example, if government regulations and economic programs have the effect of imposing electric vehicle production quotas on automobile manufacturers, the market for electric vehicles may become oversaturated. Further, any uncertainty or delay in collection of the government subsidies may also have an adverse impact on Polestars financial condition. Any of the foregoing could materially and adversely affect Polestars business, financial condition and results of operations.
Further, Polestar may not be able to obtain or agree on acceptable terms and conditions for all or a significant portion of the government grants, loans and other incentives for which it may apply. As a result, Polestars business and prospects may be adversely affected.
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Although the audit report included in this prospectus is prepared by auditors who are currently inspected fully by the United States Public Company Accounting Oversight Board (the PCAOB), there is no guarantee that future audit reports will be prepared by auditors that are completely inspected by the PCAOB and, as such, future investors may be deprived of such inspections, which could result in limitations or restrictions to the Post-Combination Companys access of the U.S. capital markets. Furthermore, trading in the Post-Combination Companys securities may be prohibited under the Holding Foreign Companies Accountable Act or the Accelerating Holding Foreign Companies Accountable Act if the SEC subsequently determines that the Post-Combination Companys audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as the Nasdaq, may determine to delist the Post-Combination Companys securities. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuers securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.
As an auditor of companies that are registered with the SEC and publicly traded in the United States and a firm registered with the PCAOB, Deloitte is required under the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. Although Polestar relies on its and its partners operations within China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese government authorities, Deloitte is currently inspected fully by the PCAOB.
Inspections of other auditors conducted by the PCAOB outside China have at times identified deficiencies in those auditors audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections of audit work undertaken in China prevents the PCAOB from regularly evaluating auditors audits and their quality control procedures. As a result, to the extent that any component of Deloittes work papers are or become located in China, such work papers will not be subject to inspection by the PCAOB. As a result, investors would be deprived of such PCAOB inspections, which could result in limitations or restrictions to the Post-Combination Companys access of the U.S. capital markets.
As part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular Chinas, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S. Congress which, if passed, would require the SEC to maintain a list of issuers for which PCAOB is not able to inspect or investigate the audit work performed by a foreign public accounting firm completely. The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (EQUITABLE) Act prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S. national securities exchanges such as the Nasdaq of issuers included on the SECs list for three consecutive years. It is unclear if this proposed legislation will be enacted. Furthermore, on May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act (the HFCA Act), which includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditors local jurisdiction. The U.S. House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was signed into law on December 18, 2020. On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. The Post-Combination Company will be required to comply with these rules if the SEC identifies it as having a non-inspection year (as defined in the interim final rules) under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA Act, including listing and trading prohibition requirements. Under the HFCA Act, the Post-Combination Companys securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if its auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could result in the Post-Combination Companys securities being delisted. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuers securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three. On September 22, 2021, the PCAOB adopted a final rule implementing the
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HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
There can be no assurance that the Post-Combination Company will be able to comply with requirements imposed by U.S. regulators. The market price of the Post-Combination Companys securities could be adversely affected as a result of anticipated negative impacts of these executive or legislative actions upon, as well as negative investor sentiment towards, companies reliant upon operations in China that are listed in the United States, regardless of whether these executive or legislative actions are implemented and regardless of the Post-Combination Companys actual operating performance.
Risks Related to Intellectual Property
Polestar may fail to adequately obtain, maintain, enforce and protect its intellectual property and licensing rights, and may not be able to prevent third parties from unauthorized use of its intellectual property and proprietary technology. If Polestar is unsuccessful in any of the foregoing, its competitive position could be harmed and it could be required to incur significant expenses to enforce its rights.
Polestars ability to compete effectively is dependent in part upon its ability to obtain, maintain, enforce and protect its intellectual property, proprietary technology and licensing rights, but it may not be able to prevent third parties from the unauthorized use of its intellectual property and proprietary technology, which could harm its business and competitive position. Polestar establishes and protects its intellectual property and proprietary technology through a combination of licensing agreements, nondisclosure and confidentiality agreements and other contractual provisions, as well as through patent, trademark, copyright and trade secret laws in the United States and other jurisdictions. Despite Polestars efforts to obtain and protect intellectual property rights, there can be no assurance that these protections will be available in all cases or will be adequate or timely to prevent Polestars competitors or other third parties from copying, reverse engineering or otherwise obtaining and using Polestars technology or products or seeking court declarations that they do not infringe, misappropriate or otherwise violate Polestars intellectual property. Failure to adequately obtain, maintain, enforce and protect Polestars intellectual property could result in its competitors offering identical or similar products, potentially resulting in the loss of Polestars competitive advantage and a decrease in its revenue, which would adversely affect its business, prospects, financial condition and results of operations.
The measures Polestar takes to obtain, maintain, protect and enforce its intellectual property, including preventing unauthorized use by third parties, may not be effective for various reasons, including the following:
| any patent application Polestar files may not result in the issuance of a patent; |
| Polestar may not be the first inventor of the subject matter to which it has filed a particular patent application, and/or it may not be the first party to file such a patent application; |
| the scope of Polestars issued patents may not be sufficient to protect its inventions and proprietary technology; |
| Polestars issued patents may be challenged by its competitors or other third parties and invalidated by courts or other tribunals; |
| patents have a finite term, and competitors and other third parties may offer identical or similar products after the expiration of Polestars patents that cover such products; |
| Polestars employees, contractors or business partners may breach their confidentiality, non-disclosure and non-use obligations; |
| competitors and other third parties may independently develop technologies that are the same or similar to Polestars; |
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| the costs associated with enforcing patents or other intellectual property rights, or confidentiality and invention assignment agreements may make enforcement impracticable; and |
| competitors and other third parties may circumvent or otherwise design around Polestars patents or other intellectual property. |
Patent, trademark, copyright and trade secret laws vary significantly throughout the world. The laws of some countries, including countries in which Polestars products are or will be sold, may not be as protective of intellectual property rights as those in the United States or Sweden, and mechanisms for obtaining and enforcing intellectual property rights may be ineffectual or inadequate. Therefore, Polestars intellectual property may not be as strong or as predictably obtained or enforced outside of the United States or Sweden. Further, policing the unauthorized use of Polestars intellectual property in some jurisdictions may be difficult or too expensive to be practical. In addition, third parties may seek to challenge, invalidate or circumvent Polestars patents, trademarks, copyrights, trade secrets or other intellectual property, or applications for any of the foregoing, which could permit Polestars competitors or other third parties to develop and commercialize products and technologies that are the same or similar to Polestars.
While Polestar has registered and applied for registration of trademarks in an effort to protect its brand and goodwill with customers, competitors or other third parties have in the past and may in the future oppose its trademark applications or otherwise challenge Polestars use of the trademarks and other brand names in which it has invested. Such oppositions and challenges can be expensive and may adversely affect Polestars ability to maintain the goodwill gained in connection with a particular trademark. In addition, Polestar may lose its trademark rights if it is unable to submit specimens or other evidence of use by the applicable deadline to perfect such trademark rights.
It is Polestars policy to enter into confidentiality and invention assignment agreements with its employees and contractors that have developed material intellectual property for Polestar, but these agreements may not be self-executing and may not otherwise adequately protect Polestars intellectual property, particularly with respect to conflicts of ownership relating to work product generated by the employees and contractors. Furthermore, Polestar cannot be certain that these agreements will not be breached and that third parties will not improperly gain access to its trade secrets, know-how and other proprietary technology. Third parties may also independently develop the same or substantially similar proprietary technology. Monitoring unauthorized use of Polestars intellectual property is difficult and costly, as are the steps Polestar has taken or will take to prevent misappropriation.
Polestar has acquired or licensed, and plans to further acquire licenses, patents and other intellectual property from third parties, including suppliers and service providers, and it may face claims that its use of this acquired or in-licensed technology infringes, misappropriates or otherwise violates the intellectual property rights of third parties. In such cases, Polestar will seek indemnification from its licensors or other applicable entities. However, Polestars rights to indemnification may be unavailable or insufficient to cover its costs and losses. Furthermore, disputes may arise with Polestars licensors or other applicable entities regarding the intellectual property subject to, and any of Polestars rights and obligations under, any license or other commercial agreement.
To prevent the unauthorized use of Polestars intellectual property, it may be necessary to prosecute actions for infringement, misappropriation or other violation of Polestars intellectual property against third parties. Any such action could result in significant costs and diversion of Polestars resources and managements attention, and there can be no assurances that Polestar will be successful in any such action, and may result in a loss of intellectual property rights. Furthermore, many of Polestars current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual property rights than Polestar currently does. Accordingly, despite its efforts, Polestar may not be able to prevent third parties from infringing, misappropriating or otherwise violating its intellectual property. Any of the foregoing could adversely affect Polestars business, prospects, financial condition and results of operations.
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Polestar uses other parties software and other intellectual property in its proprietary software, including open source software. Any inability to continuously use such software or other intellectual property in the future could have a material adverse impact Polestars business, financial condition, results of operations and prospects.
Polestar uses open source software in its products and anticipates using open source software in the future. Some open source software licenses require those who distribute open source software as part of their own software product to publicly disclose all or part of the source code to such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost, and Polestar may be subject to such terms. The terms of many open source licenses to which Polestar is subject have not been interpreted by U.S. or other courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on Polestars ability to provide or distribute its products or services. Any actual or claimed requirement to disclose Polestars proprietary source code or pay damages for breach of contract could harm Polestars business and could help third parties, including Polestars competitors, develop products and services that are similar to or better than Polestars. While Polestar monitors its use of open source software and tries to ensure that none is used in a manner that would require it to disclose its proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred. Additionally, Polestar could face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that it developed using such software, which could include its proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require Polestar to make its software source code freely available, purchase a costly license or cease offering the implicated products or services unless and until it can re-engineer them to avoid infringement, which may be a costly and time-consuming process, and Polestar may not be able to complete the re-engineering process successfully.
Additionally, the use of certain open source software can lead to greater risks than use of other parties commercial software, as open source licensors generally do not provide warranties or controls on the origin of software. There is typically no support available for open source software, and Polestar cannot ensure that the authors of such open source software will implement or push updates to address security risks or will not abandon further development and maintenance. Many of the risks associated with the use of open source software, such as the lack of warranties or assurances of title or performance, cannot be eliminated, and could, if not properly addressed, negatively affect Polestars business. Any of these risks could be difficult to eliminate or manage and, if not addressed, could have a material and adverse effect on Polestars business, financial condition and results of operations.
Polestar may become subject to claims of intellectual property infringement by third parties which, regardless of merit, could be time-consuming and costly and result in significant legal liability, and could negatively impact Polestars business, financial condition, results of operations and prospects.
Polestars competitors or other third parties may hold or obtain patents, copyrights, trademarks or other proprietary rights that could prevent, limit or interfere with Polestars ability to make, use, develop, sell or market Polestars products and services, which could make it more difficult for Polestar to operate. From time to time, the holders of such intellectual property rights may assert their rights and urge Polestar to take licenses and/or may bring suits alleging infringement or misappropriation of such rights, which could result in substantial costs, negative publicity and management attention, regardless of merit. While Polestar endeavors to obtain and protect the intellectual property rights that it expects will allow it to retain or advance its strategic initiatives, there can be no assurance that it will be able to adequately identify and protect the portions of intellectual property that are strategic to its business, or mitigate the risk of potential suits or other legal demands by its competitors. Accordingly, Polestar may consider entering into licensing agreements with respect to such rights, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur, and such licenses and associated litigation could significantly increase Polestars operating expenses. In addition, if Polestar is determined to have or believes there is a high likelihood that it has infringed upon a third partys intellectual property rights, it may be required to cease making, selling or incorporating certain
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components or intellectual property into its goods and services, to pay substantial damages and/or license royalties, to redesign its products and services and/or to establish and maintain alternative branding for its products and services. In the event that Polestar is required to take one or more such actions, its brand, business, financial condition and operating results may be harmed.
Risks Related to Tax
Unanticipated tax laws or any change in the application of existing tax laws to Polestar or Polestars customers may adversely impact its profitability and business.
Polestar operates and is subject to income and other taxes in Sweden, China, the United States and a growing number of other jurisdictions throughout the world. Existing domestic and foreign tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to Polestar (possibly with retroactive effect), which could require Polestar to change its transfer pricing policies and pay additional tax amounts, fines or penalties, surcharges and interest charges for past amounts due, the amounts and timing of which are difficult to discern. Existing tax laws, statutes, rules, regulations or ordinances could also be interpreted, changed, modified or applied adversely to Polestars customers (possibly with retroactive effect) and, if Polestars customers are required to pay additional surcharges, it could adversely affect demand for Polestars vehicles. Furthermore, changes to tax laws on income, sales, use, import/export, indirect or other tax laws, statutes, rules, regulations or ordinances on multinational corporations continue to be considered by countries in the European Union, the United States and other countries where Polestar currently operates or plans to operate. These contemplated tax initiatives, if finalized and adopted by countries, and the other tax issues described above may materially and adversely impact Polestars operating activities, effective tax rate, deferred tax assets, operating income and cash flows.
Transfers of ADSs or ADWs or the underlying Post-Combination Company securities may be subject to stamp duty or stamp duty reserve tax in the U.K., which would increase the cost of dealing in the Post-Combination Company securities.
Stamp duty or stamp duty reserve tax (SDRT) is imposed in the U.K. on certain transfers of chargeable
securities (which include securities in companies incorporated in the U.K.) at a rate of 0.5% of the consideration
paid for the transfer. Certain issues or transfers of securities to depositories or into clearance systems may be charged at a higher rate of 1.5%, unless an election has been made and maintained by the depository or clearance system under section 97A of the UK Finance Act 1986. We are not aware of any such election having been made.
Any stamp duty or SDRT payable on a transfer of the underlying Post-Combination Company securities to a depository or a clearance system will in practice generally be paid by the transferors or participants in the depository or a clearance system.
Transfers of ADSs and ADWs representing underlying Post-Combination Company securities that have been
deposited with the depository, which will take place in book entry form through the Depository Trust Company
(DTC), currently do not attract a charge to stamp duty or SDRT in the U.K., provided no written instrument of transfer is used to effect the transfer. If, following a change in law, transfers of Post-Combination Company AD securities effected through DTC attracted a charge to SDRT or stamp duty, then this would increase the cost of dealing in the Post-Combination Company AD securities.
A transfer of title in the underlying Post-Combination Company securities from the depository to another person and any subsequent transfers of title in the Post-Combination Company securities will generally attract a charge to stamp duty or SDRT at a rate of 0.5% of any consideration, which is generally payable by the transferee of the underlying Post-Combination Company securities. To the extent such transfer is effected by a written instrument of transfer, then any such duty must be paid (and the relevant instrument of transfer stamped by HM Revenue & Customs (HMRC)) before the transfer can be registered in the register of members of the Post-Combination Company. However, if those underlying Post-Combination Company securities are redeposited with the
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depository, the redeposit is expected to attract stamp duty or SDRT at the rate of 1.5% of the value of the Post-Combination Company securities, which will, in practice, be required to be paid by the transferor.
ListCo may be classified as a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. Holders of ADSs or ADWs.
A foreign corporation will be treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes if either (1) 75% or more of the gross income for a taxable year constitutes passive income for purposes of the PFIC rules, or (2) 50% or more of such foreign corporations assets in any taxable year is attributable to assets, including cash, that produce passive income or are held for the production of passive income. Passive income generally includes dividends, interest, royalties and certain rents. U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC, and the gain, if any, they derive from the sale or other disposition of their interests in the PFIC.
Based on the projected composition of ListCos income and assets, ListCo does not expect to be classified as a PFIC for the taxable year that includes the date of the Merger or, to the best of its current estimates, for subsequent taxable years. However, the application of the PFIC rules is subject to uncertainty as the composition of ListCos income and assets may change in the future and, therefore, no assurances can be provided that ListCo will not be a PFIC for the taxable year that includes the date of the Merger or in a future year. It is also possible that the IRS would not agree with ListCos conclusion, or that U.S. tax laws could change significantly. For additional information, see Material U.S. Federal Income Tax Considerations.
The IRS may not agree that ListCo is a foreign corporation for U.S. federal tax purposes.
A corporation generally is considered to be a tax resident for U.S. federal income tax purposes in the jurisdiction of its organization or incorporation. Accordingly, under the generally applicable U.S. federal income tax rules, ListCo, which is incorporated under the laws of the U.K., would be classified as a non-U.S. corporation (and, therefore, not a U.S. tax resident) for U.S. federal income tax purposes. Section 7874 of the Code provides an exception to this general rule under which a non-U.S. incorporated entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes. If ListCo were to be treated as a U.S. corporation for U.S. federal income tax purposes, it could be subject to substantial liability for additional U.S. income taxes, and the gross amount of any dividend payments to its non-U.S. holders could be subject to U.S. withholding tax (depending on the application of any income tax treaty that might apply to reduce the withholding tax). However, dividend payments would generally constitute qualified dividends and be subject to tax at the rates accorded to long-term capital gains. In addition, even if ListCo is not treated as a U.S. corporation, it may be subject to unfavorable treatment as a surrogate foreign corporation in the event that ownership attributable to former GGI stockholders exceeds a threshold amount. If it were determined that ListCo is treated as a surrogate foreign corporation for U.S. federal income tax purposes under Section 7874 of the Code and the Treasury regulations promulgated thereunder, dividends by ListCo would not qualify for qualified dividend income treatment, and U.S. affiliates of ListCo after the completion of the Merger could be subject to increased taxation under the inversion gain rules and the base erosion anti-abuse tax of Section 59A of the Code. Furthermore, the ability of the U.S. subsidiaries of ListCo to utilize certain U.S. tax attributes against income or gain recognized pursuant to certain transactions could be limited.
Parent does not currently expect ListCo to be treated as a U.S. corporation for U.S. federal income tax purposes or otherwise be subject to unfavorable treatment as a surrogate foreign corporation for U.S. federal income tax purposes. However, the rules for determining ownership under Section 7874 must be finally determined after completion of the Merger, by which time there could be adverse changes to the relevant facts and circumstances or adverse rule changes. In addition, the rules for determining ownership under Section 7874 are complex and unclear. For additional discussion of the U.S. federal income tax treatment of ListCo, see the section titled Material U.S. Federal Income Tax ConsiderationsU.S. Federal Income Tax Treatment of ListCo.
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There may be tax consequences of the Merger that may adversely affect holders of GGI Common Stock or GGI Warrants.
Although the matter is not free from doubt, the exchange of GGI Common Stock for Class A ADSs pursuant to the Merger should qualify as a tax-free exchange for U.S. federal income tax purposes. However, the closing of the Merger is not conditioned upon the receipt of an opinion of counsel regarding the U.S. federal income tax treatment of the Merger. To the extent the Merger does not so qualify, then a GGI stockholder that is a U.S. holder would generally recognize gain, if any, in an amount equal to the excess of (i) the fair market value of the Class A ADSs (and, if such U.S. holder is also surrendering GGI Warrants, any Class C ADSs (in the event that the Warrant Amendment Proposal is approved), or any ADWs (in the event that the Warrant Amendment Proposal is not approved)) received over (ii) such U.S. holders adjusted tax basis in such GGI Common Stock (and GGI Warrants, if any). For additional discussion of material U.S. federal income tax considerations of the Merger, see the section titled Material U.S. Federal Income Tax Considerations.
The IRS may take the position that Section 367(a) of the Code requires a U.S. holder to recognize gain (but not loss) pursuant to the Merger.
Section 367(a) of the Code generally requires a U.S. holder of stock or securities in a U.S. corporation to recognize gain (but not loss) when such stock or securities are exchanged for stock or securities of a non-U.S. corporation in an exchange that would otherwise qualify for nonrecognition treatment, unless certain conditions are met. It is not currently expected that Section 367(a) of the Code will apply with respect to the Merger. However, U.S. holders are cautioned that the potential application of Section 367(a) of the Code to the Merger is complex and depends on factors that cannot be determined until the closing of the Merger and the interpretation of legal authorities and facts relating to the Business Combination. U.S. holders should consult with their own tax advisors regarding the potential application of Section 367(a) of the Code in their particular situation. For additional discussion of material U.S. federal income tax considerations of the Merger, see the section titled Material U.S. Federal Income Tax Considerations.
Risks Related to Financing and Strategic Transactions
Polestar will require additional capital to support business growth, and this capital might not be available on commercially reasonable terms, or at all.
Polestar anticipates that it will need to raise additional funds through equity or debt financings. Polestars business is capital-intensive, and Polestar expects that the costs and expenses associated with its planned operations will continue to increase in the near term. Polestar does not expect to achieve positive cash flow from operations before 2024, if at all. Polestars plan to grow its business is dependent upon the timely availability of funds and further investment in development, component procurement, testing and the build-out of manufacturing capabilities. In addition, the fact that Polestar has a limited operating history means that it has limited historical data on the demand for its vehicles. As a result, Polestars future capital requirements are uncertain, and actual capital requirements may be greater than what it currently anticipates.
If Polestar raises additional funds through further issuances of equity or convertible debt securities, the Post-Combination Companys shareholders could suffer significant dilution and economic loss, and any new equity securities the Post-Combination Company issues could have rights, preferences and privileges superior to those of holders of Polestars current equity securities. Any debt financing in the future could involve additional restrictive covenants relating to the Post-Combination Companys capital raising activities and other financial and operational matters, which may make it more difficult for the Post-Combination Company to obtain additional capital and to pursue business opportunities, including potential acquisitions.
Polestar may not be able to obtain additional financing on terms favorable to it, if at all. Polestars ability to obtain such financing could be adversely affected by a number of factors, including general conditions in the global economy and in the global financial markets, including recent volatility and disruptions in the capital and
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credit markets, including as a result of the ongoing COVID-19 pandemic, or investor acceptance of its business model. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to Polestar. If Polestar is unable to obtain adequate financing or financing on terms satisfactory to it, when it requires it, Polestar will have to significantly reduce its spending, delay or cancel its planned activities or substantially change its corporate structure, and it might not have sufficient resources to conduct or support its business as projected, which would have a material and adverse effect on its results of operations, prospects and financial condition.
Polestars financial results may vary significantly from period to period due to fluctuations in its operating costs, product demand and other factors.
Polestar expects its period-to-period financial results to vary based on its operating costs and product demand, which it anticipates will fluctuate as it continues to design, develop and manufacture new vehicles, increase production capacity and establish or expand design, research and development, production, sales and service facilities. Polestars revenues from period to period may fluctuate as it identifies and investigates areas of demand, adjusts volumes and adds new product derivatives based on market demand and margin opportunities, develops and introduces new vehicles or introduces existing vehicles to new markets for the first time. In addition, automotive manufacturers typically experience significant seasonality, with comparatively low sales in the first quarter and comparatively high sales in the fourth quarter. Polestars period-to-period results of operations may also fluctuate because of other factors including labor availability and costs for hourly and management personnel; profitability of its vehicles, especially in new markets; changes in interest rates; impairment of long-lived assets; macroeconomic conditions, both internationally and locally; negative publicity relating to its vehicles; changes in consumer preferences and competitive conditions; or investment in expansion into new markets. As a result of these factors, Polestar believes that period-to-period comparisons of its financial results, especially in the short term, may have limited utility as an indicator of future performance. Significant variation in Polestars quarterly performance could significantly and adversely affect the trading price of the ADSs and ADWs.
Risks Related to GGI and the Business Combination
The GGI Initial Stockholders have agreed to vote in favor of the Business Combination Proposal, regardless of how the GGI Public Stockholders vote, and have agreed not to redeem their shares of GGI Common Stock in connection with the Business Combination.
Unlike many other blank check companies, whose initial stockholders agree to vote their common stock of the blank check company in accordance with the majority of the votes cast by holders of public stock in connection with an initial business combination, the GGI Initial Stockholders have agreed to vote any shares of GGI Common Stock owned by them in favor of the Business Combination Proposal pursuant to the GGI IPO Letter Agreement. In addition, pursuant to the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement, the GGI Initial Stockholders have agreed to vote their GGI Class F Common Stock in favor of the Business Combination Proposal and any other proposals for the Stockholder Special Meeting included in this proxy statement/prospectus, and against any alternative business combination. As a result, holders of approximately 38% of GGI Public Shares will need to vote in favor of the Business Combination Proposal for the Business Combination Proposal to be approved. Accordingly, it is more likely that the necessary stockholder approval will be received for the Business Combination Proposal than would be the case if the GGI Initial Stockholders agreed to vote any shares of GGI Common Stock owned by them in accordance with the majority of the votes cast by GGI Public Stockholders.
In addition, the GGI Initial Stockholders have agreed not to redeem their shares of GGI Common Stock in connection with the Business Combination. This may result in the satisfaction of the Minimum Cash Condition and the completion of the Business Combination that may not otherwise have been possible in the absence of such agreement.
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Because ListCo will become a publicly listed company by virtue of a merger as opposed to an underwritten initial public offering (which uses the services of one or more underwriters), less due diligence on Polestar may have been conducted as compared to an underwritten initial public offering.
ListCo will be a publicly listed company that will own Polestars business upon the completion of the Business Combination. The Business Combination differs from an underwritten initial public offering. In a traditional underwritten initial public offering, underwriters typically conduct a certain amount of due diligence on the company being taken public in order to establish a due diligence defense against liability claims under federal securities laws. Because ListCo will become a publicly listed company by virtue of a merger, an underwriter has not been engaged. However, the GGI Board and GGIs officers, as well as private investors, conducted due diligence on Polestar. This due diligence, however, may be different than the due diligence undertaken by an underwriter in a traditional initial public offering. The GGI Sponsor may have an inherent conflict of interest because its shares of GGI Common Stock and GGI Warrants will be worthless if a business combination is not completed prior to March 25, 2023. Therefore, there could be a heightened risk of an incorrect valuation of Polestars business, which could cause potential harm to investors.
The GGI Sponsor, certain members of the GGI Board and certain GGI officers have interests in the Business Combination that are different from or are in addition to (and which may conflict with) other stockholders in recommending approving the Business Combination Proposal, the Warrant Amendment Proposal and the other proposals described in this proxy statement/prospectus. Such conflicts of interests include that the GGI Sponsor and GGIs officers and directors will lose their entire investment in GGI if the Business Combination is not completed.
When considering the GGI Boards recommendation to vote in favor of approving the Business Combination Proposal, the Warrant Amendment Proposal and the other proposals described in this proxy statement/prospectus, GGIS stockholders and warrant holders should keep in mind that the GGI Sponsor and GGIs directors and officers have interests in such proposals that may be different from, or in addition to (and which may conflict with), the interests of GGI stockholders and warrant holders generally.
These interests include, among other things:
| the fact that the GGI Initial Stockholders have agreed not to redeem any Founder Shares or GGI Class A Common Stock held by them in connection with a stockholder vote to approve a proposed initial business combination; |
| the fact that the GGI Initial Stockholders have agreed to waive their rights to conversion price adjustments with respect to any Founder Shares they may hold in connection with the consummation of the Business Combination and therefore, the Founder Shares will convert on a one-for-one basis into Class A ADSs at the Closing; |
| the fact that the GGI Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if GGI fails to complete an initial business combination by March 25, 2023; |
| the fact that the GGI Sponsor paid an aggregate of $25,000 for 21,562,500 Founder Shares at approximately $0.001 per share, and, after giving effect to the cancellation of 1,562,500 Founder Shares on May 9, 2021, the remaining 20,000,000 Founder Shares will become worthless if GGI fails to complete an initial business combination by March 25, 2023. In particular, in exchange for serving on the GGI Board, GGIs independent directors, Mr. Bort, Ms. Marcellino and Ms. Tellem, each received 25,000 Founder Shares at their original purchase price of $0.001 per share from the GGI Sponsor. Because these Founder Shares will become worthless if GGI fails to complete an initial business combination by March 25, 2023, GGIs independent directors may have a conflict of interest in determining whether a particular business is an appropriate business with which to effectuate GGIs initial business combination; |
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| the fact that after giving effect to the cancellation of 1,562,500 Founder Shares on May 9, 2021 and the forfeiture of up to 1,540,835 shares of GGI Class F Common Stock pursuant to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, the remaining 18,459,165 Founder Shares that will be exchanged for Class A ADSs at the Closing will have a significantly higher value than their aggregate purchase price, which if unrestricted and freely tradable would be valued at approximately $185 million (however, given the restrictions on such shares, GGI believes such shares have a lesser value); |
| the fact that, given the differential in the purchase price that the GGI Sponsor paid for the Founder Shares as compared to the price of the GGI Public Units and the substantial number of Class A ADSs that the GGI Sponsor will receive upon exchange of the Founder Shares at the Closing, the GGI Sponsor and its affiliates may earn a positive rate of return on their investment even if the Class A ADSs trade below the price initially paid for the GGI Public Units in the GGI IPO and GGI Public Stockholders experience a negative rate of return following the completion of the Business Combination; |
| the fact that the GGI Sponsor paid an aggregate of approximately $18,000,000 for its 9,000,000 GGI Private Placement Warrants, and that such GGI Private Placement Warrants will expire worthless if an initial business combination is not consummated by March 25, 2023. The GGI Private Placement Warrants are identical to the GGI Public Warrants sold as part of the GGI Public Units except that, so long as they are held by the GGI Sponsor or its permitted transferees: (i) they will not be redeemable by GGI, except as described in the Existing Warrant Agreement; (ii) they (including the GGI Class A Common Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the GGI Sponsor until 30 days after the completion of an initial business combination; (iii) they may be exercised by the holders on a cashless basis; and (iv) they are subject to registration rights. For additional information regarding the GGI Private Placement Warrants and the GGI Public Warrants, please see the Existing Warrant Agreement, attached hereto as Annex C; |
| the fact that, in connection with the Business Combination, each GGI Private Placement Warrant will, in the event the Warrant Amendment Proposal is approved prior to the Effective Time, be converted into the right to receive one Class C-2 ADS, issued against the deposit of an underlying Post-Combination Company Class C-2 Share, which will be exercisable to acquire a Post-Combination Company Class A Share on substantially the same terms as the GGI Private Placement Warrants; |
| the fact that, in connection with the Business Combination, each GGI Private Placement Warrant will, in the event the Warrant Amendment Proposal is not approved prior to the Effective Time, be converted into the right to receive one ADW, issued against the deposit of an underlying Post-Combination Company Warrant, which will be exercisable to acquire a Post-Combination Company Class A Share on substantially the same terms as the GGI Private Placement Warrants; |
| the continued right of the GGI Sponsor to hold the Class A ADSs to be issued to the GGI Sponsor upon exercise of Class C-2 ADSs or ADWs following the Business Combination, subject to certain lock-up periods; |
| the fact that if the Trust Account is liquidated, including in the event GGI is unable to complete an initial business combination within the required time period, the GGI Sponsor has agreed to indemnify GGI to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which GGI has entered into an acquisition agreement or claims of any third party (other than the independent public accountants) for services rendered or products sold to GGI, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account; |
| the continued indemnification of the existing directors and officers of GGI and the continuation of the directors and officers liability insurance after the Business Combination; |
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| the fact that the GGI Sponsor and GGIs officers and directors will lose their entire investment in GGI and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by March 25, 2023, including the expected reimbursement at the closing of an initial business combination of approximately $615,000 of an aggregate of approximately $948,000 of expenses incurred by GGI Sponsor and its affiliates as of March 1, 2022; |
| the fact that the GGI Sponsor made available to GGI a loan of up to $4,000,000 pursuant to a promissory note, of which a net amount of $2,500,000 was advanced by the GGI Sponsor to GGI as of March 1, 2022, and that the note will mature on the earlier of March 11, 2023 and the date on which GGI consummates an initial business combination; |
| the fact that GGI has entered into the Sponsor Subscription Agreement, pursuant to which the GGI Sponsor has agreed to purchase approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs at a purchase price of $9.09 per share on the date of Closing, and the GGI Sponsor has the right to syndicate its commitment to acquire such Class A ADSs in advance of the Closing; |
| the fact that Guggenheim Securities, LLC, an affiliate of the GGI Sponsor and Andrew Rosenfield, is acting as a joint placement agent in connection with the Subscription Investments and will receive a portion of a transaction fee equal to 3% of the gross proceeds raised by the placement agents in connection with the Subscription Investments, and as a financial advisor to GGI for no additional fee; |
| the fact that the GGI Sponsor and GGIs officers and directors would beneficially own the following number of Class A ADSs at the Closing: |
Name of Person/Entity |
Number of Class A ADSs(1) | Value of Class A ADSs(2) | ||||||
Gores Guggenheim Sponsor LLC(3) |
19,350,374 | $ | 193,503,740 | |||||
GGP Sponsor Holdings LLC(3) |
19,350,374 | $ | 193,503,740 | |||||
Alec Gores(3) |
19,350,374 | $ | 193,503,740 | |||||
Andrew Rosenfield(3) |
19,350,374 | $ | 193,503,740 | |||||
Mark Stone(4) |
171,841 | $ | 1,718,410 | |||||
Andrew McBride |
20,892 | $ | 208,920 | |||||
Randall Bort |
25,000 | $ | 250,000 | |||||
Elizabeth Marcellino |
25,000 | $ | 250,000 | |||||
Nancy Tellem(5) |
40,670 | $ | 406,700 |
(1) | Does not reflect beneficial ownership of Class A ADSs subject to exercise of Post-Combination Company Class C Shares or Post-Combination Company Warrants, because such shares or warrants, as applicable, are not exercisable within 60 days of the date of this proxy statement/prospectus. |
(2) | Assumes a value of $10.00 per share, the deemed value of the GGI Common Stock in the Business Combination. |
(3) | Represents shares held by Gores Guggenheim Sponsor LLC which is jointly controlled indirectly by Mr. Gores and GGP Sponsor Holdings LLC. GGP Sponsor Holdings LLC is controlled by Mr. Rosenfield. Each of Mr. Gores and GGP Sponsor Holdings LLC may be deemed to beneficially own 19,350,374 Class A ADSs and ultimately exercises voting and dispositive power of the securities held by Gores Guggenheim Sponsor LLC. Voting and disposition decisions with respect to such securities are jointly made by Mr. Gores and GGP Sponsor Holdings LLC. Each of Mr. Gores, GGP Sponsor Holdings LLC and Mr. Rosenfield disclaim beneficial ownership of these securities except to the extent of any pecuniary interest therein. |
(4) | Reflects Class A ADSs to be purchased by Mark Stone and his immediate family as December PIPE Investors. |
(5) | Includes 15,670 Class A ADSs to be purchased by Nancy Tellem as a December PIPE Investor. |
| the fact that, pursuant to the Business Combination Agreement, the Post-Combination Company Board will include one independent director as reasonably determined by the GGI Sponsor and consented to by Parent. In addition, pursuant to the Post-Combination Articles, the Post-Combination Company Board will be subject to restrictions on its ability to convene a general meeting which proposes a resolution to remove an independent director, subject to certain conditions, and pursuant to the Shareholder Acknowledgement Agreement, Parent and the Parent Shareholders are subject to undertakings that restrict on their ability to vote in favor of the removal of independent directors on the |
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Post-Combination Company Board, and the GGI Sponsor will have third party beneficiary rights to enforce such undertakings; |
| the fact that the GGI Initial Stockholders have entered into the Registration Rights Agreement as Registration Rights Holders, which provides such Registration Rights Holders and their permitted transferees with registration rights in respect of certain Post-Combination Company securities, ADSs and ADWs at the Closing; |
| the fact that the GGI Initial Stockholders have agreed to vote any shares of GGI Common Stock owned by them in favor of the Business Combination Proposal; |
| the fact that GGI, Parent, ListCo and the GGI Initial Stockholders have entered into the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, pursuant to which the GGI Initial Stockholders have, among other things, agreed to (i) vote their GGI Class F Common Stock in favor of each of the proposals at the Special Meeting and referenced in this proxy statement/prospectus, and against any alternative business combination, (ii) waive all adjustments to the conversion ratio set forth in the Current GGI Certificate with respect to the GGI Class F Common Stock, (iii) be bound by certain transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants, and (iv) not to transfer any Class A ADSs issued pursuant to the Business Combination Agreement in respect of shares of GGI Class F Common Stock during the period beginning on the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein; and |
| the fact that GGI will reimburse the GGI Sponsor for the fees and expenses it incurs in connection with the Business Combination; provided, that such fees and expenses, together with all of GGIs other fees and expenses in connection with the Business Combination, are not in excess of $60 million in the aggregate. |
In the aggregate, the GGI Sponsor and its affiliates have approximately $218,000,000 at risk that depends upon the completion of a business combination. Specifically, $200,000,000 of such amount is the value of the GGI Sponsors and its affiliates GGI Class F Common Stock (assuming a value of $10.00 per share, the deemed value of the GGI Common Stock in the Business Combination), and $18,000,000 of such amount is the value of the GGI Private Placement Warrants held by the GGI Sponsor (based on the purchase price of $2.00 per GGI Private Placement Warrant). There are no fees contingent upon a business combination payable to the GGI Sponsors affiliates upon consummation of the Business Combination. The foregoing interests present a risk that the GGI Sponsor and its affiliates will benefit from the completion of a business combination, including in a manner that may not be aligned with GGI Public Stockholders. As such, the GGI Sponsor may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to GGI Public Stockholders rather than liquidate.
These interests may influence the GGI Board in making their recommendation that GGI stockholders vote in favor of the approval of the Business Combination Proposal and the other proposals to be voted on at the Stockholder Special Meeting, and their recommendation that the GGI warrant holders vote in favor of the proposals to be voted on at the Warrant Holder Meeting.
GGI Public Stockholders will experience dilution as a consequence of the issuance of Post-Combination Company securities, ADSs and ADWs as consideration in the Business Combination and may experience dilution from several additional sources in connection with and after the Business Combination. Having a minority share position may reduce the influence that GGI Public Stockholders have on the management of the Post-Combination Company.
The issuance of additional Post-Combination Company securities and AD securities in the Business Combination will dilute the equity interests of GGI stockholders and may adversely affect prevailing market prices for GGI Public Shares, GGI Public Warrants or the ADSs and ADWs. GGI Public Stockholders who do not redeem their
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GGI Public Shares may experience dilution from several additional sources to varying degrees in connection with and after the Business Combination, including in each of the following instances:
(1) Approximately 7.43 million Class A ADSs are expected to be issued in connection with the consummation of the Business Combination to the PIPE Investors pursuant to the PIPE Investment, at a price of $9.09 per share. In addition, pursuant to the December PIPE Subscription Agreements, the December PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of 14.3 million December PIPE Shares for an average purchase price of $9.54 per share in a private placement, for an aggregate amount of approximately $136.0 million. In addition, pursuant to the March PIPE Subscription Agreements, the March PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of 2.8 million March PIPE Shares for an average purchase price of $9.57 per share in a private placement, for an aggregate amount of approximately $27.2 million. Collectively, the approximately 24.5 million PIPE Shares represent approximately (a) 1.2%, 1.2%, 1.2% or 1.2% of the number of shares of Post-Combination Company Shares that will be outstanding following the Closing by virtue of their ownership of Class A ADSs, assuming the no redemption scenario, the illustrative redemption scenario, the contractual maximum redemption scenario and the charter redemption limitation scenario, respectively, and (b) 0.15% of the total voting power of the Post-Combination Company Shares that will be outstanding following the Closing by virtue of their ownership of Class A ADSs, in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios.
(2) Approximately 891,000 Class A ADSs are expected to be issued in connection with the consummation of the Business Combination to the GGI Sponsor pursuant to the Sponsor Subscription Investment, at a price of $9.09 per share. This represents approximately (a) 0.01% of the number of shares of Post-Combination Company Shares that will be outstanding following the Closing by virtue of their ownership of Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, and (b) 0.01% of the total voting power of the Post-Combination Company Shares that will be outstanding following the Closing by virtue of their ownership of Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios.
(3) Approximately 1.1 million Class A ADSs are expected to be issued in connection with the consummation of the Business Combination to Snita pursuant to the Volvo Cars PIPE Subscription Investment, at a price of $10.00 per share. This represents approximately (a) 0.1% of the number of shares of Post-Combination Company Shares that will be outstanding following the Closing by virtue of their ownership of Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, and (b) 0.01% of the total voting power of the Post-Combination Company Shares that will be outstanding following the Closing by virtue of their ownership of Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios.
(4) Approximately 58.9 million Post-Combination Company Preference Shares are expected to be issued in connection with the consummation of the Business Combination to Snita pursuant to the Volvo Cars Preference Subscription Investment, at a price of $10.00 per share, which are anticipated to convert into approximately 58.9 million Class A Shares at Closing. This represents approximately (a) 2.8%, 2.8%, 2.8% or 2.9% of the number of shares of Post-Combination Company Shares that will be outstanding following the Closing, assuming the no redemption scenario, the illustrative redemption scenario, the contractual maximum redemption scenario and the charter redemption limitation scenario, respectively, and (b) 0.35%of the total voting power of the Post-Combination Company Shares that will be outstanding following the Closing in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios.
(5) Up to 159,397,500, 159,022,103, 158,647,130 and 153,434,997 Post-Combination Company Shares may be issuable to Parent as consideration in the Business Combination in respect of Earn Out Shares assuming the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, respectively, of which approximately 15.2% will be Post-Combination Company Class A Shares and
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84.8% will be Post-Combination Company Class B Shares. Under the Business Combination Agreement, Parent will be entitled to receive Earn-Out Shares if the daily volume weighted average price (based on such trading day) of one share of Post-Combination Company Class A Share exceeds certain thresholds for a period of at least 20 days out of 30 consecutive trading days, as adjusted, at any time during the five-year period beginning on the 180th day following the closing of the Merger (the Common Share Price). The Earn Out Shares, which are not reflected in the shares represented in the no redemption scenario, the illustrative redemption scenario, the contractual maximum redemption scenario or the charter redemption limitation scenario described herein, will be issued as follows: (a) a one-time issuance of 20% of the Earn Out Class A Shares and 20% of the Earn Out Class B Shares if the Common Share Price is greater than $13.00; (b) a one-time issuance of 20% of the Earn Out Class A Shares and 20% of the Earn Out Class B Shares if the Common Share Price is greater than $15.50; (c) a one-time issuance of 20% of the Earn Out Class A Shares and 20% of the Earn Out Class B Shares if the Common Share Price is greater than $18.00; (d) a one-time issuance of 20% of the Earn Out Class A Shares and 20% of the Earn Out Class B Shares if the Common Share Price is greater than $20.50; and (e) a one-time issuance of 20% of the Earn Out Class A Shares and 20% of the Earn Out Class B Shares if the Common Share Price is greater than $23.00. Assuming each of the Common Share Price thresholds set forth in the prior sentence are achieved, the Earn Out Shares represent approximately (a) approximately 7% of the number of Post-Combination Company Shares that may be outstanding following the Closing in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, and (b) approximately 7.50%, 7.48%, 7.47% and 7.27% of the total fully-diluted voting power of the Post-Combination Company Shares immediately following the Closing, assuming the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, respectively. Neither GGI nor ListCo can predict whether or to what extent any or all of the Earn Out Shares will be issued.
(6) The GGI Warrants, comprised of 16,000,000 GGI Public Warrants (each of which (a) will be converted into a Class C-1 ADS following the Closing assuming the Warrant Amendment Proposal is approved or (b) will be converted into a Public ADW following the Closing assuming the Warrant Amendment Proposal is not approved) and 9,000,000 GGI Private Placement Warrants (each of which (i) will be converted into a Class C-2 ADS following the Closing assuming the Warrant Amendment Proposal is approved or (ii) will be converted into a PP ADW following the Closing assuming the Warrant Amendment Proposal is not approved). The GGI Public Warrants, which will not be redeemed in connection with the redemption by a GGI Public Stockholder of a GGI Public Share, and the Class C ADSs or ADWs into which the GGI Public Warrants convert in connection with the Business Combination will be exercisable at any time commencing on the later of 30 days after the completion of the Business Combination and March 25, 2022. The Post-Combination Company Class A Shares underlying the Class C ADSs and ADWs (into which the GGI Public Warrants will convert at Closing) represent approximately (a) 0.7%, 0.7%, 0.8% and 0.8% of the fully-diluted number of Post-Combination Company Shares immediately following the Closing, assuming the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, respectively, and (b) 0.09% of the total fully-diluted voting power of the Post-Combination Company Shares immediately following the Closing, in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. Although ListCo may redeem Post-Combination Company Public Warrants at $0.01 per warrant under certain circumstances, the 9,000,000 Post-Combination Company PP Warrants are not redeemable by ListCo so long as they are held by the GGI Sponsor or its permitted transferees. Otherwise, the Post-Combination Company PP Warrants have terms and provisions that are identical to those of the Post-Combination Company Public Warrants, including as to exercise price, exercisability and exercise period, except that the Post-Combination Company PP Warrants may be exercised for cash or on a cashless basis so long as they are held by the GGI Sponsor or its permitted transferees and are entitled to certain registration rights. If the Post-Combination Company PP Warrants are held by holders other than the GGI Sponsor or its permitted transferees, the Post-Combination Company PP Warrants will be redeemable by ListCo and exercisable by the holders on the same basis as the Post-Combination Company Public Warrants. The Post-Combination Company PP Warrants may not be transferred or sold by the GGI Sponsor (other than to its permitted transferees) until 30 days following the Closing. The Post-Combination Company Class A Shares underlying the Class C ADSs and ADWs (into which the GGI Private Placement Warrants will convert at Closing) represent approximately (a) 0.4% of the fully-
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diluted number of Post-Combination Company Shares immediately following the Closing, assuming each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, and (b) 0.05% of the total fully-diluted voting power of the Post-Combination Company Shares immediately following the Closing, assuming each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios.
(7) Pursuant to the Equity Plan, the Post-Combination Company will reserve 10,000,000 Class A ADSs, representing 0.5% of the number of outstanding Post-Combination Company Shares on a fully diluted basis (as of immediately following the Closing) in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. The granted awards, when vested and settled or exercisable, may result in the issuance of additional shares up to the amount of the share reserve under the Equity Plan. The Equity Plan provides that the number of Class A ADSs reserved for issuance thereunder will automatically increase annually on the first day of each calendar year beginning with the Evergreen Commencement Date in an amount equal to the lesser of (i) 0.5% of the aggregate number of Post-Combination Company Shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of Post-Combination Company Shares as determined by the Post-Combination Company Board. For additional information, please see Management of the Post-Combination Company.
(8) Pursuant to the Employee Stock Purchase Plan, the Post-Combination Company will reserve 2,000,000 Class A ADSs, representing 0.1% of the number of outstanding Post-Combination Company Shares on a fully diluted basis (as of immediately following the Closing) in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. The granted awards, when vested and settled or exercisable, may result in the issuance of additional shares up to the amount of the share reserve under the Employee Stock Purchase Plan. The Employee Stock Purchase Plan provides that the number of Class A ADSs reserved for issuance thereunder will automatically increase annually on the first day of each calendar year beginning with the Evergreen Commencement Date in an amount equal to the lesser of (i) 0.1% of the aggregate number of Post-Combination Company Shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of Post-Combination Company Shares as determined by the Post-Combination Company Board. For additional information, please see Management of the Post-Combination Company.
(9) The sources of dilution described above in clauses (5), (6), (7) and (8) of this risk factor are referred to as the Additional Dilution Sources in this proxy statement/prospectus. The sources of dilution described above in clauses (1), (2), (3) and (4), together with the Additional Dilution Sources, are referred to as the Cumulative Dilution Sources in this proxy statement/prospectus.
(10) Based on the assumptions regarding the Cumulative Dilution Sources set forth above, including the Additional Dilution Sources, GGI estimates that:
| in the no redemption scenario, GGI Public Stockholders ownership (including, with respect to voting percentages that assume the estimated maximum dilutive effect of the Additional Dilution Sources, holders of GGI Public Warrants that become holders of Post-Combination Company Class A Shares by virtue of exercise of their Post-Combination Company Warrants) of GGI would be reduced from 80% of the GGI Common Stock prior to the Business Combination to (i) 3.8% of the Post-Combination Company Shares (and 0.47% voting power of the Post-Combination Company Shares) following the Closing without giving effect to any dilution from the Additional Dilution Sources or (ii) 4.1% of the Post-Combination Company Shares (and 0.52% voting power of the Post-Combination Company Shares) following the Closing assuming the estimated maximum dilutive effect of the Additional Dilution Sources; |
| in the illustrative redemption scenario, GGI Public Stockholders ownership of GGI (including, with respect to voting percentages that assume the estimated maximum dilutive effect of the Additional Dilution Sources, holders of GGI Public Warrants that become holders of Post-Combination Company |
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Class A Shares by virtue of exercise of their Post-Combination Company Warrants) would be reduced from 80% of the GGI Common Stock prior to the Business Combination to (i) 3.5% of the Post-Combination Company Shares (and 0.44% voting power of the Post-Combination Company Shares) following the Closing without giving effect to any dilution from the Additional Dilution Sources or (ii) 3.9% of the Post-Combination Company Shares (and 0.50% voting power of the Post-Combination Company Shares) following the Closing assuming the estimated maximum dilutive effect of the Additional Dilution Sources; |
| in the contractual maximum redemption scenario, GGI Public Stockholders ownership of GGI (including, with respect to voting percentages that assume the estimated maximum dilutive effect of the Additional Dilution Sources, holders of GGI Public Warrants that become holders of Post- Combination Company Class A Shares by virtue of exercise of their Post-Combination Company Warrants) would be reduced from 80% of the GGI Common Stock prior to the Business Combination to (i) 3.3% of the Post-Combination Company Shares (and 0.41% voting power of the Post-Combination Company Shares) following the Closing without giving effect to any dilution from the Additional Dilution Sources or (ii) 3.7% of the Post-Combination Company Shares (and 0.47% voting power of the Post-Combination Company Shares) following the Closing assuming the estimated maximum dilutive effect of the Additional Dilution Sources; and |
| in the charter redemption limitation scenario, GGI Public Stockholders ownership of GGI (including, with respect to voting percentages that assume the estimated maximum dilutive effect of the Additional Dilution Sources, holders of GGI Public Warrants that become holders of Post-Combination Company Class A Shares by virtue of exercise of their Post-Combination Company Warrants) would be reduced from 80% of the GGI Common Stock prior to the Business Combination to (i) 0.02% of the Post-Combination Company Shares (and 0.00% voting power of the Post-Combination Company Shares) following the Closing without giving effect to any dilution from the Additional Dilution Sources or (ii) 0.7% of the Post-Combination Company Shares (and 0.09% voting power of the Post-Combination Company Shares) following the Closing assuming the estimated maximum dilutive effect of the Additional Dilution Sources. |
Additionally, the Post-Combination Company may determine, subject to the receipt of any stockholder or stock exchange approvals that may be required, to issue additional Post-Combination Company Shares or other equity securities of equal or senior rank in connection with privately negotiated transactions following the Closing.
The issuance of Post-Combination Company securities and AD securities in connection with the Business Combination, including through any of the foregoing, could have the following effects for GGI Public Stockholders who elect not to redeem their GGI Public Shares:
| their proportionate ownership interest in the Post-Combination Company will decrease; |
| the amount of cash available per share, including for payment of dividends in the future, may decrease; |
| the relative voting strength of each previously outstanding share of GGI Common Stock will be diminished; or |
| the market price of the ADSs or ADWs may decline. |
If a GGI Public Stockholder exercises its redemption rights, such exercise will not result in the loss of any warrants that it may hold. Neither GGI nor ListCo can predict the ultimate value of the Class C-1 ADSs or Public ADWs following the consummation of the Business Combination, but assuming that 100% or 80,000,000 GGI Public Shares were redeemed, the 16,000,000 retained outstanding GGI Public Warrants (that are convertible into Class C-1 ADSs or Public ADWs in connection with the Business Combination) would have an aggregate value of $[●], based on a price per GGI Public Warrant of $[●] on [●], 2022, the most recent practicable date prior to the date of this proxy statement/prospectus. In addition, on [●], 2022, the most recent practicable date prior to the date of this proxy statement/prospectus, the price per share of GGI Class A Common Stock closed at $[●]. If the
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shares of GGI Class A Common Stock (or Class A ADSs) are trading above the exercise price of $11.50 per warrant, the warrants are considered to be in the money and are therefore more likely to be exercised by the holders thereof (when they become exercisable). This in turn increases the risk to non-redeeming stockholders that the warrants will be exercised, which would result in dilution to the non-redeeming stockholders.
In each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios as described below, the residual equity value owned by non-redeeming GGI stockholders, taking into account the respective redemption amounts, is assumed to remain the deemed value of $10.00 per share as illustrated in the sensitivity table below. As a result of such redemption amounts and the assumed $10.00 per share value, the implied total equity value of the Post-Combination Company following the Closing (including the Subscription Investments and the Volvo Cars Preference Subscription Investment), assuming no dilution from any Additional Dilution Sources, would be (a) $21,253 million in the no redemption scenario, (b) $21,203 million in the illustrative redemption scenario, (c) $21,153 million in the contractual maximum redemption scenario and (d) $20,458 million in the charter redemption limitation scenario. Additionally, the sensitivity table below sets forth (x) the potential additional dilutive impact of each of the Additional Dilution Sources in each redemption scenario, as described further in Notes 9 through 15 below, and (y) the effective underwriting fee incurred in connection with the GGI IPO in each redemption scenario, as further described in Note 16 below.
Holders |
No Redemption Scenario(1) |
% of Total |
Illustrative Redemption Scenario(2) |
% of Total |
Contractual Maximum Redemption Scenario(3) |
% of Total |
Charter Redemption Limitation Scenario(4) |
% of Total |
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GGI Public Stockholders |
80,000,000 | 3.8 | % | 74,994,709 | 3.5 | % | 69,995,062 | 3.3 | % | 499,965 | 0.0 | % | ||||||||||||||||||||
GGI Initial Stockholder (including GGI Sponsor) (5) |
19,350,374 | 0.9 | % | 19,350,374 | 0.9 | % | 19,350,374 | 0.9 | % | 19,350,374 | 0.9 | % | ||||||||||||||||||||
PIPE Investors(6) |
24,532,236 | 1.1 | % | 24,532,236 | 1.2 | % | 24,532,236 | 1.2 | % | 24,532,236 | 1.2 | % | ||||||||||||||||||||
Parent Shareholders(7) |
2,001,417,390 | 94.2 | % | 2,001,417,390 | 94.4 | % | 2,001,417,390 | 94.6 | % | 2,001,417,390 | 97.8 | % | ||||||||||||||||||||
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Total Post-Combination Company Shares Outstanding(8) |
2,125,300,000 | 100 | % | 2,120,294,709 | 100 | % | 2,115,295,062 | 100 | % | 2,045,799,965 | 100 | % | ||||||||||||||||||||
Total Equity Value Post- Redemptions and PIPE Investments ($ in millions) |
$ | 21,253 | | $ | 21,203 | | $ | 21,153 | | $ | 20,458 | | ||||||||||||||||||||
Per Share Value |
$ | 10.00 | | $ | 10.00 | | $ | 10.00 | | $ | 10.00 | | ||||||||||||||||||||
Additional Dilution Sources |
No Redemption Scenario(1) |
% of Total(9) |
Illustrative Redemption Scenario(2) |
% of Total(9) |
Contractual Maximum Redemption Scenario(3) |
% of Total(9) |
Charter Redemption Limitation Scenario(4) |
% of Total(9) |
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Earn Out Shares(10) |
159,397,500 | 7.0 | % | 159,022,103 | 7.0 | % | 158,647,130 | 7.0 | % | 153,434,997 | 7.0 | % | ||||||||||||||||||||
Class C ADSs and Warrants Class C-1 ADSs or Public |
16,000,000 | 0.7 | % | 16,000,000 | 0.7 | % | 16,000,000 | 0.8 | % | 16,000,000 | 0.8 | % | ||||||||||||||||||||
Class C-2 ADSs or PP ADWs(12) |
9,000,000 | 0.4 | % | 9,000,000 | 0.4 | % | 9,000,000 | 0.4 | % | 9,000,000 | 0.4 | % | ||||||||||||||||||||
Equity Incentive Plans |
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Equity Plan(13) |
10,000,000 | 0.5 | % | 10,000,000 | 0.5 | % | 10,000,000 | 0.5 | % | 10,000,000 | 0.5 | % | ||||||||||||||||||||
Employee Stock Purchase Plan(14) |
2,000,000 | 0.1 | % | 2,000,000 | 0.1 | % | 2,000,000 | 0.1 | % | 2,000,000 | 0.1 | % | ||||||||||||||||||||
Marketing Consulting Agreement(15) |
500,000 | 0.0 | % | 500,000 | 0.0 | % | 500,000 | 0.0 | % | 500,000 | 0.0 | % | ||||||||||||||||||||
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Total Additional Dilution Sources(16) |
196,897,500 | 8.5 | % | 196,522,103 | 8.5 | % | 196,147,130 | 8.5 | % | 190,934,997 | 8.5 | % | ||||||||||||||||||||
Deferred Discount |
No Redemption Scenario(1) |
% of Total |
Illustrative Redemption Scenario(2) |
% of Total |
Contractual Maximum Redemption Scenario(3) |
% of Total |
Charter Redemption Limitation Scenario(4) |
% of Trust Account |
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Effective Deferred Discount(17) |
$28,000,000 | 3.5 | % | $28,000,000 | 3.7 | % | $28,000,000 | 4.0 | % | $28,000,000 | 560.0 | % |
(1) | This scenario assumes that no shares of GGI Class A Common Stock are redeemed by GGI Public Stockholders. The no redemption scenario excludes 159,397,500 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI Private Placement Warrant holders and 138,898 vested shares pursuant to the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
(2) | This scenario assumes that approximately 5,005,291 shares of GGI Class A Common Stock are redeemed by GGI Public Stockholders. The illustrative redemption scenario excludes 159,022,103 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares |
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issued to GGI Private Placement Warrant holders and 138,898 vested shares pursuant to the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
(3) | This scenario assumes that approximately 10,004,938 shares of GGI Class A Common Stock are redeemed by GGI Public Stockholders, which, based on the amount of $800,056,447 in the Trust Account as of December 31, 2021, represents the maximum amount of redemptions that would still enable GGI to have sufficient cash to satisfy the Minimum Cash Condition. The contractual maximum redemption scenario excludes 158,647,130 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI Private Placement Warrant holders and 138,898 vested shares pursuant to the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
(4) | This scenario assumes that approximately 79,500,035 shares of GGI Class A Common Stock are redeemed by GGI Public Stockholders, which, based on the amount of $800,056,447 in the Trust Account as of December 31, 2021, represents the maximum amount of redemptions that would still enable GGI to have sufficient cash to satisfy the provision in the Current GGI Certificate that prohibits GGI from redeeming shares of GGI Class A Common Stock in an amount that would result in GGIs failure to have net tangible assets equaling or exceeding $5,000,001. The charter redemption scenario excludes 153,434,997 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI Private Placement Warrant holders and 138,898 vested shares pursuant to the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
(5) | This row includes approximately 891,000 Post-Combination Company Class A Shares underlying the approximately 891,000 Class A ADSs to be purchased under the Sponsor Subscription Agreement. |
(6) | This row excludes approximately 891,000 Post-Combination Company Class A Shares underlying the approximately 891,000 Class A ADSs to be purchased under the Sponsor Subscription Agreements and excludes the approximately 1,117,390 Post-Combination Company Class A Shares underlying the approximately 1,117,390 Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement. |
(7) | This row excludes Earn Out Shares that are issuable to Parent Shareholders upon the realization of all of the benchmark share prices in the earn out and includes approximately 1,117,390 Post-Combination Company Class A Shares underlying the approximately 1,117,390 Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement. This row includes all Post-Combination Company Class A Shares in respect of outstanding convertible notes of Parent, all of which will be converted into Post-Combination Company Class A Shares at the Closing and 58,882,610 Post-Combination Company Class A Shares in respect of Post-Combination Company Preference Shares to be purchased by Snita upon and subject to the Closing under the Volvo Cars Preference Subscription Agreement, all of which are currently contemplated to be converted into Post-Combination Company Class A Shares at Closing. |
(8) | This row excludes Earn Out Shares and the Post-Combination Company Class A Shares underlying the Class C ADSs and ADWs into which GGI Warrants will convert, depending on whether the Warrant Amendment Proposal is approved. |
(9) | The Percentage of Total with respect to each Additional Dilution Source set forth below, including the Total Additional Dilution Sources, includes the full amount of shares issued with respect to the applicable Additional Dilution Source in both the numerator and denominator. For example, in the illustrative redemption scenario, the Percentage of Total with respect to the Employee Stock Purchase Plan would be calculated as follows: (a) 2,000,000 Class A ADSs issued pursuant to the Employee Stock Purchase Plan (reflecting 0.09% of the total number of shares of Post-Combination Company Shares outstanding as of immediately following the Closing); divided by (b) (i) 2,120,294,709 Post-Combination Company Shares (the number of shares outstanding prior to any issuance pursuant to the Employee Stock Purchase Plan) plus (ii) 2,000,000 Class A ADSs issued pursuant to the Employee Stock Purchase Plan. |
(10) | This row assumes 159,397,500, 159,022,103, 158,647,130 and 153,434,997 Earn Out Shares are issued, assuming the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, respectively, and assumes that no additional Post-Combination Company Shares are issued between the Closing and the realization of all of the benchmark share prices in the earn out. The total number of Earn Out Shares issuable to Parent Shareholders is partially determined by the number of issued and outstanding Post-Combination Company Shares as of immediately after the Effective Time. Total outstanding Percentages in this row represent (a) the foregoing Earn Out Share amounts, as applicable, divided by (b) (i) the amounts included in the row titled Total Post- Combination Company Shares Outstanding plus (ii) 159,397,500, 159,022,103, 158,647,130 or 153,434,997 Post-Combination Company Shares, assuming the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, respectively. Approximately 15.2% of the Earn Out Shares will be issued as Post-Combination Company Class A Shares, while the remaining 84.8% of the Earn Out Shares will be issued as Post-Combination Company Class B Shares. Each Post-Combination Company Class B Share will entitle the holder thereof to 10 votes per share. |
(11) | This row assumes exercise of Class C-1 ADSs or Public ADWs to purchase 16,000,000 Post-Combination Company Class A Shares (following the conversion of GGI Public Warrants into Class C-1 ADSs in the event the Warrant Amendment Proposal is approved or Public ADWs in the event the Warrant Amendment Proposal is not approved). Percentages in this row represent (a) the 16,000,000 Post- Combination Company Class A Shares underlying the Class C-1 ADSs or Public ADWs divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 16,000,000 Post-Combination Company Class A Shares underlying the Class C-1 ADSs or Public ADWs. |
(12) | This row assumes exercise of Class C-2 ADSs or PP ADWs to purchase 9,000,000 Post-Combination Company Class A Shares (following the conversion of GGI Private Placement Warrants into Class C-2 ADSs in the event the Warrant Amendment Proposal is approved or PP ADWs in the event the Warrant Amendment Proposal is not approved). Percentages in this row represent (a) the 9,000,000 Post-Combination Company Class A Shares underlying the Class C-2 ADSs or PP ADWs divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 9,000,000 Post-Combination Company Class A Shares underlying the Class C-2 ADSs or PP ADWs. |
(13) | This row assumes the issuance of all Class A ADSs reserved for issuance under the Equity Plan at Closing, which equals 10,000,000 Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation |
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scenarios. Percentages in this row represent (a) 10,000,000, divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 10,000,000 Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. The Equity Plan provides that the number of Class A ADSs reserved for issuance thereunder will automatically increase annually on the first day of each fiscal year beginning with the Evergreen Commencement Date in an amount equal to the lesser of (i) 0.5% of the aggregate number of Post-Combination Company Shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of Post-Combination Company Shares as determined by the Post-Combination Company Board. For additional information, please see Management of the Post-Combination CompanyCompensation Arrangements after the Business CombinationEquity Plan. |
(14) | This row assumes the issuance of all Class A ADSs reserved for issuance under the Employee Stock Purchase Plan at Closing, which equals 2,000,000 Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. Percentages in this row represent (a) 2,000,000, divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 2,000,000 Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. The Employee Stock Purchase Plan provides that the number of Class A ADSs reserved for issuance thereunder will automatically increase annually on the first day of each fiscal year beginning with the Evergreen Commencement Date in an amount equal to the lesser of (i) 0.1% of the aggregate number of Post-Combination Company Shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of Post-Combination Company Shares as determined by the Post-Combination Company Board. For additional information, please see Management of the Post-Combination CompanyCompensation Arrangements after the Business CombinationEmployee Stock Purchase Plan. |
(15) | Represents shares to be issued pursuant to a consulting marketing agreement following the Closing. 250,000 shares will vest and be issued on the date the Resale Registration Statement becomes effective. 250,000 shares will vest over a 24-month period with one eighth of these shares vesting each quarter. None of these vested shares will be issued prior to the effectiveness of the Resale Registration Statement. |
(16) | This row assumes the issuance of all Post-Combination Company Shares in connection with each of the Additional Dilution Sources, as described further in Notes 9 through 14 above, which equals 196,897,500 Post-Combination Company Shares in the no redemption scenario, 196,522,103 Post-Combination Company Shares in the illustrative redemption scenario, 196,147,130 Post-Combination Company Shares in the contractual maximum redemption scenario or 190,934,997 Post-Combination Company Shares in the charter redemption limitation scenario, in each case, following the Closing. Percentages in this row represent (a) the foregoing share amounts, as applicable, divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 196,897,500 Post-Combination Company Shares in the no redemption scenario, 196,522,103 Post-Combination Company Shares in the illustrative redemption scenario, 196,147,130 Post-Combination Company Shares in the contractual maximum redemption scenario or 190,934,997 Post-Combination Company Shares in the charter redemption limitation scenario. |
(17) | Reflects the Deferred Discount of $28,000,000 incurred in connection with the GGI IPO. |
The foregoing table is provided for illustrative purposes only and there can be no assurance that the AD securities will trade at the illustrative per share values set forth therein, regardless of the levels of redemption. Percentages may not sum due to rounding.
For more information, please see the sections titled The Business CombinationImpact of the Business Combination on Public Float and Unaudited Pro Forma Condensed Combined Financial Information.
The GGI Sponsor, GGI and its respective directors or officers or their affiliates may elect to purchase GGI Public Shares from GGI Public Stockholders, which may influence a vote on the Business Combination Proposal and the other proposals described in this proxy statement/prospectus and reduce the public float of GGI Public Shares (or, following the Closing, the ADSs and ADWs).
The GGI Sponsor, GGI and its respective directors or officers or their affiliates may purchase GGI Public Shares from GGI Public Stockholders in privately negotiated transactions or in the open market prior to or, following the completion of the Business Combination, the ADSs and ADWs, although they are under no obligation to do so. Such a purchase that is made prior to the Closing may include a contractual acknowledgement that such stockholder, although still the record holder of GGI Public Shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights in connection with the Business Combination. In the event that the GGI Sponsor, GGI or its directors or officers or their affiliates purchase shares in privately negotiated transactions from GGI Public Stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the Business Combination Proposal and thereby increase the likelihood of obtaining approval of the Business Combination
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Proposal or to satisfy the Minimum Cash Condition where such condition would otherwise not be met. This may result in the consummation of the Business Combination that may not otherwise have been possible.
In addition, if such purchases are made, the public float of GGI Public Shares (prior to the Closing) or ADSs and ADWs (following the Closing) and the number of beneficial holders of GGI securities (prior to the Closing) or the ADSs and ADWs (following the Closing) may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of such securities on the Nasdaq or another national securities exchange or reducing the liquidity of the trading market for such securities.
The consummation of the Business Combination is subject to a number of conditions and, if those conditions are not satisfied or waived, the Business Combination Agreement may be terminated in accordance with its terms and the Business Combination may not be completed.
The Business Combination Agreement is subject to a number of conditions which must be fulfilled in order to complete the Business Combination. These conditions to the Closing may not be fulfilled in a timely manner or at all, and, accordingly, the Business Combination may not be completed. The parties to the Business Combination Agreement may agree to waive, in whole or in part, one or more of the conditions to their obligations to complete the Business Combination, to the extent permitted by each parties organizational documents and applicable laws. However, GGI may not waive the condition that its stockholders approve the Business Combination. In addition, Parent and GGI can mutually decide to terminate the Business Combination Agreement at any time, before or after stockholder approval, or Parent or GGI may elect to terminate the Business Combination Agreement in certain other circumstances. See The Business Combination AgreementConditions to Closing of the Business Combination and The Business Combination AgreementTermination.
The exercise of GGIs directors and officers discretion in agreeing to changes or waivers in the terms of the Business Combination Agreement may result in a conflict of interest when determining whether such changes to the terms of the Business Combination Agreement or waivers of conditions are appropriate and in GGIs best interest.
In the period leading up to the Closing, other events may occur that, pursuant to the Business Combination Agreement, or related agreements, as applicable, would require GGI to agree to amend the Business Combination Agreement or the Related Agreements, to consent to certain actions or to waive rights that GGI is entitled to under those agreements. Such events could arise because of changes in the course of Polestars business, a request by Parent, Polestar, ListCo or Merger Sub to undertake actions that would otherwise be prohibited by the terms of the Business Combination Agreement or the occurrence of other events that would have a material and adverse effect on Polestars business or could entitle GGI to terminate the Business Combination Agreement. In any of such circumstances, it would be at GGIs discretion, acting through the GGI Board, to grant GGIs consent or waive those rights. The existence of financial and personal interests of one or more of the directors described elsewhere in this proxy statement/prospectus may result in a conflict of interest on the part of one or more of the directors between what they may believe is best for GGI and GGI stockholders and what they may believe is best for themselves or their affiliates in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, GGI does not believe there will be any changes or waivers that the GGI directors and officers would be likely to make after stockholder approval of the Business Combination Proposal has been obtained. While certain changes could be made without further GGI stockholder approval, if there is a change to the terms of the Business Combination Agreement that would have a material impact on GGIs stockholders, GGI may be required to circulate a new or amended proxy statement/prospectus or supplement thereto and resolicit the vote of its stockholders with respect to the Business Combination Proposal.
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The ability to successfully effect the Business Combination and to be successful thereafter will be dependent upon the efforts of key personnel, including Polestars senior management team and other key personnel, whom GGI expects to remain in the services of ListCo. The loss of key personnel could negatively impact the operations and profitability of ListCo and its financial condition could suffer as a result.
GGIs ability to successfully consummate the Business Combination is dependent upon the efforts of GGIs key personnel and the key personnel of Polestar. ListCos success depends to a significant degree upon the continued contributions of senior management of Polestar, certain of whom would be difficult to replace. The services of such personnel may not continue to be available to ListCo. Departure by certain of Polestars officers and other key employees could have a material and adverse effect on ListCos business, financial condition or operating results.
GGIs officers and directors will allocate their time to other businesses, thereby causing conflicts of interest in their determination as to how much time to devote to GGIs affairs. This conflict of interest could have a negative impact on GGIs ability to complete the Business Combination.
GGIs officers and directors are not required to, and will not, commit their full time to GGIs affairs, which may result in conflict of interest in allocating their time between GGIs operations and the Closing, on the one hand, and their other business endeavors. Each of GGIs officers and directors is engaged in other businesses for which they may be entitled to significant compensation. Furthermore, GGIs officers and directors are not obligated to contribute any specific number of hours per week to GGIs affairs and may also serve as officers or board members for other entities. If GGIs officers and directors other business affairs require them to devote time to such other affairs, this may have a negative impact on GGIs ability to complete the Business Combination.
Past performance by The Gores Group, including its management team, may not be indicative of future performance of an investment in GGI or ListCo.
Past performance by The Gores Group and by its management team, including with respect to Gores Holdings, Inc., a Delaware corporation (Gores Holdings I), Gores Holdings II, Inc., a Delaware corporation (Gores Holdings II), Gores Holdings III, Inc., a Delaware corporation (Gores Holdings III), Gores Holdings IV, Inc., a Delaware corporation (Gores Holdings IV), Gores Holdings V, Inc., a Delaware corporation (Gores Holdings V), Gores Holdings VI, Inc., a Delaware corporation (Gores Holdings VI), Gores Metropoulos, Inc., a Delaware corporation (Gores Metropoulos) Gores Metropoulos II, Inc., a Delaware corporation (Gores Metropoulos II) and Gores Holdings VIII, Inc. (Gores Holdings VIII), is not a guarantee of success with respect to the Business Combination. You should not rely on the historical record of The Gores Group or its management teams, Gores Holdings Is, Gores Holdings IIs, Gores Holdings IIIs, Gores Holdings IVs, Gores Holdings Vs, Gores Holdings VIs, Gores Metropoulos, Gores Metropoulos IIs or Gores Holdings VIIIs performance as indicative of the future performance of an investment in GGI or ListCo or the returns GGI or ListCo will, or is likely to, generate going forward.
GGI and Polestar expect to incur significant transaction costs in connection with the Business Combination, including the Deferred Discount of 3.5%, 3.7%, 4.0% and 560.0% of the value of the cash remaining in the Trust Account assuming the no redemption scenario, the illustrative redemption scenario, the contractual maximum redemption scenario and the charter redemption limitation scenario, respectively.
GGI and Polestar have both incurred and expect to incur significant, non-recurring costs in connection with consummating the Business Combination and operating as a public company following the consummation of the Business Combination. GGI and Polestar may also incur additional costs to retain key employees. Subject to certain limited exceptions and other than in respect of certain filing fees payable to governmental authorities in connection with the Business Combination, of which one-half will be paid by each of GGI and Polestar, all expenses incurred in connection with the Business Combination Agreement and the Business Combination, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs; provided, that (a) if the Business Combination
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Agreement is terminated in accordance with its terms, Parent is responsible for all unpaid transaction expenses of Parent, Parent, ListCo, Merger Sub and their respective subsidiaries, and GGI is responsible for all unpaid transaction expenses of GGI and the GGI Sponsor. If the Closing occurs, then ListCo is required to pay all unpaid transaction expenses of GGI and the GGI Sponsor up to the expense cap described below and all unpaid transaction expenses of Parent, Parent, ListCo, Merger Sub and their respective subsidiaries.
GGIs transaction expenses as a result of the Business Combination are currently estimated to be approximately $55 million, including the $28,000,000 Deferred Discount. Under the terms of the Business Combination Agreement, GGIs transaction expenses are capped at $60 million. The amount of the Deferred Discount will not be adjusted for any GGI Public Shares redeemed in connection with the Business Combination. The per-share amount GGI will distribute to GGI Public Stockholders who properly exercise their redemption rights will not be reduced by the Deferred Discount and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect its obligation to pay the Deferred Discount. As such, the Deferred Discount would represent approximately 3.5%, 3.7%, 4.0% and 560.0% of the value of the cash remaining in the Trust Account assuming the no redemption scenario, the illustrative redemption scenario, the contractual maximum redemption scenario and the charter redemption limitation scenario, respectively. In addition, any delays in satisfying the conditions to, or completing, the Business Combination could result in increased transaction expenses, which may materially and adversely affect the benefits that GGI expects to achieve from the Business Combination.
Stockholder litigation could prevent or delay the Closing or otherwise negatively impact GGIs and Polestars respective businesses, operating results and financial condition.
Stockholder lawsuits asserting class, derivative and/or individual claims for, among other things, violations of the federal securities laws and/or breaches of fiduciary duty are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on GGIs liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting the completion of the Business Combination, that injunction may delay or prevent the Business Combination from being completed, or from being completed within the expected timeframe, which may adversely affect GGIs and Polestars respective businesses, financial condition and results of operation.
GGI may not have sufficient funds to consummate the Business Combination.
As of December 31, 2021, GGI had approximately $302,504 of cash held outside the Trust Account to fund its working capital requirements. If GGI is required to seek additional capital, it would need to borrow funds from the GGI Sponsor, the GGI Initial Stockholders, the GGI management team or other third parties to operate or may be forced to liquidate. None of the GGI Sponsor, the GGI Initial Stockholders, the GGI management team or any of their affiliates is under any obligation to advance funds to GGI in such circumstances. Any such advances would be repaid only from funds held outside the Trust Account or from funds released to GGI upon completion of the Business Combination. GGI does not expect to seek loans from parties other than the GGI Sponsor or an affiliate of the GGI Sponsor as it does not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Trust Account. If GGI is unable to obtain these loans, GGI may be unable to complete the Business Combination.
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GGI has no operating history and is subject to a mandatory liquidation and subsequent dissolution requirement. As such, there is a risk that GGI will be unable to continue as a going concern if GGI does not consummate an initial business combination by March 25, 2023. Unless GGI amends the Current GGI Certificate and amends certain other agreements into which it has entered to extend the life of GGI, if GGI is unable to effect an initial business combination by March 25, 2023, it will be forced to liquidate and the GGI Warrants will expire worthless.
GGI is a blank check company, and as it has no operating history and is subject to a mandatory liquidation and subsequent dissolution requirement, there is a risk that GGI will be unable to continue as a going concern if it does not consummate an initial business combination by March 25, 2023. Unless GGI amends the Current GGI Certificate to extend the life of GGI and certain other agreements into which it has entered, if GGI does not complete an initial business combination by March 25, 2023, GGI will: (i) cease operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the GGI Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to GGI to fund Regulatory Withdrawals and/or to pay its franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding shares of GGI Common Stock, which redemption will completely extinguish GGI Public Stockholders rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of GGIs remaining stockholders and the GGI Board, dissolve and liquidate, subject in each case to its obligations under the DGCL to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the GGI Warrants, which will expire worthless if GGI fails to complete an initial business combination by March 25, 2023. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than $10.00 per share.
If, before distributing the proceeds in the Trust Account to GGI Public Stockholders, GGI files a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against GGI that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of GGI Public Stockholders and the per-share amount that would otherwise be received by GGI Public Stockholders in connection with its liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to GGI Public Stockholders, GGI files a bankruptcy petition or an involuntary bankruptcy petition is filed against them that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in GGIs bankruptcy estate and subject to the claims of third parties with priority over the claims of GGIs stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by GGIs stockholders in connection with its liquidation may be reduced.
GGI Stockholders will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate its investment, therefore, a GGI Public Stockholder may be forced to redeem or sell its GGI Public Shares or GGI Warrants, potentially at a loss.
GGI Public Stockholders will be entitled to receive funds from the Trust Account only upon the earlier to occur of: (i) the completion of the Business Combination, and then only in connection with those shares of the GGI Public Shares that such stockholder has properly elected to redeem, subject to the limitations described herein, and (ii) the redemption of the GGI Public Shares if GGI is unable to complete a business combination by March 25, 2023, subject to applicable law and as further described herein. In addition, if GGI plans to redeem GGI Public Shares because it is unable to complete a business combination by March 25, 2023, for any reason, compliance with Delaware law may require that GGI submit a plan of dissolution to its then-existing stockholders for approval prior to the distribution of the proceeds held in the Trust Account. In that case, GGI Public Stockholders may be forced to wait beyond March 25, 2023 before they receive funds from the Trust
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Account. In no other circumstances will GGI Public Stockholders have any right or interest of any kind in the Trust Account. Accordingly, to liquidate your investment, you may be forced to sell your GGI Public Shares or GGI Warrants, potentially at a loss.
The exercise price for GGI Public Warrants, as well as the Class C-1 ADSs or ADWs into which they will convert in connection with the Business Combination, is higher than in many similar blank check company offerings in the past, and, accordingly, the GGI Public Warrants, Class C-1 ADSs and ADWs are more likely to expire worthless.
The exercise price of GGI Public Warrants, as well as the Class C-1 ADSs or ADWs into which they will convert in connection with the Business Combination, is higher than many similar blank check companies in the past. Historically, with regard to units offered by blank check companies, the exercise price of a public warrant was generally a fraction of the purchase price of the units in the initial public offering. The exercise price for GGI Public Warrants is, and the exercise price for the Post-Combination Company Class C-1 Shares underlying Class C-1 ADSs or Post-Combination Company Warrants underlying ADWs will be $11.50 per share, subject to adjustment as provided herein. As a result, the GGI Public Warrants, Class C-1 ADSs and ADWs are less likely to ever be in the money and more likely to expire worthless.
If GGI Warrant holders fail to approve the Warrant Amendment Proposal, GGI and ListCo may be subject to additional expenses incurred in connection with the consummation of the Business Combination.
GGI is seeking the vote of holders of GGI Public Warrants to approve the Class C Warrant Amendment, which will amend the Existing Warrant Agreement to provide that, at the Effective Time, each GGI Public Warrant will convert into one Class C-1 ADS and each Private Placement Warrant will convert into one Class C-2 ADS. Pursuant to the Existing Warrant Agreement, approval of the Warrant Amendment Proposal requires the consent of a majority of the GGI Public Warrants issued and outstanding as of the record date. The Warrant Amendment Proposal is conditioned upon the approval of the Business Combination Proposal. In the event that GGI Warrant holders fail to approve the Warrant Amendment Proposal, ListCo may be subject to additional expenses. In particular, if the Warrant Amendment Proposal is not approved prior to the Effective Time, then each GGI Public Warrant and each Private Placement Warrant will convert into the right to receive one Public ADW or PP ADW, respectively, in which case the Post-Combination Company will issue corresponding Post-Combination Company Warrants, each of which represents the right to acquire one Post-Combination Company Class A Share and which will be deposited with the depositary. The issue of any Post-Combination Company Warrants may be regarded as a taxable disposal of an asset by ListCo for UK corporation tax purposes. There is a risk that the value of the consideration received (or deemed to be received) by ListCo in respect of the issue of the Post-Combination Company Warrants for these purposes may be treated as equal to either (i) the value of the GGI Public Warrants and the GGI Private Placement Warrants at the Effective Time, or (ii) the market value of the Post-Combination Company Warrants as at the time that they are issued. Neither GGI nor ListCo can predict the ultimate value of the GGI Public Warrants, the GGI Private Placement Warrants or any Post-Combination Company Warrants at or following the Effective Time, but based on a price per GGI Public Warrant of $[●] on [●], 2022, the most recent practicable date prior to the date of this proxy statement/prospectus, the 16,000,000 outstanding GGI Public Warrants and the 9,000,000 outstanding GGI Private Placement Warrants would have an aggregate value of approximately $[●]. If such amount was taken as the chargeable consideration received (or deemed to be received) by ListCo in respect of the issue of the Post-Combination Company Warrants, then, based on current UK corporation tax rates (currently 19%), a UK corporation tax charge of approximately $[●] would be expected. If the value of the GGI Public Warrants and the GGI Private Placement Warrants (or the corresponding Post-Combination Company Warrants) increases between the date of this proxy statement/prospectus and the Effective Time, then this UK corporation tax charge may be significantly greater. If any of the Post-Combination Company Warrants are subsequently exercised according to their terms in exchange for the issue of Post-Combination Company Class A Shares, the grant and exercise of the Post-Combination Company Warrants are treated as a single transaction and it is expected that a proportion of such UK corporation tax charge (corresponding to the proportion that the number of
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the Post-Combination Company Warrants that are so exercised bears to the total number of such Post-Combination Company Warrants issued) should be set-off or refunded to ListCo.
GGI has not registered the shares of GGI Class A Common Stock issuable upon exercise of the GGI Public Warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise the GGI Public Warrants, thus precluding such investor from being able to exercise its GGI Public Warrants except on a cashless basis and potentially causing such GGI Public Warrants to expire worthless.
GGI has not registered the shares of GGI Class A Common Stock issuable upon exercise of the GGI Public Warrants under the Securities Act or any state securities laws at this time. However, under the terms of the Existing Warrant Agreement, GGI has agreed that, as soon as practicable, but in no event later than 15 business days after the closing of an initial business combination, to use its commercially reasonable efforts to file a registration statement under the Securities Act covering such shares and use its best efforts to maintain a current prospectus relating to the GGI Class A Common Stock issuable upon exercise of the GGI Public Warrants until the expiration of the GGI Public Warrants in accordance with the provisions of the Existing Warrant Agreement. GGI cannot assure you that it will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in such registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the GGI Public Warrants are not registered under the Securities Act, GGI will be required to permit holders to exercise their GGI Public Warrants on a cashless basis. However, no GGI Public Warrant will be exercisable for cash or on a cashless basis, and GGI will not be obligated to issue any shares to holders seeking to exercise their GGI Public Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from registration is available. Notwithstanding the above, if the GGI Class A Common Stock is at the time of any exercise of a GGI Public Warrant not listed on a national securities exchange such that it satisfies the definition of a covered security under Section 18(b)(1) of the Securities Act, GGI may, at its option, require holders of GGI Public Warrants who exercise their GGI Public Warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event GGI so elects, GGI will not be required to file or maintain in effect a registration statement, but GGI will be required to use its best efforts to register the shares under applicable blue sky laws to the extent an exemption is not available.
In no event will GGI be required to net cash settle any GGI Public Warrant, or issue securities or other compensation in exchange for the GGI Public Warrants in the event that it is unable to register or qualify the shares underlying the GGI Public Warrants under applicable state securities laws and there is no exemption available. If the issuance of the shares upon exercise of the GGI Public Warrants is not so registered or qualified or exempt from registration or qualification, the holder of such GGI Public Warrant will not be entitled to exercise such GGI Public Warrant and such GGI Public Warrant may have no value and expire worthless. In such event, holders who acquired their GGI Public Warrants as part of a purchase of GGI Public Units will have paid the full unit purchase price solely for the shares of GGI Class A Common Stock included in the GGI Public Units. If and when the GGI Public Warrants become redeemable by GGI, GGI may exercise its redemption rights even if it is unable to register or qualify the underlying shares of GGI Class A Common Stock for sale under all applicable state securities laws.
In connection with the Business Combination, in the event the Warrant Amendment Proposal is approved, at the Effective Time and pursuant to the Class C Warrant Amendment, each GGI Warrant will convert into a Class C ADS, exercisable for a Class A ADS and subject to substantially the same terms as were applicable to such GGI Warrant under the Existing Warrant Agreement. If the issuance of the Class A ADSs upon exercise of the Class C ADS is not so registered or qualified or exempt from registration or qualification, the holder of such Class C ADS will not be entitled to exercise the Class C ADS and such Class C ADS may have no value and expire worthless.
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In connection with the Business Combination, in the event the Warrant Amendment Proposal is not approved, at the Effective Time and pursuant to the Warrant Amendment Agreement, each GGI Warrant will convert into an ADW, of which the underlying Post-Combination Company Warrant will be exercisable for Class A ADSs and subject to substantially the same terms as were applicable to the GGI Warrants under the Existing Warrant Agreement. If the issuance of the Class A ADSs upon exercise of the Post-Combination Company Warrant underlying the ADW is not so registered or qualified or exempt from registration or qualification, the holder of such ADW will not be entitled to exercise the underlying Post-Combination Warrant and such ADW may have no value and expire worthless.
GGI may amend the terms of the GGI Public Warrants in a manner that may be adverse to holders only with the approval by the holders of at least 50% of the then-outstanding GGI Public Warrants. As a result, the exercise price of a holders GGI Public Warrants could be increased, the exercise period could be shortened and the number of shares of GGI Common Stock purchasable upon exercise of a GGI Public Warrant could be decreased, all without the approval of that warrant holder.
The GGI Public Warrants were issued in registered form under the Existing Warrant Agreement. The Existing Warrant Agreement provides that the terms of the GGI Public Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then-outstanding GGI Public Warrants to make any change that adversely affects the interests of the registered holders. Accordingly, GGI may amend the terms of the GGI Public Warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding GGI Public Warrants approve of such amendment. Although GGIs ability to amend the terms of the GGI Public Warrants with the consent of at least 50% of the then-outstanding GGI Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the GGI Public Warrants, shorten the exercise period or decrease the number of shares of GGI Class A Common Stock purchasable upon exercise of a GGI Public Warrant. In connection with the Business Combination, at the Effective Time, the GGI Public Warrants will convert to Class C-1 ADSs (if the Warrant Amendment Proposal is approved) or ADWs (if the Warrant Amendment Proposal is not approved), each subject to substantially the same terms as the GGI Public Warrants, including in respect of the Post-Combination Company Warrants, except that ListCo may amend the terms of the underlying Post-Combination Company Class C-1 Shares in a manner adverse to a holder if holders of at least 50% of the then-outstanding Post-Combination Company Warrants approve of such amendment. With respect to the Post-Combination Company Class C-1 Shares, in accordance with the Companies Act and the Post-Combination Articles, such amendment would require (i) in order to amend the relevant provisions in the Post-Combination Articles, a special resolution (requiring approval by at least 75% of members entitled to vote at a meeting of members of ListCo) and (ii) written consent to such amendment by holders of at least 75% of the then-outstanding Post-Combination Company Class C-1 Shares.
GGI may redeem unexpired GGI Public Warrants prior to their exercise at a time and at a price that is disadvantageous to warrant holders, thereby making their GGI Public Warrants worthless, and an exercise of a significant number of warrants could adversely affect the market price of GGI Common Stock.
GGI has the ability to redeem outstanding GGI Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per GGI Public Warrant; provided that the last reported sales price of GGI Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which GGI gives proper notice of such redemption to the warrant holders and provided certain other conditions are met. GGI will not redeem the GGI Public Warrants unless an effective registration statement under the Securities Act covering the issuance of the shares of GGI Class A Common Stock issuable upon exercise of the GGI Public Warrant is effective and a current prospectus relating to those shares of GGI Class A Common Stock is available throughout the 30-day redemption period, except if the GGI Public Warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the GGI Public Warrants become redeemable by GGI, GGI may exercise GGIs redemption right even if GGI is unable to register or qualify the underlying securities
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for sale under all applicable state securities laws. Redemption of the outstanding GGI Public Warrants could force the warrant holders: (i) to exercise their GGI Public Warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so; (ii) to sell their GGI Public Warrants at the then-current market price when they might otherwise wish to hold their GGI Public Warrants; or (iii) to accept the nominal redemption price which, at the time the outstanding GGI Public Warrants are called for redemption, is likely to be substantially less than the market value of their GGI Public Warrants. Additionally, if a significant number of GGI Public Warrant holders exercise their GGI Public Warrants instead of accepting the nominal redemption price, the issuance of these shares would dilute other equity holders, which could reduce the market price of GGI Class A Common Stock. As of [●], 2022, GGI Class A Common Stock has never traded above $18.00 per share.
In addition, GGI may redeem GGI Public Warrants after they become exercisable for a number of shares of GGI Class A Common Stock determined based on the redemption date and the fair market value of GGI Class A Common Stock, starting at a trading price of $10.00. Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the GGI Public Warrants are out-of-the-money, in which case holders of GGI Public Warrants would lose any potential embedded value from a subsequent increase in the value of the GGI Class A Common Stock had such holders GGI Public Warrants remained outstanding. None of the GGI Private Placement Warrants will be redeemable by GGI (except as set forth in the Existing Warrant Agreement) so long as they are held by the GGI Sponsor or its permitted transferees. GGI Class A Common Stock currently trades above $10.00; however, trading prior to the warrants becoming exercisable is not relevant to GGIs ability to redeem the GGI Public Warrants.
In the event GGI elects to redeem the outstanding GGI Public Warrants, GGI will fix a date for the redemption (the Warrant Redemption Date) and provide notice of the redemption to be mailed by first class mail, postage prepaid by GGI not less than thirty days prior to the Warrant Redemption Date to the registered holders of the GGI Public Warrants (who will, in turn, notify the beneficial holders thereof). For addition information regarding the GGI Private Placement Warrants and the GGI Public Warrants, please see the Existing Warrant Agreement, attached hereto as Annex C.
In connection with the Business Combination, in the event the Warrant Amendment Proposal is approved, at the Effective Time and pursuant to the Class C Warrant Amendment, each GGI Public Warrant will convert into a Class C-1 ADS, exercisable for a Class A ADS and subject to substantially the same terms as were applicable to such GGI Warrant under the Existing Warrant Agreement. If ListCo redeems unexpired Post-Combination Company Class C-1 Shares prior to their exercise at a time and at a price that is disadvantageous to holders, it would make their Post-Combination Company Class C-1 Shares worthless. Further, an exercise of a significant number of Post-Combination Company Class C-1 Shares could adversely affect the market price of Class A ADSs.
In connection with the Business Combination, in the event the Warrant Amendment Proposal is not approved, at the Effective Time and pursuant to the Warrant Amendment Agreement, each GGI Warrant will convert into one ADW, of which the underlying Post-Combination Company Warrant will be exercisable for one Class A ADS and subject to substantially the same terms as were applicable to the GGI Warrants under the Existing Warrant Agreement. If ListCo redeems unexpired Post-Combination Company Warrants prior to their exercise at a time and at a price that is disadvantageous to holders, it would make their ADWs worthless. Further, an exercise of a significant number of ADWs could adversely affect the market price of Class A ADSs.
If GGI is unable to complete an initial business combination, GGI Public Stockholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against GGI that the GGI Sponsor is unable to indemnify), and GGI Warrants may expire worthless.
Unless GGI amends certain provisions of the Current GGI Certificate (which requires the affirmative vote of 65% of all then outstanding shares of GGI Class A Common Stock) and amend certain other agreements into which it has entered to extend the life of GGI, if GGI is unable to complete an initial business combination by March 25, 2023,
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GGI Public Stockholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third-party brings a claim against GGI that the GGI Sponsor is unable to indemnify (as described herein)) and the GGI Warrants will expire worthless.
If third parties bring claims against GGI, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by GGI Public Stockholders may be less than $10.00 per share.
GGIs placing of funds in the Trust Account may not protect those funds from third-party claims against it. Although GGI seeks to have all vendors, service providers (other than its independent auditors), prospective target businesses or other entities with which it does business execute agreements with it waiving any right, title, interest or claim of any kind in or to any funds held in the Trust Account for the benefit of GGI Public Stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against GGIs assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the funds held in the Trust Account, GGIs management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third-party that has not executed a waiver if management believes that such third partys engagement would be significantly more beneficial to GGI than any alternative.
Examples of possible instances where GGI may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by GGI management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where GGI management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such parties will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with GGI and will not seek recourse against the Trust Account for any reason. Upon redemption of GGI Public Shares, if GGI is unable to complete an initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with an initial business combination, GGI will be required to provide for payment of claims of creditors that were not waived that may be brought against it within the ten years following redemption. Accordingly, the per-share redemption amount received by GGI Public Stockholders could be less than the $10.00 per share initially held in the Trust Account, due to claims of such creditors.
The GGI Sponsor has agreed that it will indemnify GGI if and to the extent losses to which it may become subject as a result of any claims by a vendor (other than GGIs independent public accountants) for services rendered or products sold to it, or a prospective target business with which it has entered into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per GGI Public Share or (ii) such lesser amount per GGI Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets as of the date of the liquidation of the Trust Account, in each case net of the interest which may be withdrawn to pay Regulatory Withdrawals and/or to pay franchise and income tax obligations, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under indemnity of the underwriter of the GGI IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the GGI Sponsor will not be responsible to the extent of any liability for such third party claims. GGI has not independently verified whether the GGI Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the GGI Sponsors only assets are securities of GGI. GGI has not asked the GGI Sponsor to reserve for such indemnification obligations. Therefore, GGI cannot assure you that the GGI Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for the Business Combination and redemptions could be reduced to less than $10.00 per GGI Public Share. In such event, GGI may not be able to complete the Business Combination, and you would receive such lesser amount per share in
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connection with any redemption of your GGI Public Shares. None of GGIs officers will indemnify GGI for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
GGIs directors may decide not to enforce the indemnification obligations of the GGI Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to GGI Public Stockholders.
In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per GGI Public Share or (ii) such lesser amount per share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to fund Regulatory Withdrawals and/or to pay franchise and income tax obligations, and the GGI Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, GGIs independent directors would determine whether to take legal action against the GGI Sponsor to enforce its indemnification obligations. While GGI currently expects that its independent directors would take legal action on GGIs behalf against the GGI Sponsor to enforce its indemnification obligations to GGI, it is possible that GGIs independent directors in exercising their business judgment may choose not to do so if, for example the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine a favorable outcome is unlikely. If GGIs independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to GGI Public Stockholders may be reduced below $10.00 per share.
GGI has no operating or financial history and its results of operations and those of ListCo may differ significantly from the unaudited pro forma financial data included in this proxy statement/prospectus.
GGI is a blank check company and has no operating history and no revenues. This proxy statement/prospectus includes unaudited pro forma condensed combined financial statements for ListCo. The unaudited pro forma condensed combined statement of operations of ListCo combines GGIs historical audited results of operations for the year ended December 31, 2021 with the historical audited results of operations of Polestar Group for the year ended December 31, 2021, and gives pro forma effect to the Business Combination as if it had been consummated on January 1, 2021.
The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only, are based on certain assumptions, address a hypothetical situation and reflect limited historical financial data. Therefore, the unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations and financial position that would have been achieved had the Business Combination been consummated on the dates indicated above, or the future consolidated results of operations or financial position of ListCo. Accordingly, ListCos business, assets, cash flows, results of operations and financial condition may differ significantly from those indicated by the unaudited pro forma condensed combined financial statements included in this document. For more information, please see the section titled Unaudited Pro Forma Condensed Combined Financial Information.
GGI Public Stockholders may be held liable for claims by third parties against GGI to the extent of distributions received by GGI Public Stockholders upon redemption of their shares.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of the Trust Account distributed to the GGI Public Stockholders upon the redemption of GGI Public Shares in the event GGI does not complete an initial business combination by March 25, 2023 may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such
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stockholders pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is GGIs intention to redeem GGI Public Shares as soon as reasonably possible following March 25, 2023 in the event it does not complete an initial business combination and, therefore, GGI does not intend to comply with the foregoing procedures.
Because GGI will not be complying with Section 280 of the DGCL, Section 281(b) of the DGCL requires GGI to adopt a plan, based on facts known to it at such time that will provide for its payment of all existing and pending claims or claims that may be potentially brought against it within the ten years following its dissolution. However, because GGI is a blank check company, rather than an operating company, and its operations are limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from its vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If GGIs plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholders pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. GGI cannot assure you that it will properly assess all claims that may be potentially brought against it. As such, GGI Public Stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of GGI Public Stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of the Trust Account distributed to GGI Public Stockholders upon the redemption of GGI Public Shares in the event GGI does not complete an initial business combination by March 25, 2023 is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect GGIs business, investments and results of operations.
GGI is subject to laws, regulations and rules enacted by national, regional and local governments and Nasdaq. In particular, GGI is required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations or rules and their interpretation and application may also change from time to time and those changes could have a material and adverse effect on GGIs business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations or rules, as interpreted and applied, could have a material and adverse effect on GGIs business and results of operations.
The GGI Warrants are being accounted for as liabilities and are being recorded at fair value upon issuance with changes in fair value each period reported in GGIs earnings. The changes in value of the GGI Warrants could have an adverse effect on the market price of GGI Class A Common Stock, an adverse effect on GGIs financial results.
In light of the staff of the SEC issuing the Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (SPACs) (the SEC Staff Statement) and guidance in Accounting Standards Codification 815-40, GGIs management evaluated the terms of the GGI Warrants issued in connection with the GGI IPO, including the GGI Private Placement Warrants and the GGI Public Warrants, and concluded that the GGI Warrants include provisions that, based on the SEC Staff Statement, preclude the GGI Warrants from being classified as components of equity. As described in GGIs financial statements included in this proxy statement/prospectus, GGI is accounting for the GGI Warrants as a derivative liability and are recording that liability at fair value upon issuance and are recording any subsequent changes in fair value as of the end of each period for which earnings are reported, as it determines based upon a valuation report obtained from an independent third-party valuation firm. The impact of changes in fair value on earnings may have an adverse effect on the market price of GGI Class A Common Stock and/or GGIs financial results.
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GGIs internal control over financial reporting may not be effective and GGIs independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on GGIs business and the market price of GGI Public Shares.
If GGI is unable to develop and maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results in a timely manner, which may adversely affect investor confidence in GGI and materially and adversely affect its business and the market price of GGI Class A Common Stock and/or GGIs financial results. GGI can give no assurance as to its ability to timely remediate any material weakness identified, if at all, or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. Any required remediation measures may be time consuming and costly and there is no assurance that such measures will ultimately have the intended effects.
For example, in connection with GGIs managements assessment of its internal control over financial reporting as of March 31, 2021, GGI identified a material weakness in its internal control over financial reporting. The identified material weakness pertained to GGIs control activities over its accounting for warrants as derivative liabilities, recognition of changes in the estimated fair value of the derivative instruments and correct equity classification of all GGI Class A Common Stock. GGIs control activities were not designed appropriately to ensure that its related accounting conclusions were sufficiently documented and reviewed for compliance with U.S. GAAP. The material weakness resulted in a material misstatement of current liabilities and stockholders equity on GGIs balance sheet as well as a material misstatement of its net income within its statement of operations. This was corrected prior to the issuance of GGIs financial statements for the period ended March 31, 2021.
During the second quarter of 2021, GGIs management enhanced and revised the design of its controls and procedures over its accounting for derivative liabilities and equity treatment of GGI Class A Common Stock. These enhancements include GGIs implementation of additional procedures related to documentation of its managements evaluation of the facts and circumstances supporting its judgments and conclusions surrounding its accounting for derivative liabilities and equity treatment of GGI Class A Common Stock as well as consultation with third-party accounting and valuation experts with relevant knowledge and experience to assist its management with their evaluation of its accounting for such items. These enhancements can only be accomplished over time, and GGI can offer no assurance that these initiatives will ultimately have the intended effects.
During the interim period, GGI is prohibited from entering into certain transactions that might otherwise be beneficial to it or its respective stockholders.
Until the earlier of consummation of the Business Combination or termination of the Business Combination Agreement, GGI is subject to certain limitations on the operations of its business, including restrictions on its ability to merge, consolidate or acquire (by purchasing a substantial portion of the assets of or equity in, or by any other manner) any entity other than Polestar. See The Business Combination AgreementCovenants of the Parties. The limitations on GGIs conduct of its business during this period could have the effect of delaying or preventing other strategic transactions and may, in some cases, make it impossible to pursue business opportunities that are available only for a limited time.
If the Adjournment Proposal is not approved, and an insufficient number of votes have been obtained to authorize the consummation of the Business Combination, the GGI Board will not have the ability to adjourn the Stockholder Special Meeting to a later date in order to solicit further votes, and, therefore, the Business Combination will not be completed.
The GGI Board is seeking approval to adjourn the Stockholder Special Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI stockholders to approve the Business
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Combination Proposal or to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to GGI stockholders. If the Adjournment Proposal is not approved, the GGI Board will not have the ability to adjourn the Stockholder Special Meeting to a later date and, therefore, the Business Combination would not be completed.
Risks Related to the ADSs and ADWs Following the Business Combination
If the Business Combinations benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of the ADSs and ADWs may decline.
If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of GGI Class A Common Stock prior to the Closing may decline. The market values of GGIs securities at the time of the Business Combination may vary significantly from their prices on the date the Business Combination Agreement was executed, the date of this proxy statement/prospectus or the date on which GGI stockholders vote on the Business Combination.
There has not been a public market for Polestars stock and GGI has no operating or financial history. An active trading market for the ADSs and ADWs may never develop or, if developed, it may not be sustained. You may be unable to sell your ADSs and ADWs unless a market can be established and sustained. This risk will be exacerbated if there is a high level of redemptions of the GGI Public Shares in connection with the Closing. Following the Business Combination, fluctuations in the price of the ADSs and ADWs could contribute to the loss of all or part of your investment. The valuation ascribed to Polestar in the Business Combination may not be indicative of the price of ListCo that will prevail in the trading market following the Closing. The trading price of the ADSs and ADWs following the Closing could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond GGIs and Polestars control. Any of the factors listed below could have a material and adverse effect on the trading price of the ADSs and ADWs, which may trade at prices significantly below the price you paid for the shares of GGI Class A Common Stock that were converted into the ADSs and ADWs in the Business Combination. In such circumstances, the trading price of the ADSs and ADWs may not recover and may experience a further decline.
Factors affecting the trading price of the ADSs and ADWs following the Closing may include:
| actual or anticipated fluctuations in ListCos periodic financial results or the periodic financial results of companies perceived to be similar to ListCo; |
| changes in the markets expectations about ListCos operating results; |
| the publics reaction to ListCos press releases, other public announcements and filings with the SEC; |
| speculation in the press or investment community; |
| success of competitors; |
| ListCos operating results failing to meet the expectation of securities analysts or investors in a particular period; |
| changes in financial estimates and recommendations by securities analysts concerning ListCo or the market in general; |
| operating and stock price performance of other companies that investors deem comparable to ListCo; |
| ListCos ability to market new and enhanced features or services on a timely basis; |
| changes in laws and regulations affecting ListCos business; |
| commencement of, or involvement in, litigation involving ListCo; |
| changes in ListCos capital structure, such as future issuances of securities or the incurrence of additional debt; |
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| the volume of ADSs and ADWs available for public sale; |
| trading volume of the ADSs and ADWs on Nasdaq; |
| any major change in ListCos board of directors or management; |
| sales of substantial amounts of ADSs and ADWs by ListCos directors, officers or significant stockholders or the perception that such sales could occur; |
| the realization of any of the risk factors presented in this proxy statement/prospectus; |
| additions or departures of key personnel; |
| failure to comply with the requirements of Nasdaq; |
| failure to comply with the Sarbanes-Oxley Act or other laws or regulations; |
| actual, potential or perceived control, accounting or reporting problems; |
| changes in accounting principles, policies and guidelines; and |
| general economic and political conditions such as recessions, interest rates, international currency fluctuations and health epidemics and pandemics (including the ongoing COVID-19 pandemic), acts of war or terrorism. |
Broad market and industry factors may materially harm the market price of the ADSs and ADWs irrespective of its operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of the Post-Combination Company securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies that investors perceive to be similar to ListCo could depress the price of ADSs and ADWs regardless of its business, prospects, financial conditions or results of operations. A decline in the market price of the ADSs and ADWs also could adversely affect its ability to issue additional securities and obtain additional financing in the future.
In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert managements attention and resources, and could also require ListCo to make substantial payments to satisfy judgments or to settle litigation.
Future resales of Post-Combination Company securities or ADSs and ADWs may cause the market price of the ADSs and ADWs to drop significantly, even if ListCos business is doing well.
Substantial sales of the Post-Combination Company securities or ADSs and ADWs or the perception that these sales may occur in the future could cause a reduction in the market price of the ADSs and ADWs. Without giving effect to any issuance of Earn Out Shares and assuming (i) no redemptions of GGI Class A Common Stock, (ii) the conversion of the Post-Combination Company Preference Shares and Polestars convertible notes and (iii) no conversion or redemption of any of the Class C ADSs or ADWs, ListCo is expected to have approximately 2,125 million Post-Combination Company Shares outstanding following the Closing. Pursuant to the Parent Lock-up Agreement, Parent will be restricted, subject to certain exceptions, from selling any of the securities of ListCo that they receive pursuant to the Business Combination Agreement or Related Agreements, which restrictions will expire and therefore additional Post-Combination Company securities and AD securities will be eligible for resale 180 days after the Closing. Pursuant to the Sponsor and Supporting Sponsor Lock-Up Agreement, the GGI Initial Stockholders will be restricted, subject to certain exceptions, from selling any of the Post-Combination Company securities or AD securities that they receive pursuant to the Business Combination Agreement, in respect of their GGI Class F Common Stock, which restrictions will expire, and therefore additional Post-Combination Company securities and AD securities will be eligible for resale, 180 days after the Closing. Accordingly without giving effect to any issuance of Earn Out Shares and assuming (i) no redemptions
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of GGI Class A Common Stock, (ii) the conversion of the Post-Combination Company Preference Shares and Polestars convertible notes and (iii) no conversion or redemption of any of the Class C ADSs or ADWs, up to approximately 2,125 million Post-Combination Company Shares, including Post-Combination Company Shares held by the Parent Shareholders and Post-Combination Company Class A Shares underlying Class A ADSs held by the GGI Initial Stockholders, will be eligible for resale as soon as 180 days after the Closing. See Shares Eligible for Future Sale.
Upon expiration or waiver of the applicable lock-up periods, and upon effectiveness of the registration statement ListCo plans to file pursuant to the Registration Rights Agreement and the Subscription Agreements, or upon satisfaction of the requirements of Rule 144 under the Securities Act, certain shareholders of ListCo may sell large amounts of Post-Combination Company securities and AD securities in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility in or putting significant downward pressure on the price of ADSs and ADWs. See Shares Eligible for Future Sale. In addition, the issuance of any additional Post-Combination Company securities or ADSs or ADWs may have an adverse effect on the market price of the ADSs or ADWs.
The grant and future exercise of registration rights may adversely affect the market price of the ADSs and ADWs following the consummation of the Business Combination.
Pursuant to the Registration Rights Agreement, the Registration Rights Holders can each demand that ListCo register their registrable securities under certain circumstances and will each also have piggyback registration rights for these securities in connection with certain registrations of securities that ListCo undertakes. In addition, ListCo is required to file and maintain an effective registration statement under the Securities Act covering such securities and certain other securities of ListCo following the consummation of the Business Combination. Additionally, pursuant to the Subscription Agreements and Registration Rights Agreement, ListCo must file a registration statement within 30 days after the consummation of the Business Combination registering up to 2,213,697,500 Class A ADSs held by the PIPE Investors and Class A ADSs held by the Registration Rights Holders. See Shares Eligible for Future SaleRegistration Rights.
The registration of these securities will permit the public sale of such securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of ADSs and ADWs.
The Class C ADSs or ADWs will become exercisable for the Class A ADSs, which would increase the number of shares eligible for future resale in the public market and result in dilution to its shareholders.
GGI issued GGI Public Warrants to purchase 16,000,000 shares of GGI Class A Common Stock as part of the GGI IPO and, on the GGI IPO closing date, GGI issued Private Placement Warrants to the GGI Sponsor to purchase 9,000,000 shares of GGI Class A Common Stock, in each case at $11.50 per share. The GGI Private Placement Warrants are identical to the GGI Public Warrants sold as part of the GGI Public Units except that, so long as they are held by the GGI Sponsor or its permitted transferees: (i) they will not be redeemable by GGI, except as described in the Existing Warrant Agreement; (ii) they (including the GGI Class A Common Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the GGI Sponsor until 30 days after the completion of an initial business combination; (iii) they may be exercised by the holders on a cashless basis; and (iv) they are subject to registration rights. The GGI Warrants will become exercisable on the later of 30 days after the consummation of the Business Combination or 12 months from the GGI IPO. For additional information regarding the GGI Private Placement Warrants and the GGI Public Warrants, please see the Existing Warrant Agreement, attached hereto as Annex C.
In connection with the Business Combination, in the event the Warrant Amendment Proposal is approved, each GGI Warrant will convert into a Class C ADS, of which the underlying Post-Combination Company Class C Share will be exercisable for a Class A ADS representing one Post-Combination Company Class C Share and
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subject to substantially the same terms as were applicable to the GGI Warrants under the Existing Warrant Agreement. In the event the Warrant Amendment Proposal is not approved, each GGI Warrant will convert into one Post-Combination Company Warrant in the form of an ADW, which will be exercisable for one Class A ADSs and subject to substantially the same terms as were applicable to the GGI Warrants under the Existing Warrant Agreement. Please see Description of ListCos SecuritiesPost-Combination Company Warrants. The shares of GGI Class A Common Stock and, following the Closing, the Class A ADSs issued upon exercise of the Class C ADSs or ADWs will result in dilution to then existing Post-Combination Company shareholders and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of Class A ADSs.
ListCo may issue additional equity securities or convertible debt securities without the approval of the holders of the ADSs and ADWs, which would dilute ownership interests and may depress the market price of the ADSs and ADWs.
ListCo will continue to require significant capital investment to support its business, and ListCo may issue additional equity securities or convertible debt securities of equal or senior rank in the future without approval of the holders of the ADSs and ADWs in certain circumstances.
ListCos issuance of additional equity securities or convertible debt securities of equal or senior rank may have the following effects: (i) ListCos shareholders proportionate ownership interest in ListCo may decrease; (ii) the amount of cash available per share, including for payment of dividends in the future, may decrease; (iii) the relative voting power of each previously outstanding Class A ADS may be diminished; and (iv) the market price of ADSs and ADWs may decline.
Furthermore, after the Business Combination, it is anticipated that employees of ListCo and its subsidiaries will be granted equity awards under the Equity Plan and the Employee Stock Purchase Plan. Holders of ADSs and ADWs will experience additional dilution when those equity awards become vested and settled or exercised, as applicable, for Post-Combination Company securities. See Management of the Post-Combination CompanyCompensation Arrangements after the Business Combination.
The market price and trading volume of the ADSs and ADWs may be volatile and could decline significantly following the Business Combination.
The stock markets, including Nasdaq, on which ListCo intends to list the Class A ADSs and the Class C-1 ADSs or the Public ADWs to be issued pursuant to the Business Combination under the symbols PSNY, and PSNYW, respectively, have from time to time experienced significant price and volume fluctuations. Even if an active, liquid and orderly trading market develops and is sustained for the ADSs and the Public ADWs following the Business Combination, the market price of the ADSs and the Public ADWs may be volatile and could decline significantly. In addition, the trading volume in the ADSs and the Public ADWs may fluctuate and cause significant price variations to occur. If the market price of the ADSs and the Public ADWs declines significantly, you may be unable to resell your Post-Combination Company securities, ADSs and Public ADWs at or above the market price of the ADSs and Public ADWs as of the date of the consummation of the Business Combination. Neither GGI nor Polestar can assure you that the market price of the ADSs and the Public ADWs will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following:
| the realization of any of the risk factors presented in this proxy statement/prospectus; |
| actual or anticipated differences in ListCos estimates, or in the estimates of analysts, for ListCos revenues, |
| results of operations, level of indebtedness, liquidity or financial condition; |
| additions and departures of key personnel; |
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| failure to comply with the requirements of Nasdaq; |
| failure to comply with the Sarbanes-Oxley Act or other laws or regulations; |
| future issuances, sales, resales or repurchases or anticipated issuances, sales, resales or repurchases, of Post-Combination Company securities; |
| publication of research reports about ListCo; |
| the performance and market valuations of other similar companies; |
| commencement of, or involvement in, litigation involving ListCo; |
| broad disruptions in the financial markets, including sudden disruptions in the credit markets; |
| speculation in the press or investment community; |
| actual, potential or perceived control, accounting or reporting problems; |
| changes in accounting principles, policies and guidelines; and |
| other events or factors, including those resulting from infectious diseases, health epidemics and pandemics (including the ongoing COVID-19 pandemic), natural disasters, war, acts of terrorism or responses to these events. |
In the past, securities class-action litigation has often been instituted against companies following periods of volatility in the market price of their shares. This type of litigation could result in substantial costs and divert ListCos managements attention and resources, which could have a material and adverse effect on ListCo.
Polestars (and, consequently, ListCos) management team has limited experience managing a public company.
Most members of Polestars (and, consequently, ListCos) management team have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Polestars management team may not successfully or efficiently manage Polestars transition to a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from Polestars senior management and could divert their attention away from the day-to-day management of Polestars business, which could adversely affect its business, results of operations, cash flows and financial condition. In addition, Polestar expects to hire additional personnel to support its operations as a public company, which will increase its operating costs in future periods.
The requirements of being a public company may strain ListCos resources and distract its management, which could make it difficult to manage its business.
Following the completion of the Business Combination, ListCo will be required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to ListCo and could have a negative effect on ListCos results of operations, financial condition or business.
As a public company, ListCo will be subject to the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act. These requirements may place a strain on ListCos systems and resources. The Exchange Act requires that ListCo file an annual report with respect to its business and financial condition. In addition, it intends to publish certain results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of Nasdaq. Press releases relating to certain financial results and material events will also be furnished to the SEC on Form 6-K. The Sarbanes-Oxley Act requires that ListCo implement
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and maintain effective disclosure controls and procedures and internal controls over financial reporting. To implement, maintain and improve the effectiveness of its disclosure controls and procedures, ListCo will need to commit significant resources, hire additional staff and provide additional management oversight. ListCo will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining its growth also will require ListCo to commit additional management, operational and financial resources to identify new professionals to join it and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert managements attention from other business concerns, which could have a material and adverse effect on ListCos results of operations, financial condition or business.
ListCos independent registered public accounting firm will not be required to formally attest to the effectiveness of the combined companys internal control over financial reporting until its second annual report. Polestar has identified material weaknesses in its internal control over financial reporting related to not maintaining an effective control environment and cannot assure you that there will not be material weaknesses or significant deficiencies in its internal controls in the future.
ListCo expects to incur additional expenses and devote increased management effort toward ensuring compliance with the applicable regulations. Polestar and GGI cannot predict or estimate the amount of additional costs ListCo may incur as a result of becoming a public company or the timing of such costs.
ListCo will be a foreign private issuer within the meaning of the rules under the Exchange Act, and as such it will be exempt from certain provisions applicable to United States domestic public companies.
Because ListCo will qualify as a foreign private issuer under the Exchange Act, it will be exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: (i) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q, quarterly certifications by the principal executive and financial officers or current reports on Form 8-K; (ii) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (iii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iv) the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
ListCo will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, it intends to publish its results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of Nasdaq. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information ListCo is required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. For example, U.S. domestic issuers are required to file annual reports within 60 to 90 days from the end of each fiscal year. As a result, there may be less publicly available information concerning ListCos business than there would be if ListCo were a U.S. public company, and you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
As ListCo will be a foreign private issuer and intends to follow certain home country corporate governance practices, its shareholders may not have the same protections afforded to shareholders of companies that are subject to all of Nasdaqs corporate governance requirements.
As a foreign private issuer, ListCo will be subject to different U.S. securities laws than domestic U.S. issuers. As long as ListCo continues to qualify as a foreign private issuer under the Exchange Act, ListCo will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
| the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; |
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| the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and |
| the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. |
In addition, ListCo is not required to file annual reports and financial statements with the SEC as promptly as U.S. domestic companies whose securities are registered under the Exchange Act, and is not required to comply with Regulation FD, which restricts the selective disclosure of material information.
Further, ListCo is exempt from certain corporate governance requirements of Nasdaq by virtue of being a foreign private issuer. Although the foreign private issuer status exempts ListCo from most of Nasdaqs corporate governance requirements, ListCo has decided to voluntarily comply with these requirements, except for the requirement to have a compensation committee and a nominating and corporate governance committee consisting entirely of independent directors.
Furthermore, Nasdaq rules also generally require each listed company to obtain shareholder approval prior to the issuance of securities in certain circumstances in connection with the acquisition of the stock or assets of another company, equity based compensation of officers, directors, employees or consultants, change of control and certain transactions other than a public offering. As a foreign private issuer, ListCo is exempt from these requirements and may elect not to obtain shareholders approval prior to any further issuance of our Class A ADSs other than as may be required by the laws of England and Wales.
Subject to requirements under the Post-Combination Articles and Shareholder Acknowledgment Agreement that the ListCo Board be comprised of a majority of independent directors for the three years following the Closing, ListCo may in the future elect to avail itself of these exemptions or to follow home country practices with regard to other matters. As a result, its shareholders will not have the same protections afforded to shareholders of companies that are subject to all of Nasdaqs corporate governance requirements.
Further, by virtue of being a controlled company under Nasdaq listing rules, ListCo may elect not to comply with certain Nasdaq corporate governance requirements, including that:
| a majority of the board of directors consist of independent directors (however, pursuant to the Post-Combination Articles and Shareholder Acknowledgment Agreement, for the three years following the Closing, the Post-Combination Company Board must be comprised of a majority of independent directors); |
| the compensation committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; |
| the nominating and governance committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; and |
| there be an annual performance evaluation of the compensation and nominating and corporate governance committees. |
Other than as specified above, ListCo may in the future elect to avail itself of these exemptions. As a result, its shareholders will not have the same protections afforded to shareholders of companies that are subject to all of Nasdaqs corporate governance requirements.
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ListCo may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, ListCo will be a foreign private issuer, and therefore will not be required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and may take advantage of certain exemptions to Nasdaqs corporate governance rules. The determination of foreign private issuer status is made annually on the last business day of an issuers most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to ListCo on June 30, 2022. In the future, ListCo would lose its foreign private issuer status if (i) more than 50% of its outstanding voting securities are owned by U.S. residents and (ii) a majority of its directors or executive officers are U.S. citizens or residents, or it fails to meet additional requirements necessary to avoid loss of foreign private issuer status. If ListCo loses its foreign private issuer status, it will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. ListCo would also have to mandatorily comply with U.S. federal proxy requirements, and its officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, it would lose its ability to rely upon exemptions from certain corporate governance requirements under the listing rules of Nasdaq. As an U.S. listed public company that is not a foreign private issuer, ListCo would incur significant additional legal, accounting and other expenses that it will not incur as a foreign private issuer.
If ListCo no longer qualifies as a foreign private issuer, it may be eligible to take advantage of exemptions from Nasdaqs corporate governance standards if it continues to qualify as a controlled company. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company is a controlled company. Following the consummation of the Business Combination, it is expected that, without giving effect to any issuance of Earn Out Shares and assuming (i) no redemptions of GGI Class A Common Stock, (ii) the conversion of the Post-Combination Company Preference Shares and Polestars convertible notes and (iii) no conversion or redemption of any of the Class C ADSs or ADWs, Parent (of which 42.7% is owned by PSD Investment Limited and 48.8% is owned by Volvo Cars as of March 4, 2022) and its affiliates will beneficially hold approximately 99.3% of the outstanding voting power of ListCo. As of March 4, 2022, Mr. Li Shufu controls PSD Investment Limited and owns approximately 91.1% of equity interests in Geely, which owns approximately 82.0% of equity interests in Volvo Cars. Therefore, Mr. Li Shufu, as a controlling equity interest holder in Geely, effectively controls Parent, and is expected to beneficially hold approximately 99.3% of the outstanding voting power of ListCo. In addition, under the terms of the Volvo Cars Preference Subscription Agreement, Snita, a wholly-owned subsidiary of Volvo Cars, will purchase, substantially concurrently with the Closing, Post-Combination Company Preference Shares. The Post-Combination Company Preference Shares will automatically convert into Post-Combination Company Class A Shares immediately following the Closing and on any date when Post-Combination Company Shares may be issued to Snita or any of Volvo Carss wholly-owned subsidiaries, in each case, only if Volvo Cars, alone or taken together with all other legal entities that are controlled by Geely, after conversion, holds less than 50% of the outstanding voting power of Post-Combination Company Shares. As of the date hereof, it is currently anticipated that all of the Post-Combination Company Preference Shares will convert into Post-Combination Company Class A Shares at Closing, in accordance with, and subject to, the terms of the Post-Combination Company Preference Shares. As a result, following the consummation of the Business Combination, ListCo will be a controlled company within the meaning of Nasdaq rules, which permit a controlled company to elect not to comply with certain corporate governance requirements, including:
| the requirement that a majority of its board of directors consist of independent directors (however, pursuant to the Post-Combination Articles and Shareholder Acknowledgment Agreement, for the three years following the Closing, the Post-Combination Company Board must be comprised of a majority of independent directors); |
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| the requirement that compensation of its executive officers be determined by a majority of the independent directors of the board or a compensation committee comprised solely of independent directors with a written charter addressing the committees purpose and responsibilities; and |
| the requirement that director nominees be selected, or recommended for the boards selection, either by a majority of the independent directors of the board or a nominating committee comprised solely of independent directors with a written charter addressing the committees purpose and responsibilities. |
Other than as specified above, ListCo may in the future elect to avail itself of these exemptions. As a result, its shareholders will not have the same protections afforded to shareholders of companies that are subject to all of Nasdaqs corporate governance requirements.
Polestar has identified material weaknesses in its internal control over financial reporting. If Polestar and ListCo are unable to remediate these material weaknesses or identifies additional material weaknesses, it could lead to errors in ListCos financial reporting, which could adversely affect ListCos business and the market price of the ADSs and ADWs.
As a private company, Polestar has not been required to document and test its internal controls over financial reporting nor has management been required to certify the effectiveness of its internal controls and its auditors have not been required to opine on the effectiveness of its internal control over financial reporting. Following the Business Combination, ListCo will become subject to the internal control over financial reporting requirements established pursuant to the Sarbanes-Oxley Act and will become subject to the auditor attestation requirements in the year in which it files its second annual report. ListCo may not be able to complete its evaluation, testing and any required remediation in a timely fashion. In addition, Polestars current controls and any new controls that it or ListCo develops may become inadequate because of poor design and changes in its business, including increased complexity resulting from any international expansion. Any failure to implement and maintain effective internal controls over financial reporting could adversely affect the results of assessments by its independent registered public accounting firm and their attestation reports.
Polestar has identified material weaknesses in its internal control over financial reporting. Consequently, Polestar and ListCo may not be able to detect errors timely, ListCos financial statements could be misstated, ListCo could be subject to regulatory scrutiny and a loss of confidence by stakeholders, which could harm ListCos business and adversely affect the market price of ADSs and ADWs.
Polestar has identified material weaknesses in its internal control over financial reporting. If Polestar and ListCo fail to develop and maintain an effective system of internal control over financial reporting, it may be unable to accurately report its financial results or prevent fraud.
In the course of auditing the Polestar Automotive Holding Limiteds financial statements as of and for the years ended December 31, 2021 and 2020, the Polestar Automotive Holding Limited and its independent registered public accounting firm identified material weaknesses in the Polestar Automotive Holding Limiteds internal control over financial reporting as well as other control deficiencies. As defined in standards established by the PCAOB, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Polestar Automotive Holding Limiteds annual or interim financial statements will not be prevented or detected on a timely basis. As of December 31, 2020, the material weaknesses identified relate to Polestar failing to design and maintain an effective control environment with the appropriate associated control activities, including over its IT environment, as evidenced by internal controls that were not formalized and lacked evidence of review. In addition, the accounting department does not have a sufficient number of personnel with SEC technical accounting expertise to perform supervisory reviews and monitor activities over financial reporting matters and controls. Remediation of this material weakness is ongoing and management has determined there is still a material weakness as of December 31, 2021. Further, as of December 31, 2021, Polestar does not have the appropriate process and controls to recognize revenue in accordance with agreements with customers. Moreover,
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Polestar does not have the appropriate process and controls to properly recognize intangible assets at period end in accordance with their service agreement for the upcoming Polestar 4 model.
As a result, the Polestar Group is in the process of designing and implementing the following measures to strengthen its SEC financial reporting capabilities and its internal audit function:
(1) | the Polestar Group will continue to hire additional accounting and finance resources with appropriate technical accounting and reporting experience to execute key controls related to various financial reporting processes; |
(2) | the Polestar Group will continue to document, evaluate, remediate and test internal controls over financial reporting, including those that operate at a sufficient level of precision and frequency or that evidence the performance of the control; and |
(3) | the Polestar Group will assess existing entity-level controls and information technology general controls and, as necessary, design and implement enhancements to such controls. |
All internal control systems, no matter how well designed, have inherent limitations including the possibility of human error and the circumvention or overriding of controls. Further, because of changes in conditions, the effectiveness of internal controls may vary over time. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
The Polestar Group cannot be certain that these measures will successfully remediate the material weakness or that other material weaknesses will not be discovered in the future. If the Polestar Groups efforts are not successful or other material weaknesses or control deficiencies occur in the future, the Polestar Group may be unable to report its financial results accurately on a timely basis or help prevent fraud, which could cause its reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause the market price of the Post-Combination Companys AD securities to decline. In addition, it could in turn limit the Post-Combination Companys access to capital markets, harm its results of operations and lead to a decline in the trading price of the Post-Combination Companys securities. Additionally, ineffective internal control over financial reporting could expose it to increased risk of fraud or misuse of corporate assets and subject it to potential delisting from the stock exchange on which the Post-Combination Company lists, regulatory investigations and civil or criminal sanctions. The Post-Combination Company may also be required to restate its financial statements from prior periods.
The Post-Combination Company is a limited company incorporated under the laws of England and Wales and as a public company will be subject to the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act requires public companies includes a report of management on its internal control over financial reporting in certain of its filings. In addition, when the Post-Combination Company files its second annual report, its independent registered public accounting firm must attest to and report on the effectiveness of the Post-Combination Companys internal control over financial reporting. The Post-Combination Companys management may conclude that its internal control over financial reporting is not effective. Moreover, even if the Post-Combination Companys management concludes that its internal control over financial reporting is effective, its independent registered public accounting firm, after conducting such public accounting firms own independent testing, may issue a report that is qualified if it is not satisfied with the Post-Combination Companys internal controls or the level at which its controls are documented, designed, operated or reviewed, or if such public accounting firm interprets the relevant requirements differently from the Post-Combination Company. In addition, after the Post-Combination Company becomes a public company, its reporting obligations may place a significant strain on its management, operational and financial resources and systems for the foreseeable future. The Post-Combination Company may be unable to timely complete its evaluation testing and any required remediation.
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During the course of documenting and testing its internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, the Post-Combination Company may identify other weaknesses and deficiencies in its internal control over financial reporting. In addition, if the Post-Combination Company fails to maintain the adequacy of its internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, it may not be able to conclude on an ongoing basis that it has effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Generally, if the Post-Combination Company fails to achieve and maintain an effective internal control environment, it could suffer material misstatements in its financial statements and fail to meet its reporting obligations, which would likely cause investors to lose confidence in its reported financial information. This could in turn limit the Post-Combination Companys access to capital markets, and harm its results of operations. Additionally, ineffective internal control over financial reporting could expose the Post-Combination Company to increased risk of fraud or misuse of corporate assets and subject it to potential delisting from the stock exchange on which it lists, regulatory investigations and civil or criminal sanctions.
ListCos dual-class voting structure may limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of the Post-Combination Company securities or ADSs and ADWs may view as beneficial.
ListCos authorized and issued ordinary shares will be divided into Post-Combination Company Class A Shares and Post-Combination Company Class B Shares. Each Post-Combination Company Class A Share will be entitled to one vote, while each Post-Combination Company Class B Share will be entitled to ten votes. Only the Class A ADSs, which represent an underlying Post-Combination Company Class A Share, will be listed and traded on Nasdaq, and the Post-Combination Company intends to maintain the dual-class voting structure after the consummation of the Business Combination.
Parent and its affiliates will hold all of the outstanding Post-Combination Company Class B Shares and will have control of the voting power of all outstanding Post-Combination Company Class B Shares. As a result, it is expected that, without giving effect to any issuance of Earn Out Shares and assuming (i) no redemptions of GGI Class A Common Stock, (ii) the conversion of the Post-Combination Company Preference Shares and Polestars convertible notes and (iii) no conversion or redemption of any of the Class C ADSs or ADWs, Parent and its affiliates will control approximately 99.3% of the total voting power of all issued and outstanding Post-Combination Company Shares voting together as a single class immediately following the Closing, even though Parent will only own approximately 94.6% of outstanding Post-Combination Company Shares.
The U.K. City Code on Takeovers and Mergers, or the Takeover Code, may apply to ListCo.
The Takeover Code applies, among other things, to an offer for a public company whose registered office is in the U.K. (or the Channel Islands or the Isle of Man) and whose securities are not admitted to trading on a regulated market in the U.K. (or the Channel Islands or the Isle of Man) if the company is considered by the Panel on Takeovers and Mergers, or the Takeover Panel, to have its place of central management and control in the U.K. (or the Channel Islands or the Isle of Man). This is known as the residency test. Under the Takeover Code, the Takeover Panel will determine whether ListCos place of central management and control is in the U.K. by looking at various factors, including the structure of ListCos Board, the functions of the directors of the ListCo Board and where they are resident.
If at the time of a takeover offer, the Takeover Panel determines that ListCos place of central management and control is in the U.K., ListCo would be subject to a number of rules and restrictions, including but not limited to the following: (i) ListCos ability to enter into deal protection arrangements with a bidder would be extremely limited; (ii) ListCo might not, without the approval of shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (iii) ListCo would be obliged to provide equality of information to all bona fide competing bidders.
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Upon completion of the Business Combination, ListCo expects a majority of its Board to reside outside of the U.K., the Channel Islands and the Isle of Man. Accordingly, based upon ListCos current board and management structure and its intended plans for its directors and management, for the purposes of the Takeover Code, ListCo is considered to have its place of central management and control outside the U.K., the Channel Islands or the Isle of Man. The Takeover Code is not expected to apply to ListCo. It is possible that in the future circumstances, and in particular the Post-Combination Company Board Composition, could change which may cause the Takeover Code to apply to ListCo.
There will be material differences between your current rights as a holder of the GGI Public Shares and the rights one will have as a holder of the Post-Combination Company Shares or Class A ADSs, some of which may adversely affect you.
Upon completion of the Business Combination, the GGI stockholders will no longer be stockholders of GGI, but will be shareholders of ListCo. There will be material differences between the current rights of the GGI stockholders and the rights you will have as a holder of the ADSs and ADWs, some of which may adversely affect you. See Comparison of Stockholder Rights, Description of ListCos SecuritiesDescription of ListCo Share Capital and Post-Combination Articles and Description of the Post-Combination Companys American Depositary Securities.
Upon completion of the Business Combination, GGI stockholders will become holders of Class A ADSs, and the GGI warrant holders will become holders of the Class C ADSs or ADWs. The market price for the ADSs and ADWs may be affected by factors different from those that historically have affected GGI.
Upon the completion of the Business Combination, GGI stockholders will become holders of Class A ADSs and each GGI Warrant will convert into a Class C ADS if the Warrant Amendment Proposal is approved or otherwise, an ADW. ListCos business differs from that of GGI, and, accordingly, the results of operations of ListCo will be affected by some factors that are different from those currently affecting the results of operations of GGI. GGI is a special purpose acquisition company incorporated in Delaware that is not engaged in any operating activity, directly or indirectly. ListCo is a limited company incorporated under the laws of England and Wales and, after the consummation of the Business Combination its subsidiaries will be engaged in the design, manufacturing and sale of electric vehicles. ListCos business and results of operations will be affected by regional, country and industry risks and operating risks to which GGI was not exposed. See Risks Related to Polestars Business and Industry.
Subsequent to the completion of the Business Combination, GGI may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and the price of the ADSs and ADWs, which could cause you to lose some or all of your investment.
Although GGI has conducted due diligence on Polestar, GGI cannot assure you that this diligence will surface all material issues that may be present in Polestars business, that it would be possible to uncover all material issues through a customary amount of due diligence or that factors outside of Polestars business and outside of GGIs and Polestars control will not later arise. As a result of these factors, ListCo may be forced to later write down or write off assets, restructure operations, or incur impairment or other charges that could result in losses. Even if GGIs due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with its preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on ListCos liquidity, any charges of this nature could contribute to negative market perceptions about ListCo or its securities. Accordingly, GGI stockholders who choose to remain shareholders of ListCo following the Business Combination could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value.
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If securities or industry analysts do not publish research, publish inaccurate or unfavorable research or cease publishing research about ListCo, the ADS and Public ADW trading prices and trading volumes could decline significantly.
The trading market for the ADSs and Public ADWs will depend, in part, on the research and reports that securities or industry analysts publish about ListCo or its business. ListCo may be unable to sustain coverage by well-regarded securities and industry analysts. If either none or only a limited number of securities or industry analysts maintain coverage of ListCo, or if these securities or industry analysts are not widely respected within the general investment community, the demand for the ADSs and Public ADWs could decrease, which might cause the ADSs and Public ADWs trading price and trading volume to decline significantly. In the event that ListCo obtains securities or industry analyst coverage, if one or more of the analysts who cover ListCo downgrades their assessment of ListCo or publish inaccurate or unfavorable research about ListCos business, the market price and liquidity for the ADSs and Public ADWs could be negatively impacted.
If the Warrant Amendment Proposal is not approved, the Existing Warrant Agreement will be assigned by GGI to ListCo at the Closing. The Existing Warrant Agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of the warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with ListCo in connection with such warrants.
If the Warrant Amendment Proposal is not approved, the Existing Warrant Agreement will be assigned by GGI to ListCo at the Closing pursuant to the Warrant Amendment Agreement. Pursuant to the Warrant Amendment Agreement, each GGI Public Warrant would convert into a Public ADW and each GGI Private Placement Warrant would convert into a PP ADW, with each Public ADW and PP ADW representing one Post-Combination Company Warrant exercisable for Class A ADSs, subject to substantially the same terms as were applicable to the GGI Warrants under the Existing Warrant Agreement.
Pursuant to the Warrant Amendment Agreement, ListCo would assume GGIs obligations under the Existing Warrant Agreement. Under the Existing Warrant Agreement and the Warrant Amendment Agreement (i) any action, proceeding or claim against GGI arising out of or relating in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, (ii) GGI irrevocably submits to such jurisdiction, which jurisdiction will be exclusive and (iii) subject to applicable law, GGI a has waived any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Notwithstanding the foregoing, these provisions of the Existing Warrant Agreement and the Warrant Amendment Agreement do not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of warrants under the Existing Warrant Agreement will be deemed to have notice of and to have consented to the forum provisions of the Existing Warrant Agreement and the Warrant Amendment Agreement. If any action, the subject matter of which is within the scope the forum provisions of the Existing Warrant Agreement or the Warrant Amendment Agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a foreign action) in the name of any holder of the warrants, such holder will be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an enforcement action), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holders counsel in the foreign action as agent for such warrant holder.
Since, if the Warrant Amendment Proposal is not approved, the provisions of the Existing Warrant Agreement and the Warrant Amendment Agreement will continue to apply to Post-Combination Company Warrants after the Closing, and since the choice-of-forum and related provisions will not be amended by the Warrant Amendment
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Agreement, the choice-of-forum provision will continue to limit a warrant holders ability after the Closing to bring a claim in a judicial forum that it finds favorable for disputes with ListCo, which may discourage such lawsuits. Alternatively, if a court were to find this provision of the Existing Warrant Agreement or the Warrant Amendment Agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, ListCo may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect its business, financial condition and results of operations and result in a diversion of the time and resources of ListCos management and Post-Combination Company Board.
If the Warrant Amendment Proposal is approved, at the Effective Time and pursuant to the Class C Warrant Amendment, each GGI Warrant will convert into a Class C ADS representing one Class C Share exercisable for one Class A ADS, subject to substantially the same terms as were applicable to such GGI Warrant under the Existing Warrant Agreement, and governed by the Post-Combination Articles. For more information on the Post-Combination Articles and the exclusive forum provision, please see the risk factor titled The Post-Combination Articles and the Deposit Agreements may provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act and the Exchange Act and that certain claims may only be instituted in the courts of England and Wales, which could limit the ability of securityholders of ListCo to choose a favorable judicial forum for disputes with ListCo or ListCos directors, officers or employees.
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because ListCo is incorporated under the law of England and Wales and because ListCo will conduct substantially all of its operations outside of the United States and a majority of ListCos directors and executive officers will reside outside of the United States.
Upon completion of the Business Combination, ListCo will be a limited company incorporated under the laws of England and Wales, and will conduct a majority of its operations outside the United States through Polestar (which will be a wholly-owned subsidiary of ListCo). Substantially all of ListCos assets will be located outside the United States. A majority of ListCos officers and directors will reside outside the United States and a substantial portion of the assets of those persons will be located outside of the United States. As a result, it could be difficult or impossible for you to bring an action against ListCo or against these individuals outside of the United States in the event that you believe that your rights have been infringed upon under the applicable securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of England and Wales and of the jurisdictions in which ListCo will primarily operate could render you unable to enforce a judgment against ListCos assets or the assets of ListCos directors and officers.
ListCos management has been advised that there is currently no treaty between the United States and the United Kingdom providing for the reciprocal recognition and enforcement of judgments of United States courts by the courts of England and Wales. Further, it is unclear if extradition treaties now in effect between the United States and applicable jurisdictions would permit effective enforcement of criminal penalties of U.S. federal securities laws.
In addition, ListCos corporate affairs will be governed by the Post-Combination Articles, the Companies Act and the laws of England and Wales. The rights of ListCos shareholders and the fiduciary duties of ListCos directors under the laws of England and Wales may not be as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, England and Wales have a different body of securities laws than the United States. Some U.S. states, such as Delaware, may have more fully developed and judicially interpreted bodies of corporate law than England and Wales. In addition, companies
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organized under the laws of England and Wales may not have standing to initiate a shareholder derivative action in a federal court of the United States.
Certain corporate governance practices in England and Wales, which is ListCos home jurisdiction, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. To the extent ListCo chooses to follow home country practice with respect to corporate governance matters, its shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers. See Management of the Post-Combination CompanyForeign Private Issuer.
As a result of all of the above, ListCos shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.
It is not expected that ListCo will pay dividends in the foreseeable future after the Business Combination.
It is expected that ListCo will retain most, if not all, of its available funds and any future earnings after the Business Combination to fund the development and growth of its business. As a result, it is not expected that ListCo will pay any cash dividends in the foreseeable future.
Following completion of the Business Combination, the Post-Combination Company Board will have complete discretion as to whether to distribute dividends. Even if the Post-Combination Company Board decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on the future results of operations and cash flow, capital requirements and surplus, the amount of distributions, if any, received by ListCo from subsidiaries, ListCos financial condition, contractual restrictions and other factors deemed relevant by the Post-Combination Company Board. There is no guarantee that the ADSs and ADWs will appreciate in value after the Business Combination or that the trading price of the ADSs and ADWs will not decline.
Following the Business Combination, ListCo will be a holding company and will depend on the ability of its subsidiaries to pay dividends.
Following the Business Combination, ListCo will be a holding company without any direct operations and will have no significant assets other than its ownership interest in Polestar. Accordingly, ListCos ability to pay dividends will depend upon the financial condition, liquidity and results of operations of, and ListCos receipt of dividends, loans or other funds from, Polestar and its subsidiaries. ListCos subsidiaries are separate and distinct legal entities and have no obligation to make funds available to ListCo. In addition, there are various statutory, regulatory and contractual limitations and business considerations on the extent, if any, to which ListCos subsidiaries may pay dividends, make loans or otherwise provide funds to ListCo.
ListCo will grant share-based incentives following the Business Combination, which may result in increased share-based compensation expenses.
ListCo will adopt the Equity Plan and the Employee Stock Purchase Plan prior to Closing. Initially, the maximum number of Class A ADSs that may be issued under the Equity Plan after it becomes effective will be 10,000,000 Class A ADS. Such amount will be increased each year during the term of the Equity Plan by up to 0.5% of the total number of Post-Combination Company Shares outstanding on each December 31 immediately prior to the date of such increase. The Equity Plan permits the award of options, stock appreciation rights, restricted stock, restricted stock units, performance awards, other stock-based awards, cash awards and substitute awards to employees of ListCo and its subsidiaries and affiliates. ListCo will account for compensation costs for all awards granted under the Equity Plan using a fair-value based method and recognize expenses in its consolidated statements of profit or loss in accordance with IFRS.
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Initially, the maximum number of Class A ADSs that may be issued under the Employee Stock Purchase Plan after it becomes effective will be 2,000,000 Class A ADSs. Such amount will be increased each year during the term of the Employee Stock Purchase Plan by up to 0.1% of the total number of Post-Combination Company Shares outstanding on each December 31 immediately prior to the date of such increase. The Employee Stock Purchase Plan provides employees of ListCo and its subsidiaries and affiliates with the opportunity to purchase Class A ADSs and, in certain instances, to receive matching awards of Class A ADSs from ListCo. For more information on the share incentive plans, see Management of the Post-Combination CompanyEquity Plan and Employee Stock Purchase Plan. ListCo believes the granting of share-based compensation is of significant importance to its ability to attract and retain key employees, and as such, after the consummation of the Business Combination, ListCo will grant share-based compensation and incur share-based compensation expenses. As a result, expenses associated with share-based compensation may increase, which may have an adverse effect on ListCos business and results of operations.
Holders of ADSs and ADWs have fewer rights than direct holders of the Post-Combination Company securities and must act through the depositary to exercise their rights. The voting rights of holders of ADSs and ADWs are limited by the terms of the Deposit Agreements, and such holders may not be able to exercise their right to vote their ListCo securities directly.
Holders of ADSs and ADWs do not have the same rights as ListCo shareholders who hold Post-Combination Company securities directly. Holders of the AD securities will only be able to exercise the voting rights with respect to the underlying Post-Combination Company securities in accordance with the provisions of the Deposit Agreements. The holders and beneficial owners of the AD securities will be parties to and bound by the terms of the Deposit Agreements for the AD securities they own. Under the Deposit Agreements, ADS and ADW holders must vote by giving voting instructions to the depositary. If ListCo asks for instructions of ADS and ADW holders, then upon receipt of such voting instructions, the depositary will try to vote the underlying Post-Combination Company securities in accordance with these instructions. ADS and ADW holders will not be able to directly exercise their right to vote with respect to the underlying Post-Combination Company securities unless they present their ADSs and/or ADWs for cancellation and withdraw the underlying Post-Combination Company securities prior to the applicable record date for the meeting. When a meeting is convened, an ADS or ADW holder may not receive sufficient advance notice to withdraw the underlying Post-Combination Company securities his or her AD securities to allow such holder to vote with respect to any specific matter. If ListCo asks for instructions of holders of ADW, the depositary will notify ADS and/or ADW holders of the upcoming vote and will arrange to deliver voting materials to ADS and/or ADW holders. ListCo has agreed to give the depositary prior notice of meetings of holders of shares and warrants. Nevertheless, ListCo cannot assure you that holders of AD securities will receive the voting materials in time to ensure that holders of AD securities can instruct the depositary to vote the underlying shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out holders of AD securities voting instructions. This means that a holder of AD securities may not be able to exercise the right to vote and may have no legal remedy if the underlying Post-Combination Company securities underlying his or her of AD securities are not voted as such holder requested. Please see Description of the Post-Combination Companys American Depositary Securities.
The depositary for the AD securities will give ListCo a discretionary proxy to vote the Post-Combination Company securities underlying the AD securities if the holders of such AD securities do not give timely voting instructions to the depositary, except in limited circumstances, which could adversely affect the interests of holders of the ADSs.
Under the Deposit Agreements for the AD securities, if any holders of AD securities do not vote their AD securities, the depositary will give ListCo a discretionary proxy to vote the Post-Combination Company securities underlying such AD securities at shareholders meetings unless:
| ListCo has failed to timely provide the depositary with notice of meeting and related voting materials; |
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| ListCo has instructed the depositary that it does not wish a discretionary proxy to be given; |
| ListCo has informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; |
| a matter to be voted on at the meeting would have a material adverse impact on shareholders; or |
| the voting at the meeting is to be made on a show of hands. |
The effect of this discretionary proxy is that if any such holder of the AD securities does not provide timely and valid voting instructions, such holder cannot prevent the Post-Combination Company securities underlying such AD securities from being voted, except under the circumstances described above. This may make it more difficult for holders of AD securities to influence the management of ListCo.
The Post-Combination Articles and the Deposit Agreements may provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act and the Exchange Act and that certain claims may only be instituted in the courts of England and Wales, which could limit the ability of securityholders of ListCo to choose a favorable judicial forum for disputes with ListCo or ListCos directors, officers or employees.
The Post-Combination Articles provide that unless the Post-Combination Company consents in writing to the selection of an alternative forum, the courts of England and Wales will, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Post-Combination Company; (b) any action, including any action commenced by a member of the Post-Combination Company in its own name or on behalf of the Post-Combination Company, asserting a claim of breach of any fiduciary or other duty owed by any director, officer or other employee of the Post-Combination Company (including but not limited to duties arising under the Companies Act); (c) any action arising out of or in connection with the Post-Combination Articles or otherwise in any way relating to the constitution or conduct of the Post-Combination Company; or (d) any action asserting a claim against the Post-Combination Company governed by the internal affairs doctrine (as such concept is recognized under the laws of the United States of America). The Deposit Agreements will also provide for exclusive forum in state and federal courts in the City of New York. This forum selection provision in the Post-Combination Articles will not apply to actions or suits brought to enforce any liability or duty created by the Securities Act, Exchange Act or any claim for which the federal district courts of the United States of America are, as a matter of the laws of the United States of America, the sole and exclusive forum for determination of such a claim. The Post-Combination Articles provide that the federal district courts in the United States will be the exclusive forum for claims against ListCo under the Securities Act and the Exchange Act.
Although ListCo believes these exclusive forum provisions will benefit ListCo by providing increased consistency in the application of U.S. federal securities laws and the laws of England and Wales in the types of lawsuits to which they apply, these choice of forum provisions may increase a securityholders cost and limit the securityholders ability to bring a claim in a judicial forum that it finds favorable for disputes with ListCo or ListCos directors, officers or other employees, which may discourage lawsuits against ListCo and ListCos directors, officers and other employees. ListCos shareholders will not be deemed to have waived ListCos compliance with the U.S. federal securities laws and the rules and regulations thereunder as a result of ListCos exclusive forum provision. Any person or entity purchasing or otherwise acquiring any of the Post-Combination Company shares or other securities, whether by transfer, sale, operation of law or otherwise, will be deemed to have notice of and have irrevocably agreed and consented to these provisions. There is uncertainty as to whether a court would enforce such provisions. The Securities Act provides that state courts and federal courts will have concurrent jurisdiction over claims under the Securities Act, and the enforceability of similar choice of forum provisions in other companies charter documents has been challenged in legal proceedings. It is possible that a court could find this type of provisions to be inapplicable or unenforceable, and if a court were to find this provision in the Post-Combination Articles to be inapplicable or unenforceable in an action, the Post-
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Combination Company may incur additional costs associated with resolving the dispute in other jurisdictions, which could have adverse effect on the Post-Combination Companys business and financial performance.
An ADS or ADW holders right to pursue claims against the depositary is limited by the terms of the Deposit Agreements.
Under the Deposit Agreements, any action or proceeding against or involving the depositary arising out of or based upon the Deposit Agreements or the transactions contemplated thereby or by virtue of owning the ADS and ADW may only be instituted in state and federal courts in the City of New York, and a holder of the ADS and ADW will have irrevocably waived any objection which such holder may have to the laying of venue of any such proceeding, and irrevocably submitted to the exclusive jurisdiction of such courts in any such action or proceeding. However, there is uncertainty as to whether a court would enforce this exclusive jurisdiction provision. Furthermore, investors cannot waive compliance with the U.S. federal securities laws and rules and regulations promulgated thereunder. Also, ListCo may amend or terminate the Deposit Agreement without the consent of any holder of ADSs or ADWs. If a holder continues to hold its ADSs and ADWs after an amendment to the Deposit Agreement, such holder agrees to be bound by the applicable Deposit Agreement as so amended.
ADS and ADW holders may not be entitled to a jury trial with respect to claims arising under the Deposit Agreements, which could result in less favorable results to the plaintiff(s) in any such action.
The Deposit Agreements governing the ADSs and ADWs provide that owners and holders of ADSs and ADWs irrevocably waive the right to a trial by jury in any legal proceeding arising out of or relating to the Deposit Agreements or the ADSs or ADWs, including claims under U.S. federal securities laws, against ListCo or the depositary to the fullest extent permitted by applicable law. If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the Deposit Agreements with a jury trial. Although ListCo is not aware of a specific federal decision that addresses the enforceability of a jury trial waiver in the context of U.S. federal securities laws, it is ListCos understanding that jury trial waivers are generally enforceable. Moreover, insofar as the Deposit Agreements are governed by the laws of the State of New York, New York laws similarly recognize the validity of jury trial waivers in appropriate circumstances. In determining whether to enforce a jury trial waiver provision, New York courts and federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. ListCo believes that this is the case with respect to the Deposit Agreements and the ADSs and ADWs.
In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim of fraud or one which is based upon a creditors negligence in failing to liquidate collateral upon a guarantors demand, or in the case of an intentional tort claim (as opposed to a contract dispute). No condition, stipulation or provision of the Deposit Agreements or ADSs or ADWs serves as a waiver by any holder or beneficial owner of ADSs or ADWs or by ListCo or the depositary of compliance with any provision of U.S. federal securities laws and the rules and regulations promulgated thereunder.
If any owner or holder of ADSs or ADWs brings a claim against ListCo or the depositary in connection with matters arising under the Deposit Agreements or the ADSs or ADWs, including claims under U.S. federal securities laws, such owner or holder may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against ListCo or the depositary. If a lawsuit is brought against ListCo or the depositary under the Deposit Agreements, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different results than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice hearing such claims and the venue of the hearing.
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The depositary for the ADSs and ADWs is entitled to charge holders fees for various services, including annual service fees.
The depositary for the ADSs and ADWs is entitled to charge holders fees for various services, including for the issuance of the ADSs and ADWs upon deposit of Post-Combination Company securities (other than in the case of ADSs and ADWs issued pursuant to the Business Combination), cancellation of ADSs and ADWs, distributions of cash dividends or other cash distributions, distributions of ADSs and ADWs pursuant to share dividends or other free share distributions, distributions of securities other than ADSs and ADWs and annual service fees. For more information, please see the sections titled Description of the Post-Combination Companys American Depositary SecuritiesADSsFees and Charges and Description of the Post-Combination Companys American Depositary SecuritiesADWsFees and Charges. In the case of ADSs and ADWs issued by the depositary into the DTC the fees will be charged by the DTC participant to the account of the applicable beneficial owner in accordance with the procedures and practices of the DTC participant as in effect at the time. The depositary for the ADSs and ADWs will not be responsible for any United Kingdom stamp duty or SDRT arising upon the issuance or transfer of ADSs and ADWs but will require the person who deposits shares or warrants to pay the applicable United Kingdom stamp duty or SDRT. For more information, please see the section titled Risks Related to TaxTransfers of ADSs or ADWs or the underlying Post-Combination Company securities may be subject to stamp duty or stamp duty reserve tax in the U.K., which would increase the cost of dealing in the Post-Combination Company securities.
The ADS and ADW holders may not receive dividends or other distributions of the Post-Combination Company Shares and the holders thereof may not receive any value for them, if it is illegal or impractical to make them available to such holders.
Under the terms of the Deposit Agreements, the depositary of the ADSs and ADWs will agree to distribute to holders of the ADSs and ADWs the cash dividends or other distributions it or the custodian receives on the applicable deposited securities underlying the ADSs and ADWs, after deducting its fees, taxes and expenses. For more information, please see the sections titled Description of the Post-Combination Companys American Depositary SecuritiesADSsFees and Charges and Description of the Post-Combination Companys American Depositary SecuritiesADWsFees and Charges. Holders of the ADSs and ADWs will receive these distributions in proportion to the number of ADSs and ADWs they hold. However, the depositary is not responsible for making such distributions if it decides that such distributions are unlawful or impractical. For example, it would be unlawful to make a distribution to a holder of ADSs and ADWs if it consists of securities that require registration under the Securities Act but such securities are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not practicable to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. ListCo has no obligation to register under U.S. securities laws securities received through such distributions. ListCo also has no obligation to take any other action to permit the distribution of ADSs and ADWs. This means that holders of the ADSs and ADWs may not receive distributions ListCo makes on its securities or any value for them if it is illegal or impractical for ListCo to make them available to such holders. These restrictions may cause a material decline in the value of the ADSs and ADWs.
Holders of ADSs (and ADWs, if applicable) may experience dilution of their holdings due to their inability to participate in rights offerings.
ListCo may, from time to time, distribute rights to its shareholders, including rights to acquire securities. Under the Deposit Agreements for the ADSs (and ADWs, if applicable), the depositary will not distribute rights to holders of ADSs (and ADWs, if applicable) unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs (and ADWs, if applicable) or are registered under the provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. ListCo may be unable to establish an exemption from registration under the Securities Act, and ListCo is under no
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obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs (and ADWs, if applicable) may be unable to participate in ListCos rights offerings and may experience dilution of their holdings as a result.
Holders of ADSs and ADWs may be subject to limitations on transfer of their ADSs and ADWs.
ADSs and ADWs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADSs and ADWs on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of ADSs and ADWs generally when ListCos share register or the books of the depositary are closed, or at any time if ListCo or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the Deposit Agreement, or for any other reason.
Risks Related to the Redemption
GGI does not have a specified maximum redemption threshold in the Current GGI Certificate, except that in no event will GGI redeem GGI Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. The absence of a different maximum redemption threshold in the Current GGI Certificate may make it possible for GGI to complete a business combination with which a substantial majority of its stockholders do not agree.
The Current GGI Certificate does not provide a specified maximum redemption threshold, except that in no event will GGI redeem GGI Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 (such that it is not subject to the SECs penny stock rules). Based on a value of $10.00 per share, up to 79,500,035 GGI Public Shares may be redeemed under the Current GGI Certificate. This is referred to this as the charter redemption limitation scenario. Additionally, a GGI Public Stockholder, together with any of its affiliates or any other person with whom it is acting in concert or as a group (as defined under Section 13 of the Exchange Act), will be restricted from redeeming in the aggregate their shares or, if part of such a group, the groups shares, in excess of 15% of the GGI Public Shares. Furthermore, the Business Combination Agreement provides that the obligation of Polestar to consummate the Business Combination is subject to the Minimum Cash Condition. As a result, GGI may be able to complete the Business Combination even if a substantial majority of GGI Public Stockholders are not in favor of the Business Combination and have redeemed their GGI Public Shares or have entered into privately negotiated agreements to sell their GGI Public Shares to the GGI Sponsor, officers, directors, advisors or their affiliates. As of the date of this proxy statement/prospectus, no agreements with respect to the private purchase of GGI Public Shares by GGI or the persons described above have been entered into with any such investor or holder. GGI will file a Current Report on Form 8-K with the SEC to disclose private arrangements entered into or significant private purchases made by any of the aforementioned persons that would affect the vote on the Business Combination Proposal or other proposals (as described in this proxy statement/prospectus) at the Stockholder Special Meeting or the Warrant Holder Meeting.
In the event the aggregate cash consideration GGI would be required to pay for all shares of GGI Public Shares that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the Business Combination Agreement exceeds the aggregate amount of cash available to GGI, GGI may not complete the Business Combination or redeem any shares, all shares of GGI Public Shares submitted for redemption will be returned to the holders thereof, and GGI instead may search for an alternate initial business combination.
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If you or a group of stockholders of which you are a part are deemed to hold an aggregate of more than 15% of GGI Public Shares, you (or, if a member of such a group, all of the members of such group in the aggregate) will lose the ability to redeem all such shares in excess of 15% of GGI Public Shares.
A GGI Public Stockholder, together with any of their affiliates or any other person with whom it is acting in concert or as a group (as defined under Section 13 of the Exchange Act), will be restricted from redeeming in the aggregate their shares or, if part of such a group, the groups shares, in excess of 15% of the GGI Public Shares. GGI Public Stockholders who wish to redeem their GGI Public Shares for a pro rata portion of the Trust Account must, among other things, identify the beneficial holder of the shares being redeemed. Such identification, together with other public information relating to stock ownership available to GGI at that time, such as Section 13D, Section 13G and Section 16 filings under the Exchange Act, will be the sole basis on which GGI make the above-referenced determination. Your inability to redeem any such excess shares will reduce your influence over GGIs ability to consummate the Business Combination and you could suffer a material loss on your investment in GGI if you sell such excess shares in open market transactions. Additionally, you will not receive redemption distributions with respect to such excess shares if GGI consummates the Business Combination. As a result, you will continue to hold that number of shares aggregating to more than 15% of the GGI Public Shares and, in order to dispose of such excess shares, would be required to sell your stock in open market transactions, potentially at a loss. GGI cannot assure you that the value of such excess shares will appreciate over time following the Business Combination or that the market price of GGI Class A Common Stock will exceed the per-share redemption price. Notwithstanding the foregoing, stockholders may challenge GGIs determination as to whether a stockholder is acting in concert or as a group with another stockholder in a court of competent jurisdiction.
However, GGIs stockholders ability to vote all of their shares (including such excess shares) for or against the Business Combination is not restricted by this limitation on redemption.
There is no guarantee that a stockholders decision whether to redeem GGI Public Shares for a pro rata portion of the Trust Account will put the stockholder in a better future economic position.
GGI can give no assurance as to the price at which a GGI stockholder may be able to sell the Class A ADSs following the Business Combination or its GGI Public Shares following any alternative initial business combination. Certain events following the consummation of any initial business combination, including the Business Combination, may cause an increase in GGIs share price, and may result in a lower value realized now than a GGI Public Stockholder might realize in the future had the stockholder not redeemed its shares. Similarly, if a stockholder does not redeem its shares, the stockholder will bear the risk of ownership of Class A ADSs after the consummation of the Business Combination or the GGI Public Shares after the consummation of any alternative initial business combination, and there can be no assurance that a stockholder can sell its shares in the future for a greater amount than the redemption price set forth in this proxy statement/prospectus. Stockholders should consult their own tax and/or financial advisor for assistance on how this may affect their individual situation.
GGI Public Stockholders who wish to redeem their shares for a pro rata portion of the Trust Account must comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline. If stockholders fail to comply with the redemption requirements specified in this proxy statement/prospectus, they will not be entitled to redeem their GGI Public Shares for a pro rata portion of the funds held in the Trust Account.
GGI Public Stockholders who wish to redeem their shares for a pro rata portion of the Trust Account must, among other things (i) submit a request in writing, (ii) identify the beneficial holder of the shares being redeemed and (iii) tender their certificates to the Transfer Agent or deliver their shares to the Transfer Agent electronically through the ATOP system at least two business days prior to the Special Meeting. In order to obtain a physical stock certificate, a stockholders broker and/or clearing broker, DTC and the Transfer Agent will need to act to facilitate this request. It is GGIs understanding that stockholders should generally allot at least two weeks to
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obtain physical certificates from the Transfer Agent. However, because GGI does not have any control over this process or over the brokers, it may take significantly longer than two weeks to obtain a physical stock certificate. If it takes longer than anticipated to obtain a physical certificate, stockholders who wish to redeem their shares may be unable to obtain physical certificates by the deadline for exercising their redemption rights and thus will be unable to redeem their shares.
GGI Public Stockholders electing to redeem their shares will receive their pro rata portion of the Trust Account less Regulatory Withdrawals and franchise and income taxes payable, calculated as of two business days prior to the anticipated consummation of the Business Combination. Please see the section titled Special Meeting of GGI StockholdersRedemption Rights for additional information on how to exercise your redemption rights.
If a stockholder fails to receive notice of GGIs offer to redeem GGI Public Shares in connection with the Business Combination, such shares may not be redeemed.
If, despite GGIs compliance with the proxy rules, a stockholder fails to receive its proxy materials, such stockholder may not become aware of the opportunity to redeem its GGI Public Shares. As a result, its GGI Public Shares may not be redeemed.
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SPECIAL MEETING OF GGI STOCKHOLDERS
This proxy statement/prospectus is being provided to GGI stockholders as part of a solicitation of proxies by the GGI Board for use at the Stockholder Special Meeting to be held on [●], 2022, and at any adjournment thereof. This proxy statement/prospectus contains important information regarding the Stockholder Special Meeting, the proposals on which you are being asked to vote and information you may find useful in determining how to vote and voting procedures.
This proxy statement/prospectus is being first mailed on or about [●] 2022, to all stockholders of record of GGI as of April 20, 2022, the record date for the Stockholder Special Meeting. Stockholders of record who owned shares of GGI Common Stock at the close of business on the record date are entitled to receive notice of, attend and vote at the Stockholder Special Meeting. On the record date, there were 100,000,000 shares of GGI Common Stock outstanding.
Date, Time and Place
In light of public health concerns regarding the COVID-19 pandemic, the Stockholder Special Meeting will be held via live webcast at www.meetnow.global/MYGAWFM, on [●], 2022, at [●]. The Stockholder Special Meeting can be accessed by visiting www.meetnow.global/MYGAWFM, where you will be able to listen to the meeting live and vote during the meeting. Please note that you will only be able to access the Stockholder Special Meeting by means of remote communication. Please have your Control Number, which can be found on your GGI stockholder proxy card, to join the Stockholder Special Meeting. If you do not have a control number, please contact Computershare Trust Company, N.A., the Transfer Agent.
Proposals at the Stockholder Special Meeting
At the Stockholder Special Meeting, GGI stockholders will vote on the following proposals:
1. | Business Combination ProposalTo consider and vote upon a proposal to adopt the Business Combination Agreement, a copy of which is attached to this proxy statement/prospectus as Annexes A-1, A-2, A-3 and A-4, and approve, among other things, the Business Combination (Stockholder Proposal No. 1); |
2. | Governance ProposalsTo consider and act upon, on a non-binding advisory basis, separate proposals with respect to certain governance provisions in the Post-Combination Articles, attached hereto as Annex B, in accordance with SEC requirements (Stockholder Proposal No. 2); and |
3. | Adjournment ProposalTo consider and vote upon a proposal to allow the chairman of the Stockholder Special Meeting to adjourn the Stockholder Special Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI stockholders to approve the Business Combination Proposal or to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to GGI stockholders (Stockholder Proposal No. 3). |
THE GGI BOARD UNANIMOUSLY RECOMMENDS THAT
YOU VOTE FOR EACH OF THESE PROPOSALS.
Voting Power; Record Date
As a stockholder of GGI, you have a right to vote on certain matters affecting GGI. The proposals that will be presented at the Stockholder Special Meeting and upon which you are being asked to vote are summarized above and fully set forth in this proxy statement/prospectus. You will be entitled to vote or direct votes to be cast at the Stockholder Special Meeting if you owned shares of GGI Common Stock at the close of business on April 20, 2022, which is the record date for the Stockholder Special Meeting. You are entitled to one vote for each share of GGI Common Stock that you owned as of the close of business on the record date. If your shares are held in street name or are in a margin or similar account, you should contact your broker, bank or other nominee to
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ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were 100,000,000 shares of GGI Common Stock outstanding, of which 80,000,000 are GGI Public Shares and 20,000,000 are Founder Shares held by the GGI Initial Stockholders.
Vote of the GGI Initial Stockholders and GGIs Other Directors and Officers
Prior to the GGI IPO, GGI entered into agreements with the GGI Sponsor and each of GGIs directors and officers, pursuant to which each agreed to vote any shares of GGI Common Stock owned by them in favor of the Business Combination Proposal. In addition, pursuant to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, the GGI Initial Stockholders have agreed to vote their GGI Class F Common Stock in favor of the Business Combination Proposal and any other proposals for the Stockholder Special Meeting included in this proxy statement/prospectus, and against any alternative business combination. None of the GGI Sponsor or GGIs directors or officers have purchased any shares of GGI Common Stock during or after the GGI IPO and, as of the date of this proxy statement/prospectus, neither GGI nor the GGI Sponsor or GGIs directors or officers have entered into agreements, and are not currently in negotiations, to purchase shares prior to the consummation of the Business Combination. Currently, the GGI Initial Stockholders own 20% of the issued and outstanding shares of GGI Common Stock, including all of the GGI Class F Common Stock, and will be able to vote all such shares at the Stockholder Special Meeting.
Pursuant to the GGI IPO Letter Agreement, the GGI Initial Stockholders have waived their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if GGI fails to complete an initial business combination within 24 months from the closing date of the GGI IPO. However, if the GGI Initial Stockholders acquire GGI Public Shares after the GGI IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such GGI Public Shares if GGI fails to complete an initial business combination within the allotted 24-month time period.
Quorum and Required Vote for Proposals for the Stockholder Special Meeting
A majority of the issued and outstanding shares of GGI Common Stock entitled to vote as of the record date at the Stockholder Special Meeting must be present, in person via the virtual meeting platform or represented by proxy, at the Stockholder Special Meeting to constitute a quorum and in order to conduct business at the Stockholder Special Meeting. Abstentions will be counted as present for the purpose of determining a quorum.
The Business Combination Proposal (and consequently, the Business Combination Agreement and the Business Combination, including the Merger) will be approved only if the holders of a majority of the outstanding shares of GGI Common Stock entitled to vote thereon at the Stockholder Special Meeting vote FOR the Business Combination Proposal. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Stockholder Special Meeting, abstentions and broker non-votes will have the same effect as a vote AGAINST the Business Combination Proposal. The GGI Initial Stockholders have agreed to vote their shares of GGI Common Stock in favor of the Business Combination Proposal. As of the record date, the GGI Sponsor and GGIs directors and officers own 20% of the issued and outstanding shares of GGI Common Stock. As a result, holders of approximately 38% of GGI Public Shares will need to vote in favor of the Business Combination Proposal for the Business Combination Proposal to be approved.
The Governance Proposals will be approved only if the holders of a majority of the votes cast by holders of the outstanding shares of GGI Common Stock represented in person via the virtual meeting platform or by proxy and entitled to vote thereon at the Stockholder Special Meeting vote FOR the Governance Proposals. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Stockholder Special Meeting, abstentions and broker non-votes will have no effect on the vote to approve the Governance Proposals. The GGI Initial Stockholders have agreed to vote the shares of GGI Class F Common Stock they own in favor of the Governance Proposals.
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The Adjournment Proposal will be approved only if the holders of a majority of the votes cast by holders of the outstanding shares of GGI Common Stock represented in person via the virtual meeting platform or by proxy and entitled to vote thereon at the Stockholder Special Meeting vote FOR the Adjournment Proposal. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Stockholder Special Meeting, abstentions and broker non-votes will have no effect on the vote to approve the Adjournment Proposal. The GGI Initial Stockholders have agreed to vote the shares of GGI Class F Common Stock they own in favor of the Adjournment Proposal.
It is important for you to note that, in the event that the Business Combination Proposal does not receive the requisite vote for approval, GGI will not consummate the Business Combination. If GGI does not consummate the Business Combination, GGI may fail to complete an initial business combination by March 25, 2023, in which case GGI will be required to dissolve and liquidate the Trust Account by returning the then remaining funds in such account to GGI Public Stockholders unless GGI amends the Current GGI Certificate (which requires the affirmative vote of 65% of all then outstanding shares of GGI Common Stock) and amend certain other agreements into which GGI has entered to extend the life of GGI.
Recommendation to GGI Stockholders
The GGI Board believes that approval of each of the Business Combination Proposal, the Governance Proposals and the Adjournment Proposal to be presented at the Stockholder Special Meeting is in the best interests of GGI and its stockholders and unanimously recommends that its stockholders vote FOR each of the proposals.
When considering the GGI Boards recommendation to vote in favor of approving the Business Combination Proposal, the Warrant Amendment Proposal and the other proposals described in this proxy statement/prospectus, GGIS stockholders and warrant holders should keep in mind that the GGI Sponsor and GGIs directors and officers have interests in such proposals that may be different from, or in addition to (and which may conflict with), the interests of GGI stockholders and warrant holders generally. The GGI Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination, and in recommending to GGI stockholders and GGI warrant holders that they approve the proposals to be presented to GGI stockholders and GGI warrant holders, respectively. GGI stockholders and GGI warrant holders should take these interests into account in deciding whether to approve the proposals set forth in this proxy statement/prospectus.
These interests include, among other things:
| the fact that the GGI Initial Stockholders have agreed not to redeem any Founder Shares or GGI Class A Common Stock held by them in connection with a stockholder vote to approve a proposed initial business combination; |
| the fact that the GGI Initial Stockholders have agreed to waive their rights to conversion price adjustments with respect to any Founder Shares they may hold in connection with the consummation of the Business Combination and therefore, the Founder Shares will convert on a one-for-one basis into Class A ADSs at the Closing; |
| the fact that the GGI Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if GGI fails to complete an initial business combination by March 25, 2023; |
| the fact that the GGI Sponsor paid an aggregate of $25,000 for 21,562,500 Founder Shares at approximately $0.001 per share, and, after giving effect to the cancellation of 1,562,500 Founder Shares on May 9, 2021, the remaining 20,000,000 Founder Shares will become worthless if GGI fails to complete an initial business combination by March 25, 2023. In particular, in exchange for serving on the GGI Board, GGIs independent directors, Mr. Bort, Ms. Marcellino and Ms. Tellem, each received 25,000 Founder Shares at their original purchase price of $0.001 per share from the GGI |
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Sponsor. Because these Founder Shares will become worthless if GGI fails to complete an initial business combination by March 25, 2023, GGIs independent directors may have a conflict of interest in determining whether a particular business is an appropriate business with which to effectuate GGIs initial business combination; |
| the fact that after giving effect to the cancellation of 1,562,500 Founder Shares on May 9, 2021 and the forfeiture of up to 1,540,835 shares of GGI Class F Common Stock pursuant to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, the remaining 18,459,165 Founder Shares that will be exchanged for Class A ADSs at the Closing will have a significantly higher value than their aggregate purchase price, which if unrestricted and freely tradable would be valued at approximately $185 million (however, given the restrictions on such shares, GGI believes such shares have a lesser value); |
| the fact that, given the differential in the purchase price that the GGI Sponsor paid for the Founder Shares as compared to the price of the GGI Public Units and the substantial number of Class A ADSs that the GGI Sponsor will receive upon exchange of the Founder Shares at the Closing, the GGI Sponsor and its affiliates may earn a positive rate of return on their investment even if the Class A ADSs trade below the price initially paid for the GGI Public Units in the GGI IPO and GGI Public Stockholders experience a negative rate of return following the completion of the Business Combination; |
| the fact that the GGI Sponsor paid an aggregate of approximately $18,000,000 for its 9,000,000 GGI Private Placement Warrants, and that such GGI Private Placement Warrants will expire worthless if an initial business combination is not consummated by March 25, 2023. The GGI Private Placement Warrants are identical to the GGI Public Warrants sold as part of the GGI Public Units except that, so long as they are held by the GGI Sponsor or its permitted transferees: (i) they will not be redeemable by GGI, except as described in the Existing Warrant Agreement; (ii) they (including the GGI Class A Common Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the GGI Sponsor until 30 days after the completion of an initial business combination; (iii) they may be exercised by the holders on a cashless basis; and (iv) they are subject to registration rights. For additional information regarding the GGI Private Placement Warrants and the GGI Public Warrants, please see the Existing Warrant Agreement, attached hereto as Annex C; |
| the fact that, in connection with the Business Combination, each GGI Private Placement Warrant will, in the event the Warrant Amendment Proposal is approved prior to the Effective Time, be converted into the right to receive one Class C-2 ADS, issued against the deposit of an underlying Post-Combination Company Class C-2 Share, which will be exercisable to acquire a Post-Combination Company Class A Share in the form of a Class A ADS on substantially the same terms as the GGI Private Placement Warrants; |
| the fact that, in connection with the Business Combination, each GGI Private Placement Warrant will, in the event the Warrant Amendment Proposal is not approved prior to the Effective Time, be converted into the right to receive one PP ADW, issued against the deposit of an underlying Post-Combination Company Warrant, which will be exercisable to acquire a Post-Combination Company Class A Share in the form of a Class A ADS on substantially the same terms as the GGI Private Placement Warrants; |
| the continued right of the GGI Sponsor to hold the Class A ADSs to be issued to the GGI Sponsor upon exercise of Class C-2 ADSs or ADWs following the Business Combination, subject to certain lock-up periods; |
| the fact that if the Trust Account is liquidated, including in the event GGI is unable to complete an initial business combination within the required time period, the GGI Sponsor has agreed to indemnify GGI to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of |
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prospective target businesses with which GGI has entered into an acquisition agreement or claims of any third party (other than the independent public accountants) for services rendered or products sold to GGI, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account; |
| the continued indemnification of the existing directors and officers of GGI and the continuation of the directors and officers liability insurance after the Business Combination; |
| the fact that the GGI Sponsor and GGIs officers and directors will lose their entire investment in GGI and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by March 25, 2023, including the expected reimbursement at the closing of an initial business combination of approximately $615,000 of an aggregate of approximately $948,000 of expenses incurred by GGI Sponsor and its affiliates as of March 1, 2022; |
| the fact that the GGI Sponsor made available to GGI a loan of up to $4,000,000 pursuant to a promissory note, of which a net amount of $2,500,000 was advanced by the GGI Sponsor to GGI as of March 1, 2022, and that the note will mature on the earlier of March 11, 2023 and the date on which GGI consummates an initial business combination; |
| the fact that GGI has entered into the Sponsor Subscription Agreement, pursuant to which the GGI Sponsor has agreed to purchase approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs at a purchase price of $9.09 per share on the date of Closing, and the GGI Sponsor has the right to syndicate its commitment to acquire such Class A ADSs in advance of the Closing; |
| the fact that Guggenheim Securities, LLC, an affiliate of the GGI Sponsor and Andrew Rosenfield, is acting as a joint placement agent in connection with the Subscription Investments and will receive a portion of a transaction fee equal to 3% of the gross proceeds raised by the placement agents in connection with the Subscription Investments, and as a financial advisor to GGI for no additional fee; |
| the fact that the GGI Sponsor and GGIs officers and directors would beneficially own the following number of Class A ADSs at the Closing: |
Name of Person/Entity |
Number of Class A ADSs(1) |
Value of Class A ADSs(2) |
||||||
Gores Guggenheim Sponsor LLC(3) |
19,350,374 | $ | 193,503,740 | |||||
GGP Sponsor Holdings LLC(3) |
19,350,374 | $ | 193,503,740 | |||||
Alec Gores(3) |
19,350,374 | $ | 193,503,740 | |||||
Andrew Rosenfield(3) |
19,350,374 | $ | 193,503,740 | |||||
Mark Stone(4) |
171,841 | $ | 1,718,410 | |||||
Andrew McBride |
20,892 | $ | 208,920 | |||||
Randall Bort |
25,000 | $ | 250,000 | |||||
Elizabeth Marcellino |
25,000 | $ | 250,000 | |||||
Nancy Tellem(5) |
40,670 | $ | 406,700 |
(1) | Does not reflect beneficial ownership of Class A ADSs subject to exercise of Post-Combination Company Class C Shares or Post-Combination Company Warrants, because such shares or warrants, as applicable, are not exercisable within 60 days of the date of this proxy statement/prospectus. |
(2) | Assumes a value of $10.00 per share, the deemed value of the GGI Common Stock in the Business Combination. |
(3) | Represents shares held by Gores Guggenheim Sponsor LLC which is jointly controlled indirectly by Mr. Gores and GGP Sponsor Holdings LLC. GGP Sponsor Holdings LLC is controlled by Mr. Rosenfield. Each of Mr. Gores and GGP Sponsor Holdings LLC may be deemed to beneficially own 19,350,374 Class A ADSs and ultimately exercises voting and dispositive power of the securities held by Gores Guggenheim Sponsor LLC. Voting and disposition decisions with respect to such securities are jointly made by Mr. Gores and GGP Sponsor Holdings LLC. Each of Mr. Gores, GGP Sponsor Holdings LLC and Mr. Rosenfield disclaim beneficial ownership of these securities except to the extent of any pecuniary interest therein. |
(4) | Reflects Class A ADSs to be purchased by Mark Stone and his immediate family as December PIPE Investors. |
(5) | Includes 15,670 Class A ADSs to be purchased by Nancy Tellem as a December PIPE Investor. |
| the fact that, pursuant to the Business Combination Agreement, the Post-Combination Company Board will include one independent director as reasonably determined by the GGI Sponsor and consented to |
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by Parent. In addition, pursuant to the Post-Combination Articles, the Post-Combination Company Board will be subject to restrictions on its ability to convene a general meeting which proposes a resolution to remove an independent director, subject to certain conditions, and pursuant to the Shareholder Acknowledgement Agreement, Parent and the Parent Shareholders are subject to undertakings that restrict on their ability to vote in favor of the removal of independent directors on the Post-Combination Company Board, and the GGI Sponsor will have third party beneficiary rights to enforce such undertakings; |
| the fact that the GGI Initial Stockholders have entered into the Registration Rights Agreement as Registration Rights Holders, which provides such Registration Rights Holders and their permitted transferees with registration rights in respect of certain Post-Combination Company securities, ADSs and ADWs at the Closing; |
| the fact that the GGI Initial Stockholders have agreed to vote any shares of GGI Common Stock owned by them in favor of the Business Combination Proposal; |
| the fact that GGI, Parent, ListCo and the GGI Initial Stockholders have entered into the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, pursuant to which the GGI Initial Stockholders have, among other things, agreed to (i) vote their GGI Class F Common Stock in favor of each of the proposals at the Special Meeting and referenced in this proxy statement/prospectus, and against any alternative business combination, (ii) waive all adjustments to the conversion ratio set forth in the Current GGI Certificate with respect to the GGI Class F Common Stock, (iii) be bound by certain transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants, and (iv) not to transfer any Class A ADSs issued pursuant to the Business Combination Agreement in respect of shares of GGI Class F Common Stock during the period beginning on the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein; and |
| the fact that GGI will reimburse the GGI Sponsor for the fees and expenses it incurs in connection with the Business Combination; provided, that such fees and expenses, together with all of GGIs other fees and expenses in connection with the Business Combination, are not in excess of $60 million in the aggregate. |
In the aggregate, the GGI Sponsor and its affiliates have approximately $218,000,000 at risk that depends upon the completion of a business combination. Specifically, $200,000,000 of such amount is the value of the GGI Sponsors and its affiliates GGI Class F Common Stock (assuming a value of $10.00 per share, the deemed value of the GGI Common Stock in the Business Combination), and $18,000,000 of such amount is the value of the GGI Private Placement Warrants held by the GGI Sponsor (based on the purchase price of $2.00 per GGI Private Placement Warrant). There are no fees contingent upon a business combination payable to the GGI Sponsors affiliates upon consummation of the Business Combination. The foregoing interests present a risk that the GGI Sponsor and its affiliates will benefit from the completion of a business combination, including in a manner that may not be aligned with GGI Public Stockholders. As such, the GGI Sponsor may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to GGI Public Stockholders rather than liquidate.
These interests may influence the GGI Board in making their recommendation that GGI stockholders vote in favor of the approval of the Business Combination Proposal and the other proposals to be voted on at the Stockholder Special Meeting, and their recommendation that the GGI warrant holders vote in favor of the proposals to be voted on at the Warrant Holder Meeting.
Abstentions and Broker Non-Votes
Abstentions are considered present for the purposes of establishing a quorum. For purposes of approval, a failure to vote or an abstention will have no effect on the Governance Proposals and the Adjournment Proposal, but a
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failure to vote or abstention will have the same effect as a vote AGAINST the Business Combination Proposal. In general, if your shares are held in street name and you do not instruct your broker, bank or other nominee on a timely basis on how to vote your shares, your broker, bank or other nominee, in its sole discretion, may either leave your shares unvoted or vote your shares on routine matters, but not on any non-routine matters.
None of the proposals at the Stockholder Special Meeting are routine matters. As such, without your voting instructions, your brokerage firm cannot vote your shares on any proposal to be voted on at the Stockholder Special Meeting.
Voting Your Shares Stockholders of Record
If you are a GGI stockholder of record, you may vote by mail or you can attend the Stockholder Special Meeting in person via the virtual meeting platform and vote during the meeting by following the instructions on your GGI stockholder proxy card. Each share of GGI Common Stock that you own in your name entitles you to one vote on each of the proposals for the Stockholder Special Meeting. Your one or more GGI stockholder proxy cards show the number of shares of GGI Common Stock that you own.
Voting by Mail. You can vote your shares by completing, signing, dating and returning the enclosed GGI stockholder proxy card in the postage-paid envelope provided. By signing the GGI stockholder proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the GGI stockholder proxy card to vote your shares at the Stockholder Special Meeting in the manner you indicate. You are encouraged to sign and return the GGI stockholder proxy card even if you plan to attend the Stockholder Special Meeting so that your shares will be voted if you are unable to attend the Stockholder Special Meeting. If you receive more than one GGI stockholder proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all GGI stockholder proxy cards to ensure that all of your shares are voted. If you hold your shares in street name through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Stockholder Special Meeting. If you sign and return the GGI stockholder proxy card but do not give instructions on how to vote your shares, your shares of GGI Common Stock will be voted as recommended by the GGI Board. The GGI Board recommends voting FOR the Business Combination Proposal, FOR each of the Governance Proposals and FOR the Adjournment Proposal. Votes submitted by mail must be received by [●] on [●], 2022.
Voting via the Virtual Meeting Platform. You can attend the Stockholder Special Meeting in person via the virtual meeting platform and vote during the meeting by following the instructions on your GGI stockholder proxy card. You can access the Stockholder Special Meeting by visiting the website www.meetnow.global/MYGAWFM. You will need your control number for access. If you are a Registered Holder and do not have a control number, please contact Computershare Trust Company, N.A., the Transfer Agent. If you are a beneficial holder and do not have a control number, please contact your broker, bank or nominee. To attend and participate at the Stockholder Special Meeting, you can sign in with your control number as a Registered Holder or a beneficial owner who has registered with a legal proxy. If you hold your shares in street name, which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares. However, if your shares are held in the name of your broker, bank or other nominee, you must get a proxy from the broker, bank or other nominee. That is the only way GGI can be sure that the broker, bank or nominee has not already voted your shares of GGI Common Stock.
Voting Your Shares Beneficial Owners
If your shares are held in an account at a brokerage firm, bank or other nominee, then you are the beneficial owner of shares held in street name and this proxy statement/prospectus is being sent to you by that broker, bank or other nominee. The broker, bank or other nominee holding your account is considered to be the
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stockholder of record for purposes of voting at the Stockholder Special Meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote the shares in your account by following the instructions that the broker, bank or other nominee provides you along with this proxy statement/prospectus. As a beneficial owner, if you wish to vote at the Stockholder Special Meeting, you must get a proxy from the broker, bank or other nominee. Please see the section titled Special Meeting of GGI StockholdersAttending the Stockholder Special Meeting.
Attending the Stockholder Special Meeting
Only GGI stockholders on the record date or their legal proxyholders may attend and participate at the Stockholder Special Meeting. Please note that you will only be able to access the Stockholder Special Meeting by means of remote communication. Please have your Control Number, which can be found on your GGI stockholder proxy card, to join the special meeting. If you are a registered holder and do not have a control number, please contact Computershare Trust Company, N.A., the Transfer Agent. If you are a beneficial holder and do not have a control number, please contact your broker, bank or nominee.
The virtual meeting platform is fully supported across browsers (MS Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most up-to-date version of applicable software and plugins. Participants should ensure that they have a strong WiFi connection wherever they intend to participate in the meeting. You are encouraged to access the meeting prior to the start time. For further assistance, should you need it, please call 1-888-724-2416.
Revoking Your Proxy
If you give a proxy, you may revoke it at any time before the Stockholder Special Meeting or at the Stockholder Special Meeting by doing any one of the following:
| you may send another GGI stockholder proxy card with a later date; |
| you may notify GGIs Secretary in writing to Gores Guggenheim, Inc., 6260 Lookout Road, Boulder, CO 80301, before the Stockholder Special Meeting that you have revoked your proxy; or |
| you may attend the Stockholder Special Meeting, revoke your proxy, and vote in person via the virtual meeting platform, as indicated above. |
No Additional Matters
The Stockholder Special Meeting has been called only to consider the approval of the Business Combination Proposal, the Governance Proposals and the Adjournment Proposal. Under GGIs current bylaws, other than procedural matters incident to the conduct of the Stockholder Special Meeting, no other matters may be considered at the Stockholder Special Meeting if they are not included in this proxy statement/prospectus, which serves as the notice of the Stockholder Special Meeting.
Who Can Answer Your Questions about Voting
If you have any questions about how to vote or direct a vote in respect of your shares of GGI Common Stock, you may call Morrow, GGIs proxy solicitor, at (800) 662-5200 (toll free), or banks and brokerage firms, please call collect at (203) 658-9400.
Redemption Rights
Pursuant to the Current GGI Certificate, any holders of GGI Public Shares may demand that such shares be redeemed in exchange for a pro rata share of the aggregate amount on deposit in the Trust Account, less Regulatory Withdrawals and franchise and income taxes payable, calculated as of two business days prior to the
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consummation of the Business Combination. If demand is properly made and the Business Combination is consummated, these shares, immediately prior to the Business Combination, will cease to be outstanding and will represent only the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account which holds the proceeds of the GGI IPO (calculated as of two business days prior to the consummation of the Business Combination, less Regulatory Withdrawals and franchise and income taxes payable). For illustrative purposes, based on the balance of the Trust Account of $800,056,447 as of December 31, 2021, the estimated per share redemption price would have been approximately $10.00.
In order to exercise your redemption rights, you must:
| If you hold GGI Public Units, separate the underlying GGI Public Shares and GGI Public Warrants; |
| prior to 5:00 P.M., Eastern Time on [●], 2022 (two business days before the Stockholder Special Meeting), tender your shares physically or electronically, identify to GGI the beneficial holder of the shares being redeemed and submit a request in writing that GGI redeems your GGI Public Shares for cash to Computershare Trust Company, N.A., the Transfer Agent, at www.ggiredemption.com, and, for shares physically tendered (which must be submitted with accompanying documents), at the following address: |
Computershare Trust Company, N.A.
Attn: Corporate Actions Voluntary Offer
150 Royall Street, Suite V
Canton, MA 02021
| identify to GGI the beneficial holder of the GGI Public Shares being redeemed |
and
| deliver your GGI Public Shares either physically or electronically through DTCs ATOP system to the Transfer Agent at least two business days before the Stockholder Special Meeting. Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the Transfer Agent and time to effect delivery. Stockholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically. If you do not submit a written request and deliver your GGI Public Shares as described above, your shares will not be redeemed. |
Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in street name are required to either tender their certificates to the Transfer Agent prior to the date set forth in this proxy statement/prospectus, or up to two business days prior to the vote on the proposal to approve the Business Combination at the Stockholder Special Meeting, or to deliver their shares to the Transfer Agent electronically using DTCs ATOP system, at such stockholders option. The requirement for physical or electronic delivery prior to the Stockholder Special Meeting ensures that a redeeming stockholders election to redeem is irrevocable once the Business Combination is approved.
Holders of outstanding GGI Public Units must separate the underlying GGI Public Shares and GGI Public Warrants prior to exercising redemption rights with respect to the GGI Public Shares.
If you hold GGI Public Units registered in your own name, you must deliver the certificate for such GGI Public Units to Computershare Trust Company, N.A., the Transfer Agent, with written instructions to separate such GGI Public Units into GGI Public Shares and GGI Public Warrants. This must be completed far enough in advance to permit the mailing of the GGI Public Share certificates back to you so that you may then exercise your redemption rights upon the separation of the GGI Public Shares from the GGI Public Units.
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If a broker, dealer, commercial bank, trust company or other nominee holds your GGI Public Units, you must instruct such nominee to separate your GGI Public Units. Your nominee must send written instructions by facsimile to Computershare Trust Company, N.A., the Transfer Agent. Such written instructions must include the number of GGI Public Units to be split and the nominee holding such GGI Public Units. Your nominee must also initiate electronically, using DTCs Deposit/Withdrawal at Custodian (DWAC) system, a withdrawal of the relevant GGI Public Units and a deposit of an equal number of GGI Public Shares and GGI Public Warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights upon the separation of the GGI Public Shares from the GGI Public Units.
While this is typically done electronically on the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your GGI Public Units to be separated in a timely manner, you will likely not be able to exercise your redemption rights. Each redemption of shares of GGI Class A Common Stock by the GGI Public Stockholders will reduce the amount in the Trust Account, which had a balance of $800,056,447 as of December 31, 2021. The Business Combination Agreement provides that the obligations of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub to consummate the Business Combination is conditioned on the aggregate of (i) cash held in the Trust Account and all other funds immediately available to GGI (after giving effect to any stockholder redemptions and prior to the payment of any unpaid or contingent liabilities and fees and expenses of GGI (including, as applicable, any GGI transaction expenses)), (ii) the Sponsor Investment Amount, (iii) the PIPE Investment Amount and (iv) the Volvo Cars PIPE Investment Amount being no less than $950,000,000 as of the Closing (the Minimum Cash Condition). The Minimum Cash Condition is for the benefit of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub and may be waived by such parties. If, as a result of redemptions of GGI Class A Common Stock by GGIs Public Stockholders, the Minimum Cash Condition is not met (or waived), then Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub may elect not to consummate the Business Combination. In addition, (x) in no event will GGI redeem shares of GGI Class A Common Stock in an amount that would result in GGIs failure to have net tangible assets equaling or exceeding $5,000,001 and (y) a GGI Public Stockholder, together with any of its affiliates or any other person with whom it is acting in concert or as a group (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the groups shares, in excess of 15% of the shares of GGI Common Stock included in the GGI Public Units sold in the GGI IPO.
Prior to exercising redemption rights, stockholders should verify the market price of GGI Class A Common Stock as they may receive higher proceeds from the sale of their GGI Class A Common Stock in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. GGI cannot assure you that you will be able to sell your shares of GGI Class A Common Stock in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in GGI Class A Common Stock when you wish to sell your shares.
If you exercise your redemption rights, your shares of GGI Class A Common Stock will cease to be outstanding immediately prior to the Business Combination and will only represent the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account. You will no longer own those shares and will have no right to participate in, or have any interest in, the future growth of the Post-Combination Company, if any. You will be entitled to receive cash for these shares only if you properly and timely demand redemption.
Unless GGI amends the Current GGI Certificate (which requires the affirmative vote of 65% of all then outstanding shares of GGI Common Stock) and amend certain other agreements into which GGI has entered to extend the life of GGI, if the Business Combination is not approved and GGI does not consummate an initial business combination by March 25, 2023, GGI will be required to dissolve and liquidate the Trust Account by returning the then remaining funds in such account to the GGI Public Stockholders and GGI Warrants will expire worthless.
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Appraisal Rights
Appraisal rights or dissenters rights are not available to holders of shares of GGI Common Stock in connection with the Business Combination.
Proxy Solicitation Costs for the Stockholder Special Meeting
GGI is soliciting proxies on behalf of the GGI Board. This proxy solicitation is being made by mail, but also may be made by telephone or in person. GGI has engaged Morrow to assist in the solicitation of proxies for the Stockholder Special Meeting. GGI and GGIs directors, officers and employees may also solicit proxies in person. GGI will ask banks, brokers and other institutions, nominees and fiduciaries to forward this proxy statement/prospectus and the related proxy materials to their principals and to obtain their authority to execute proxies and voting instructions.
GGI will bear the entire cost of the proxy solicitation, including the preparation, assembly, printing, mailing and distribution of this proxy statement/prospectus and the related proxy materials. GGI will pay Morrow a fee of $47,500, plus disbursements, reimburse Morrow for its reasonable out-of-pocket expenses and indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses for their services as GGIs proxy solicitor. GGI will reimburse brokerage firms and other custodians for their reasonable out-of-pocket expenses for forwarding this proxy statement/prospectus and the related proxy materials to GGI stockholders. GGIs directors, officers and employees who solicit proxies will not be paid any additional compensation for soliciting.
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GGI PUBLIC WARRANT HOLDER MEETING
This proxy statement/prospectus is being provided to GGI Public Warrant holders as part of a solicitation of proxies by the GGI Board for use at the Warrant Holder Meeting to be held on [●], 2022, and at any adjournment thereof. This proxy statement/prospectus contains important information regarding the Warrant Holder Meeting, the proposals on which you are being asked to vote and information you may find useful in determining how to vote and voting procedures.
This proxy statement/prospectus is being first mailed on or about [●], 2022 to all GGI Public Warrant holders of record as of April 20, 2022. The record date for the Warrant Holder Meeting is April 20, 2022. GGI Public Warrant holders of record who owned GGI Public Warrants at the close of business on the record date are entitled to receive notice of, attend and vote at the Warrant Holder Meeting. As of the record date of the Warrant Holder Meeting, there were 16,000,000 outstanding GGI Public Warrants.
Date, Time and Place
In light of public health concerns regarding the COVID-19 pandemic, the Warrant Holder Meeting will be held via live webcast at www.meetnow.global/MYVPLYT, on [●], 2022 at [●]. The Warrant Holder Meeting can be accessed by visiting www.meetnow.global/MYVPLYT, where you will be able to listen to the meeting live and vote during the meeting. Please note that you will only be able to access the Warrant Holder Meeting by means of remote communication. Please have your Control Number, which can be found on your GGI warrant holder proxy card, to join the Warrant Holder Meeting. If you do not have a control number, please contact Computershare Trust Company, N.A., the Transfer Agent.
Proposals at the Warrant Holder Meeting
At the Warrant Holder Meeting, holders of GGI Public Warrants will vote on the following proposals:
1. | Warrant Amendment ProposalTo consider and vote upon a proposal to approve the Class C Warrant Amendment, a form of which is attached to this proxy statement/prospectus as Annex D (Warrant Holder Proposal No. 1); and |
2. | Warrant Holder Adjournment ProposalTo consider and act upon a proposal to approve the adjournment of the Warrant Holder Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI warrant holders to approve the Warrant Amendment Proposal or to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to GGI warrant holders (Warrant Holder Proposal No. 2). |
THE GGI BOARD UNANIMOUSLY RECOMMENDS THAT
YOU VOTE FOR EACH OF THESE PROPOSALS.
Voting Power; Record Date
As a GGI Public Warrant holder, you have a right to vote on certain matters affecting GGI. The proposals that will be presented at the Warrant Holder Meeting and upon which you are being asked to vote are summarized above and fully set forth in this proxy statement/prospectus. You will be entitled to vote or direct votes to be cast at the Warrant Holder Meeting if you owned GGI Public Warrants at the close of business on April 20, 2022 which is the record date for the Warrant Holder Meeting. You are entitled to one vote for each GGI Public Warrant that you owned as of the close of business on the record date. If your warrants are held in street name or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the warrants you beneficially own are properly counted. As of the record date of the Warrant Holder Meeting, there were 16,000,000 outstanding GGI Public Warrants.
Vote of the GGI Initial Stockholders and GGIs Other Directors and Officers
The GGI Sponsor and GGIs directors and officers do not hold any GGI Public Warrants and will thus not be entitled to vote at the Warrant Holder Meeting.
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Quorum and Required Vote for Proposals for the Warrant Holder Meeting
A majority of the GGI Public Warrants outstanding and entitled to vote at the Warrant Holder Meeting must be present, in person via the virtual meeting platform or represented by proxy, at the Warrant Holder Meeting to constitute a quorum and in order to conduct business at the Warrant Holder Meeting.
The Warrant Amendment Proposal will be approved only if the holders of at least 50% of outstanding GGI Public Warrants vote FOR the Warrant Amendment Proposal. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Warrant Holder Meeting, abstentions and broker non-votes will have the same effect as a vote AGAINST the Warrant Amendment Proposal.
The Warrant Holder Adjournment Proposal will be approved only if the holders of a majority of the votes cast by holders of GGI Public Warrant present or represented by proxy and entitled to vote at the Warrant Holder Meeting vote FOR the Warrant Holder Adjournment Proposal. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Warrant Holder Meeting, abstentions and broker non-votes will have no effect on the vote to approve the Warrant Holder Adjournment Proposal.
Recommendation to GGI Public Warrant Holders
The GGI Board believes that approval of each of the Warrant Amendment Proposal the Warrant Holder Adjournment Proposal to be presented at the Warrant Holder Meeting is in the best interests of GGI and its GGI Public Warrant holders and unanimously recommends that its GGI Public Warrant holders vote FOR each of the proposals.
When you consider the recommendation of the GGI Board in favor of approval of the Warrant Holder Proposal, you should keep in mind that the GGI Initial Stockholders and certain other members of the GGI Board and officers of GGI have interests in the Business Combination that are different from or in addition to (or which may conflict with) your interests as a GGI Public Warrant holder. GGI Public Warrant holders should take these interests into account in deciding whether to approve the proposals presented at the Warrant Holder Meeting, including the Warrant Amendment Proposal.
Abstentions and Broker Non-Votes
Abstentions are considered present for the purposes of establishing a quorum. For purposes of approval, a failure to vote or an abstention will have no effect on the Warrant Holder Adjournment Proposal, but a failure to vote or abstention will have the same effect as a vote AGAINST the Warrant Amendment Proposal. In general, if your GGI Public Warrants are held in street name and you do not instruct your broker, bank or other nominee on a timely basis on how to vote your GGI Public Warrants, your broker, bank or other nominee, in its sole discretion, may either leave your GGI Public Warrants unvoted or vote your GGI Public Warrants on routine matters, but not on any non-routine matters.
None of the proposals at the Warrant Holder Meeting are routine matters. As such, without your voting instructions, your brokerage firm cannot vote your GGI Public Warrants on any proposal to be voted on at the Warrant Holder Meeting.
Voting Your Warrants Warrant Holders of Record
If you are a GGI Public Warrant holder of record, you may vote by mail or you can attend the Warrant Holder Meeting in person via the virtual meeting platform and vote during the meeting by following the instructions on your GGI warrant holder proxy card. Each GGI Public Warrant that you own in your name entitles you to one vote on each of the proposals for the Warrant Holder Meeting. Your one or more GGI warrant holder proxy cards show the number of GGI Public Warrants that you own.
Voting by Mail. You can vote your GGI Public Warrants by completing, signing, dating and returning the enclosed GGI warrant holder proxy card in the postage-paid envelope provided. By signing the GGI warrant
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holder proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the GGI warrant holder proxy card to vote your GGI Public Warrants at the Warrant Holder Meeting in the manner you indicate. You are encouraged to sign and return the GGI warrant holder proxy card even if you plan to attend the Warrant Holder Meeting so that your GGI Public Warrants will be voted if you are unable to attend the Warrant Holder Meeting. If you receive more than one GGI warrant holder proxy card, it is an indication that your GGI Public Warrants are held in multiple accounts. Please sign and return all GGI warrant holder proxy cards to ensure that all of your GGI Public Warrants are voted. If you hold your GGI Public Warrants in street name through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your GGI Public Warrants are represented and voted at the Warrant Holder Meeting. If you sign and return the GGI warrant holder proxy card but do not give instructions on how to vote your GGI Public Warrants, your GGI Public Warrants will be voted as recommended by the GGI Board. The GGI Board recommends voting FOR the Warrant Amendment Proposal and FOR the Warrant Holder Adjournment Proposal. Votes submitted by mail must be received by [●] on [●], 2022.
Voting via the Virtual Meeting Platform. You can attend the Warrant Holder Meeting in person via the virtual meeting platform and vote during the meeting by following the instructions on your GGI warrant holder proxy card. You can access the Warrant Holder Meeting by visiting the website www.meetnow.global/MYVPLYT. You will need your control number for access. If you are a Registered Holder and do not have a control number, please contact Computershare Trust Company, N.A., the Transfer Agent. If you are a beneficial holder and do not have a control number, please contact your broker, bank or nominee. To attend and participate at the Warrant Holder Meeting, you can sign in with your control number as a Registered Holder or a beneficial owner who has registered with a legal proxy. If you hold your GGI Public Warrants in street name, which means your GGI Public Warrants are held of record by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or nominee to ensure that votes related to the GGI Public Warrants you beneficially own are properly counted. In this regard, you must provide the record holder of your GGI Public Warrants with instructions on how to vote your GGI Public Warrants. However, if your GGI Public Warrants are held in the name of your broker, bank or other nominee, you must get a proxy from the broker, bank or other nominee. That is the only way GGI can be sure that the broker, bank or nominee has not already voted your GGI Public Warrants.
Voting Your Warrants Beneficial Owners
If your GGI Public Warrants are held in an account at a brokerage firm, bank or other nominee, then you are the beneficial owner of GGI Public Warrants held in street name and this proxy statement/prospectus is being sent to you by that broker, bank or other nominee. The broker, bank or other nominee holding your account is considered to be the holder of record of your GGI Public Warrants for purposes of voting at the Warrant Holder Meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote the GGI Public Warrants in your account by following the instructions that the broker, bank or other nominee provides you along with this proxy statement/prospectus. As a beneficial owner, if you wish to vote at the Warrant Holder Meeting, you must get a proxy from the broker, bank or other nominee. Please see the section titled GGI Public Warrant Holder MeetingAttending the Warrant Holder Meeting.
Attending the Warrant Holder Meeting
Only GGI Public Warrant holders on the record date or their legal proxyholders may attend and participate at the Warrant Holder Meeting. Please note that you will only be able to access the Warrant Holder Meeting by means of remote communication. Please have your Control Number, which can be found on your GGI warrant holder proxy card, to join the Warrant Holder Meeting. If you are a registered holder and do not have a control number, please contact Computershare Trust Company, N.A., the Transfer Agent. If you are a beneficial holder and do not have a control number, please contact your broker, bank or nominee.
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The virtual meeting platform is fully supported across browsers (MS Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most up-to-date version of applicable software and plugins. Participants should ensure that they have a strong WiFi connection wherever they intend to participate in the meeting. You are encouraged to access the meeting prior to the start time. For further assistance, should you need it, please call 1-888-724-2416.
Revoking Your Proxy
If you give a proxy, you may revoke it at any time before the Warrant Holder Meeting or at the Warrant Holder Meeting by doing any one of the following:
| you may send another GGI warrant holder proxy card with a later date; |
| you may notify GGIs Secretary in writing to Gores Guggenheim, Inc., 6260 Lookout Road, Boulder, CO 80301, before the Warrant Holder Meeting that you have revoked your proxy; or |
| you may attend the Warrant Holder Meeting, revoke your proxy, and vote in person via the virtual meeting platform, as indicated above. |
Who Can Answer Your Questions about Voting
If you have any questions about how to vote or direct a vote in respect of your GGI Public Warrants, you may call Morrow, GGIs proxy solicitor, at (800) 662-5200 (toll free), or banks and brokerage firms, please call collect at (203) 658-9400.
Redemption Rights
Holders of outstanding GGI Public Warrants do not have redemption rights in connection with the Business Combination.
Proxy Solicitation Costs for Warrant Holder Meeting
GGI is soliciting proxies on behalf of the GGI Board. This proxy solicitation is being made by mail, but also may be made by telephone or in person. GGI has engaged Morrow to assist in the solicitation of proxies for the Warrant Holder Meeting. GGI and GGIs directors, officers and employees may also solicit proxies in person. GGI will ask banks, brokers and other institutions, nominees and fiduciaries to forward this proxy statement/prospectus and the related proxy materials to their principals and to obtain their authority to execute proxies and voting instructions.
GGI will bear the entire cost of the proxy solicitation, including the preparation, assembly, printing, mailing and distribution of this proxy statement/prospectus and the related proxy materials. GGI will pay Morrow a fee of $47,500, plus disbursements, reimburse Morrow for its reasonable out-of-pocket expenses and indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses for their services as GGIs proxy solicitor. GGI will reimburse brokerage firms and other custodians for their reasonable out-of-pocket expenses for forwarding this proxy statement/prospectus and the related proxy materials to GGI Public Warrant holders. GGIs directors, officers and employees who solicit proxies will not be paid any additional compensation for soliciting.
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General
On September 27, 2021, GGI entered into the Business Combination Agreement with Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub. Pursuant to the Business Combination Agreement and in connection therewith, among other things and subject to the terms and conditions contained therein:
| in connection with the Merger, prior to the Closing, Parent will, and will cause ListCo, Polestar Singapore, Polestar Sweden and their respective subsidiaries to, complete the Pre-Closing Reorganization; |
| following the Pre-Closing Reorganization at the Closing, Merger Sub will merge with and into GGI in the Merger, pursuant to which the separate corporate existence of Merger Sub will cease and GGI will be the surviving corporation and will become a wholly owned subsidiary of ListCo; |
| at the Effective Time and by virtue of the Merger: |
| any units of GGI that are outstanding immediately prior to the Effective Time held by GGI stockholders will be automatically separated and the holder thereof will be deemed to hold one share of GGI Class A Common Stock and one-fifth of a GGI Public Warrant, which underlying securities will be converted as described below; |
| each share of GGI Class A Common Stock issued and outstanding immediately prior to the Effective Time, other than those held in treasury, will be exchanged for one Class A ADS; |
| each share of GGI Class F Common Stock issued and outstanding immediately prior to the Effective Time, other than those held in treasury, will be exchanged for one newly issued Class A ADS; and |
| all GGI Common Stock held in treasury will be canceled and extinguished without consideration; |
| in the event the Warrant Amendment Proposal is approved prior to the Effective Time, pursuant to the Class C Warrant Amendment, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-1 ADS representing one Post-Combination Company Class C-1 Share. Each Post-Combination Company Class C-1 Share will be exercisable to acquire a Post-Combination Company Class A Share at an exercise price of $11.50 per share. In addition, each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-2 ADS representing one Post-Combination Company Class C-2 Share. Each Post-Combination Company Class C-2 Share will be exercisable to acquire a Post-Combination Company Class A Share at an exercise price of $11.50 per share; |
| in the event that the Warrant Amendment Proposal is not approved prior to the Effective Time, pursuant to the Warrant Amendment Agreement, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one Public ADW. In addition, each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one PP ADW; |
| ListCo will adopt the Post-Combination Articles, to provide for, among other things, that (i) the initial Post-Combination Company Board will include nine directors, each serving staggered three-year terms, (ii) for a period of three years following the Closing, a majority of the Post-Combination Company Board will be (a) independent under applicable stock exchange rules and (b) unaffiliated with the Volvo Cars or Geely, and (iii) for a period of three years following the Closing, except as required by applicable law, the Post-Combination Company Board may not convene a general meeting which proposes a resolution to remove an independent director unless a majority of the directors (including at least two independent directors) approve of such resolution and following any such removal, a majority of the directors (including at least two independent directors) must approve the appointment of any new independent director to fill the vacancy; |
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| Parent, Parent Shareholders, ListCo, the GGI Sponsor and the independent directors of GGI entered into the Registration Rights Agreement; and |
| prior to the Closing (but after the completion of the Pre-Closing Reorganization), ListCo and Parent will approve and adopt the Equity Plan and the Employee Stock Purchase Plan. |
In addition and in connection with the foregoing,
| pursuant to the Registration Rights Agreement, the Registration Rights Holders and their permitted transferees are entitled to registration rights in respect of certain Post-Combination Company securities, ADSs and ADWs at the Closing; |
| pursuant to the Parent Shareholder Acknowledgement, that Parent and the Parent shareholders have undertaken that (i) the initial Post-Combination Company Board will include nine directors, a majority of whom will be independent directors, (ii) for a period of three years following the Closing, Parent and the Parent shareholders will not vote in favor of the removal any independent directors of ListCo unless at least two independent directors vote in favor of such removal, (iii) for a period of three years following the Closing, Parent and the Parent shareholders will not require ListCo to convene a general meeting for the purpose of removing an independent director, and (iv) for three years following the Closing, Parent and the Parent shareholders will not vote in favor of any amendment to the Post-Combination Articles relating to the composition of the Post-Combination Company Board or the appointment or removal of ListCo directors. The GGI Sponsor will have third party beneficiary rights to enforce the aforementioned undertakings; |
| pursuant to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, each GGI Initial Stockholder has, among other things, agreed to (i) vote their GGI Class F Common Stock in favor of the Business Combination Proposal and any other proposals for the Stockholder Special Meeting included in this proxy statement/prospectus, and against any alternative business combination, (ii) waive all adjustments to the conversion ratio set forth in the Current GGI Certificate with respect to the GGI Class F Common Stock, (iii) be bound by certain transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants, and (iv) not transfer any Class A ADSs issued pursuant to the Business Combination Agreement during the period beginning on the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein. In addition, the GGI Sponsor has agreed to the forfeiture of up to 1,540,835 shares of GGI Class F Common Stock. A copy of the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement is attached to this proxy statement/prospectus as Annexes K-1, K-2 and K-3; and |
| pursuant to the Parent Lock-Up Agreement, each Parent Shareholder has, subject to certain exceptions, among other things, agreed not to transfer any equity security of ListCo issued to them pursuant to the Business Combination Agreement or other transaction documents contemplated by the Business Combination Agreement during the period commencing the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein. |
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Organizational Structure
The following diagram shows the current ownership structure of GGI:
(1) | For more information about the ownership interests of the GGI Initial Stockholders, including the GGI Sponsor, prior to the Business Combination, please see the section titled Beneficial Ownership of Securities. |
The following diagram shows the current ownership structure of ListCo:
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The following diagram illustrates the ownership percentages and structure of the Post-Combination Company ((i) without giving effect to any issuance of Earn Out Shares or shares pursuant to the Equity Plan, Employee Stock Purchase Plan and a consulting marketing agreement, (ii) assuming no redemptions of GGI Class A Common Stock, the conversion of Polestars convertible notes and no conversion or redemption of any of the Post-Combination Company Class C Shares or Post-Combination Company Warrants, and (iii) excluding any Post-Combination Company Class C Shares issued to GGI Private Placement Warrant holders):
(1) | Including Subscription Shares to be issued to GGI Sponsor. |
(2) | Including Subscription Shares and Post-Combination Company Class A Shares converted from Post-Combination Company Preference Shares to be issued to Snita. |
(3) | Excluding Subscription Shares to be issued to GGI Sponsor and Snita. |
Consideration in the Business Combination
Consideration to Parent in the Business Combination
Pursuant to the Business Combination Agreement, Parent will receive stock consideration. following the Pre-Closing Reorganization, Parent will hold an aggregate number of Post-Combination Company Shares equal to approximately (a) $20,003,000,000 divided by $10.00, less (b) (i) the aggregate principal amount due in respect of the Parent Convertible Notes, divided by (ii) the applicable conversion price of such notes, less (c) 58,882,610, which represents the aggregate number of Post-Combination Company Preference Shares issued pursuant to the Volvo Cars Preference Subscription Agreement.
As additional consideration for Parents contribution to ListCo of all the issued and outstanding equity securities of Polestar Sweden, Parent will be entitled to receive, subject to the terms provided in the Business Combination Agreement, earn out shares from Post-Combination Company, issuable in Post-Combination Company Class A Shares and Post-Combination Company Class B Shares up to an aggregate number equal to approximately (a) 0.075 multiplied by (b) the number of issued and outstanding Post-Combination Company Shares as of immediately after the Closing (including Post-Combination Company Shares issued pursuant to the Subscription Agreements).
Conditions to Closing of the Business Combination.
The Closing is expected to take place electronically through the exchange of documents via e-mail or facsimile as promptly as practicable (and in any event no later than 9:00 a.m., New York time, on the third business day after the date on which all of the conditions described below under the subsection Conditions to Closing of the Business Combination have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the Closing)) or at such other time, date and location as GGI and Polestar may mutually agree in writing.
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The respective obligations of each of GGI and Polestar to complete the Business Combination are subject to the satisfaction of the following conditions, any one or more of which may be waived (if legally permitted) in writing by all of such parties:
| the applicable waiting period (and any extension thereof) under the HSR Act relating to the Business Combination will have expired, been terminated or obtained (or deemed, by applicable law, to have been obtained); |
| there will not have been enacted or promulgated any law or other legal restraint or prohibition issued by any court of competent jurisdiction or other governmental authority preventing the consummation of the Business Combination; |
| this proxy statement/prospectus will have become effective in accordance with the provisions of the Securities Act, and no stop order will have been issued by the SEC and remain in effect with respect to this proxy statement/prospectus; |
| the Business Combination Proposal will have been approved; |
| the Required Parent Shareholder Approval will have been obtained; |
| after completion of the GGI stockholder redemptions and prior to the Closing, GGI will have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act); |
| the Class A ADSs that constitute the share consideration paid to GGI and Class A ADSs that are issued in connection with the PIPE Investment will have been approved for listing on Nasdaq; |
| the ADWs or the Class C-1 ADSs, as applicable, will have been approved for listing on Nasdaq; and |
| the Post-Combination Company Board will have a number of directors and composition of directors determined in accordance with the Business Combination Agreement as of the Closing. |
Conditions to Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Subs Obligations
The obligation of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub to consummate and effect the Merger and the other transactions contemplated by the Business Combination Agreement are subject to the satisfaction, at or prior to the Closing, of each of the following conditions, any one or more of which may be waived in writing by Parent:
| (i) the representations and warranties of GGI related to corporate organization, due authorization, capitalization and brokers will be true and correct in all material respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all material respects as of such earlier date), (ii) representations and warranties related to the capitalization of GGI will be true and correct in all respects (except for de minimis inaccuracies) as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all respects (except for de minimis inaccuracies) as of such earlier date), (iii) the representation and warranty related to the absence of certain changes will be true and correct in all respects as of the Closing Date as though made on and as of the Closing Date and (iv) the other representations and warranties of GGI (other than the representations and warranties related to corporate organization, due authorization, capitalization and brokers) will be true and correct (without giving effect to any limitations as to materiality or any similar limitation set forth in the Business Combination Agreement) in all respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all respects as of such earlier date), except where the failure of such |
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representations and warranties to be true and correct, individually and in the aggregate has not had a GG Material Adverse Effect (as defined in the Business Combination Agreement); |
| the covenants and agreements of GGI contained in the Business Combination Agreement to be performed prior to the Closing will have been performed in all material respects; |
| the sum of (a) the amount in the Trust Account (after taking into account any stockholder redemptions), (b) the Sponsor Investment Amount, (c) the Volvo Cars PIPE Investment Amount and (d) the PIPE Investment Amount will be no less than $950,000,000, prior to the payment of any unpaid or contingent liabilities and fees and expenses of GGI (including, as applicable, any GGI transaction expenses) as of the Closing; and |
| GGI will have delivered, or caused to be delivered, to Polestar, ListCo and Parent a certificate, duly executed by an authorized officer of GGI, dated as of the Closing Date, to the effect that the conditions specified in the first two bullets are satisfied. |
Conditions to GGIs Obligations
The obligations of GGI to consummate and effect the Merger and the other transactions contemplated by the Business Combination Agreement are subject to the satisfaction, at or prior to the Closing, of each of the following conditions, any one or more of which may be waived in writing by GGI:
| (i) certain representations and warranties of the Parent and Polestar related to corporate organization, due authorization, capitalization and brokers will be true and correct (without giving effect to any limitation as to materiality set forth therein) in all material respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all material respects as of such earlier date), (ii) the representations and warranties set forth in certain representations and warrants of the Parent and Polestar related to the capitalization of Parent, Polestar and ListCo will be true and correct in all respects (except for de minimis inaccuracies) as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all respects (except for de minimis inaccuracies) as of such earlier date), (iii) the representation and warranty related to the absence of certain changes with respect to Parent and Polestar will be true and correct in all respects as of the Closing Date as though made on and as of the Closing Date and (iv) the representations and warranties of Polestar, ListCo and Merger Sub (other than the representations and warranties of Parent and Polestar related to corporate organization, due authorization, capitalization and brokers, certain representations and warranties of Parent, Polestar and ListCo relating to capitalization of equity securities) will be true and correct (without giving effect to any limitation as to materiality or Material Adverse Effect or any similar limitation set forth in the Business Combination Agreement) in all respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all respects as of such earlier date), except where the failure of such representations and warranties to be true and correct, individually and in the aggregate has not had a Material Adverse Effect; |
| the covenants and agreements of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub contained in the Business Combination Agreement to be performed prior to the Closing will have been performed in all material respects; |
| the Pre-Closing Reorganization will have been completed; and |
| Parent will have delivered, or caused to be delivered, to GGI a certificate duly executed by an authorized officer of Parent, dated as of the Closing Date, to the effect that the conditions specified in the first two bullets above are satisfied. |
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Impact of the Business Combination on Public Float
It is anticipated that, upon consummation of the Business Combination and without giving effect to any issuance of Earn Out Shares, any exercise of Class C ADSs or ADWs or any redemptions: (i) GGI Public Stockholders will retain an ownership interest of approximately 3.8% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs; (ii) the GGI Initial Stockholders (including the GGI Sponsor) will own approximately 0.9% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs (including approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased under the Sponsor Subscription Agreement); (iii) the PIPE Investors will own approximately 1.2% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs; and (iv) the Parent Shareholders will own approximately 94.2% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs (including (a) approximately 1.1 million Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement, (b) approximately 58.9 million Post-Combination Company Class A Shares in the form of Class A ADSs following the conversion of the Post-Combination Company Preference Shares purchased under the Volvo Cars Preference Subscription Agreement and (c) Post-Combination Company Class A Shares in the form of Class A ADSs following the conversion at the Closing of Parent Convertible Notes).
In the event that, following the Business Combination, 159,397,500 Earn Out Shares are issued to Parent Shareholders and assuming no exercise of Class C ADSs or ADWs, no redemptions and that no additional Post-Combination Company Shares are issued between the Closing and the realization of all of the benchmark share prices in the earn out: (i) GGI Public Stockholders will retain an ownership interest of approximately 3.5% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs; (ii) the GGI Initial Stockholders (including the GGI Sponsor) will own approximately 0.8% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs (including approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased under the Sponsor Subscription Agreement); (iii) the PIPE Investors will own approximately 1.1% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs; and (iv) the Parent Shareholders will own approximately 94.6% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs (including (a) approximately 1.1 million Post-Combination Company Class A Shares in the form of Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement, (b) approximately 58.9 million Post-Combination Company Class A Shares in the form of Class A ADSs following the conversion of the Post-Combination Company Preference Shares purchased under the Volvo Cars Preference Subscription Agreement and (c) Post-Combination Company Class A Shares in the form of Class A ADSs following the conversion at the Closing of Parent Convertible Notes).
If a GGI Public Stockholder exercises its redemption rights, such exercise will not result in the loss of any warrants that it may hold. Neither GGI nor ListCo can predict the ultimate value of the Class C ADSs or ADWs following the Closing, but assuming that 100% or 80,000,000 shares of GGI Class A Common Stock held by GGI Public Stockholders were redeemed, the 16,000,000 retained outstanding GGI Public Warrants would have an aggregate value of $[●], based on a price per GGI Public Warrant of $[●] on [●], 2022, the most recent practicable date prior to the date of this proxy statement/prospectus. In addition, on [●], 2022, the most recent practicable date prior to the date of this proxy statement/prospectus, the price per share of GGI Class A Common Stock closed at $[●]. If the shares of GGI Class A Common Stock are trading above the exercise price of $11.50 per warrant, the warrants are considered to be in the money and are therefore more likely to be exercised by the holders thereof (when they become exercisable). This in turn increases the risk to non-redeeming stockholders that the warrants will be exercised, which would result in immediate dilution to the non- redeeming stockholders.
In each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios as described below, the residual equity value owned by non-redeeming GGI stockholders, taking into account the respective redemption amounts, is assumed to remain the deemed value of $10.00 per share as illustrated in the sensitivity table below. As a result of such redemption amounts and the assumed $10.00
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per share value, the implied total equity value of the Post-Combination Company following the Business Combination (including the Subscription Investments and the Volvo Cars Preference Subscription Investment), assuming no dilution from any Additional Dilution Sources, would be (a) $21,253 million in the no redemption scenario, (b) $21,203 million in the illustrative redemption scenario, (c) $21,153 million in the contractual maximum redemption scenario and (d) $20,458 million in the charter redemption limitation scenario. Additionally, the sensitivity table below sets forth (x) the potential additional dilutive impact of each of the Additional Dilution Sources in each redemption scenario, as described further in Notes 9 through 15 below, and (y) the effective underwriting fee incurred in connection with the GGI IPO in each redemption scenario, as further described in Note 16 below.
Holders |
No Redemption Scenario(1) |
% of Total |
Illustrative Redemption Scenario(2) |
% of Total |
Contractual Maximum Redemption Scenario(3) |
% of Total |
Charter Redemption Limitation Scenario(4) |
% of Total |
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GGI Public Stockholders |
80,000,000 | 3.8 | % | 74,994,709 | 3.5 | % | 69,995,062 | 3.3 | % | 499,965 | 0.0 | % | ||||||||||||||||||||
GGI Initial Stockholder (including GGI Sponsor) (5) |
19,350,374 | 0.9 | % | 19,350,374 | 0.9 | % | 19,350,374 | 0.9 | % | 19,350,374 | 0.9 | % | ||||||||||||||||||||
PIPE Investors(6) |
24,532,236 | 1.1 | % | 24,532,236 | 1.2 | % | 24,532,236 | 1.2 | % | 24,532,236 | 1.2 | % | ||||||||||||||||||||
Parent Shareholders(7) |
2,001,417,390 | 94.2 | % | 2,001,417,390 | 94.4 | % | 2,001,417,390 | 94.6 | % | 2,001,417,390 | 97.8 | % | ||||||||||||||||||||
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Total Post-Combination Company Shares Outstanding(8) |
2,125,300,000 | 100 | % | 2,120,294,709 | 100 | % | 2,115,295,062 | 100 | % | 2,045,799,965 | 100 | % | ||||||||||||||||||||
Total Equity Value Post- Redemptions and PIPE Investments ($ in millions) |
$ | 21,253 | | $ | 21,203 | | $ | 21,153 | | $ | 20,458 | | ||||||||||||||||||||
Per Share Value |
$ | 10.00 | | $ | 10.00 | | $ | 10.00 | | $ | 10.00 | | ||||||||||||||||||||
Additional Dilution Sources |
No Redemption Scenario(1) |
% of Total(9) |
Illustrative Redemption Scenario(2) |
% of Total(9) |
Contractual Maximum Redemption Scenario(3) |
% of Total(9) |
Charter Redemption Limitation Scenario(4) |
% of Total(9) |
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Earn Out Shares(10) |
159,397,500 | 7.0 | % | 159,022,103 | 7.0 | % | 158,647,130 | 7.0 | % | 153,434,997 | 7.0 | % | ||||||||||||||||||||
Class C ADSs and Warrants |
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Class C-1 ADSs or Public |
16,000,000 | 0.7 | % | 16,000,000 | 0.7 | % | 16,000,000 | 0.8 | % | 16,000,000 | 0.8 | % | ||||||||||||||||||||
Class C-2 ADSs or PP ADWs(12) |
9,000,000 | 0.4 | % | 9,000,000 | 0.4 | % | 9,000,000 | 0.4 | % | 9,000,000 | 0.4 | % | ||||||||||||||||||||
Equity Incentive Plans |
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Equity Plan(13) |
10,000,000 | 0.5 | % | 10,000,000 | 0.5 | % | 10,000,000 | 0.5 | % | 10,000,000 | 0.5 | % | ||||||||||||||||||||
Employee Stock Purchase Plan(14) |
2,000,000 | 0.1 | % | 2,000,000 | 0.1 | % | 2,000,000 | 0.1 | % | 2,000,000 | 0.1 | % | ||||||||||||||||||||
Marketing Consulting Agreement(15) |
500,000 | 0.0 | % | 500,000 | 0.0 | % | 500,000 | 0.0 | % | 500,000 | 0.0 | % | ||||||||||||||||||||
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Total Additional Dilution Sources(16) |
196,897,500 | 8.5 | % | 196,522,103 | 8.5 | % | 196,147,130 | 8.5 | % | 190,934,997 | 8.5 | % | ||||||||||||||||||||
Deferred Discount |
No Redemption Scenario(1) |
% of Total |
Illustrative Redemption Scenario(2) |
% of Total |
Contractual Maximum Redemption Scenario(3) |
% of Total |
Charter Redemption Limitation Scenario(4) |
% of Trust Account |
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Effective Deferred Discount(17) |
$28,000,000 | 3.5 | % | $28,000,000 | 3.7 | % | $28,000,000 | 4.0 | % | $28,000,000 | 560.0 | % |
(1) | This scenario assumes that no shares of GGI Class A Common Stock are redeemed by GGI Public Stockholders. The no redemption scenario excludes 159,397,500 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI Private Placement Warrant holders and 138,898 vested shares pursuant to the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
(2) | This scenario assumes that approximately 5,005,291 shares of GGI Class A Common Stock are redeemed by GGI Public Stockholders. The illustrative redemption scenario excludes 159,022,103 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI Private Placement Warrant holders and 138,898 vested shares pursuant to the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
(3) | This scenario assumes that approximately 10,004,938 shares of GGI Class A Common Stock are redeemed by GGI Public Stockholders, which, based on the amount of $800,056,447 in the Trust Account as of December 31, 2021, represents the maximum amount of redemptions that would still enable GGI to have sufficient cash to satisfy the Minimum Cash Condition. The contractual maximum redemption scenario excludes 158,647,130 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI |
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Private Placement Warrant holders and 138,898 vested shares pursuant to the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
(4) | This scenario assumes that approximately 79,500,035 shares of GGI Class A Common Stock are redeemed by GGI Public Stockholders, which, based on the amount of $800,056,447 in the Trust Account as of December 31, 2021, represents the maximum amount of redemptions that would still enable GGI to have sufficient cash to satisfy the provision in the Current GGI Certificate that prohibits GGI from redeeming shares of GGI Class A Common Stock in an amount that would result in GGIs failure to have net tangible assets equaling or exceeding $5,000,001. The charter redemption scenario excludes 153,434,997 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI Private Placement Warrant holders and 138,898 vested shares pursuant to the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
(5) | This row includes approximately 891,000 Post-Combination Company Class A Shares underlying the approximately 891,000 Class A ADSs to be purchased under the Sponsor Subscription Agreement. |
(6) | This row excludes approximately 891,000 Post-Combination Company Class A Shares underlying the approximately 891,000 Class A ADSs to be purchased under the Sponsor Subscription Agreements and excludes the approximately 1,117,390 Post-Combination Company Class A Shares underlying the approximately 1,117,390 Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement. |
(7) | This row excludes Earn Out Shares that are issuable to Parent Shareholders upon the realization of all of the benchmark share prices in the earn out and includes approximately 1,117,390 Post-Combination Company Class A Shares underlying the approximately 1,117,390 Class A ADSs to be purchased under the Volvo Cars PIPE Subscription Agreement. This row includes all Post-Combination Company Class A Shares in respect of outstanding convertible notes of Parent, all of which will be converted into Post-Combination Company Class A Shares at the Closing and 58,882,610 Post-Combination Company Class A Shares in respect of Post-Combination Company Preference Shares to be purchased by Snita upon and subject to the Closing under the Volvo Cars Preference Subscription Agreement, all of which are currently contemplated to be converted into Post-Combination Company Class A Shares at Closing. |
(8) | This row excludes Earn Out Shares and the Post-Combination Company Class A Shares underlying the Class C ADSs and ADWs into which GGI Warrants will convert, depending on whether the Warrant Amendment Proposal is approved. |
(9) | The Percentage of Total with respect to each Additional Dilution Source set forth below, including the Total Additional Dilution Sources, includes the full amount of shares issued with respect to the applicable Additional Dilution Source in both the numerator and denominator. For example, in the illustrative redemption scenario, the Percentage of Total with respect to the Employee Stock Purchase Plan would be calculated as follows: (a) 2,000,000 Class A ADSs issued pursuant to the Employee Stock Purchase Plan (reflecting 0.09% of the total number of shares of Post-Combination Company Shares outstanding as of immediately following the Closing); divided by (b) (i) 2,120,294,709 Post-Combination Company Shares (the number of shares outstanding prior to any issuance pursuant to the Employee Stock Purchase Plan) plus (ii) 2,000,000 Class A ADSS issued pursuant to the Employee Stock Purchase Plan. |
(10) | This row assumes 159,397,500, 159,022,103, 158,647,130 and 153,434,997 Earn Out Shares are issued, assuming the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, respectively, and assumes that no additional Post-Combination Company Shares are issued between the Closing and the realization of all of the benchmark share prices in the earn out. The total number of Earn Out Shares issuable to Parent Shareholders is partially determined by the number of issued and outstanding Post-Combination Company Shares as of immediately after the Effective Time. Total outstanding Percentages in this row represent (a) the foregoing Earn Out Share amounts, as applicable, divided by (b) (i) the amounts included in the row titled Total Post- Combination Company Shares Outstanding plus (ii) 159,397,500, 159,022,103, 158,647,130 or 153,434,997 Post-Combination Company Shares, assuming the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios, respectively. Approximately 15.2% of the Earn Out Shares will be issued as Post-Combination Company Class A Shares, while the remaining 84.8% of the Earn Out Shares will be issued as Post-Combination Company Class B Shares. Each Post-Combination Company Class B Share will entitle the holder thereof to 10 votes per share. |
(11) | This row assumes exercise of Class C-1 ADSs or Public ADWs to purchase 16,000,000 Post-Combination Company Class A Shares (following the conversion of GGI Public Warrants into Class C-1 ADSs in the event the Warrant Amendment Proposal is approved or Public ADWs in the event the Warrant Amendment Proposal is not approved). Percentages in this row represent (a) the 16,000,000 Post- Combination Company Class A Shares underlying the Class C-1 ADSs or Public ADWs divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 16,000,000 Post-Combination Company Class A Shares underlying the Class C-1 ADSs or Public ADWs. |
(12) | This row assumes exercise of Class C-2 ADSs or PP ADWs to purchase 9,000,000 Post-Combination Company Class A Shares (following the conversion of GGI Private Placement Warrants into Class C-2 ADSs in the event the Warrant Amendment Proposal is approved or PP ADWs in the event the Warrant Amendment Proposal is not approved). Percentages in this row represent (a) the 9,000,000 Post-Combination Company Class A Shares underlying the Class C-2 ADSs or PP ADWs divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 9,000,000 Post-Combination Company Class A Shares underlying the Class C-2 ADSs or PP ADWs. |
(13) | This row assumes the issuance of all Class A ADSs reserved for issuance under the Equity Plan at Closing, which equals 10,000,000 Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. Percentages in this row represent (a) 10,000,000, divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 10,000,000 Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. The Equity Plan provides that the number of Class A ADSS reserved for issuance thereunder will automatically increase annually on the first day of each fiscal year beginning with the Evergreen Commencement Date in an amount equal to the lesser of (i) 0.5% of the aggregate number of Post-Combination Company Shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of Post-Combination |
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Company Shares as determined by the Post-Combination Company Board. For additional information, please see Management of the Post- Combination CompanyCompensation Arrangements after the Business CombinationEquity Plan. |
(14) | This row assumes the issuance of all Class A ADSs reserved for issuance under the Employee Stock Purchase Plan at Closing, which equals 2,000,000 Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. Percentages in this row represent (a) 2,000,000, divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 2,000,000 Class A ADSs in each of the no redemption, illustrative redemption, contractual maximum redemption and charter redemption limitation scenarios. The Employee Stock Purchase Plan provides that the number of Class A ADSs reserved for issuance thereunder will automatically increase annually on the first day of each fiscal year beginning with the Evergreen Commencement Date in an amount equal to the lesser of (i) 0.1% of the aggregate number of Post-Combination Company Shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of Post-Combination Company Shares as determined by the Post-Combination Company Board. For additional information, please see Management of the Post-Combination CompanyCompensation Arrangements after the Business CombinationEmployee Stock Purchase Plan. |
(15) | Represents shares to be issued pursuant to a consulting marketing agreement following the Closing 250,000 shares will vest and be issued on the date the Resale Registration Statement becomes effective. 250,000 shares will vest over a 24-month period with one eighth of these shares vesting each quarter. None of these vested shares will be issued prior to the effectiveness of the Resale Registration Statement. |
(16) | This row assumes the issuance of all Post-Combination Company Shares in connection with each of the Additional Dilution Sources, as described further in Notes 9 through 14 above, which equals 196,897,500 Post-Combination Company Shares in the no redemption scenario, 196,522,103 Post-Combination Company Shares in the illustrative redemption scenario, 196,147,130 Post-Combination Company Shares in the contractual maximum redemption scenario or 190,934,997 Post-Combination Company Shares in the charter redemption limitation scenario, in each case, following the Closing. Percentages in this row represent (a) the foregoing share amounts, as applicable, divided by (b) (i) the amounts included in the row titled Total Post-Combination Company Shares Outstanding plus (ii) 196,897,500 Post-Combination Company Shares in the no redemption scenario, 196,522,103 Post-Combination Company Shares in the illustrative redemption scenario, 196,147,130 Post-Combination Company Shares in the contractual maximum redemption scenario or 190,934,997 Post-Combination Company Shares in the charter redemption limitation scenario. |
(17) | Reflects the Deferred Discount of $28,000,000 incurred in connection with the GGI IPO. |
The foregoing table is provided for illustrative purposes only and there can be no assurance that the AD securities will trade at the illustrative per share values set forth therein, regardless of the levels of redemption. Percentages may not sum due to rounding.
For more information, please see the sections titled The Business CombinationImpact of the Business Combination on Public Float and Unaudited Pro Forma Condensed Combined Financial Information.
Background of the Business Combination
GGI is a blank check company incorporated as a Delaware corporation on December 21, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The Business Combination was the result of a search for a potential business combination utilizing the networks, industry experience and investing and operating experience of GGIs management team, the GGI Board, representatives of GGI and representatives of The Gores Group, an affiliate of the GGI Sponsor. The terms of the Business Combination were the result of extensive negotiations between, with respect to GGI, GGIs management team, representatives of GGI and representatives of The Gores Group acting on behalf of GGI (under the oversight of GGIs independent directors) and, with respect to Polestar, representatives of Polestar. The following is a brief summary of the background of these negotiations, the Business Combination and related transactions.
Prior to the consummation of the GGI IPO, neither GGI, nor anyone acting on its behalf, contacted any prospective target business or had any substantive discussions, formal or otherwise, with respect to a transaction with GGI.
After the consummation of the GGI IPO, representatives of GGI, the GGI Sponsor and The Gores Group on behalf of GGI commenced an active search for prospective businesses and assets for GGI to acquire. Additionally, representatives of GGI, the GGI Sponsor and The Gores Group contacted and were contacted by a number of individuals and entities with respect to acquisition opportunities.
In evaluating potential businesses and assets for which blank check companies sponsored by affiliates of The Gores Group might be interested in acquiring, The Gores Group generally surveys the landscape of potential
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acquisition opportunities based on their knowledge of, and familiarity, with the M&A marketplace. In general, The Gores Group and its affiliates look for acquisition targets that are (i) of a size relevant to the public marketplace, which The Gores Group generally views as companies with an enterprise value of at least $1.5 billion, and (ii) positioned, operationally and financially, to be successful as a public company. The Gores Group further looks for those transactions that it believes, if entered into, would be well received by the public markets. In particular, The Gores Group generally seeks to identify companies that (a) have an existing strong management team, (b) are positioned for growth, and (c) have the potential to generate significant cash flow. The Gores Group also seeks to identify companies that it believes would benefit from being a publicly-held entity, particularly with respect to access to capital for both organic growth and for use in acquisitions. The Gores Group generally applies this criteria when evaluating potential targets. This approach is consistent with the approach that GGI and representatives of The Gores Group, acting on behalf of GGI, took to evaluate potential businesses for GGIs initial business combination. The GGI Charter provides that the doctrine of corporate opportunity does not apply with respect to any of GGIs directors or officers unless such corporate opportunity is offered to such person solely in his or her capacity as a director or officer of GGI and such opportunity is one GGI is legally and contractually permitted to undertake and would otherwise be reasonable for GGI to pursue. GGI does not believe that this provision impacted GGIs search for prospective business combination targets.
Following the GGI IPO, GGIs management, representatives of GGI, the GGI Sponsor and The Gores Group:
| considered and conducted an analysis of nine potential acquisition targets (other than Polestar) (the Other Potential Targets), entering into non-disclosure agreements with three of the Other Potential Targets on customary terms and which did not contain standstill provisions; and |
| ultimately decided not to engage in due diligence or detailed negotiations with any of the Other Potential Targets or their representatives. |
The three Other Potential Target businesses that GGI entered into non-disclosure agreements with included (i) a health and wellness company (Company A), (ii) an automotive artificial intelligence computing platform company (Company B), and (iii) a construction chemicals company (Company C).
As part of its regular evaluation of potential acquisition targets, the GGI Board and GGIs management team generally discuss, on a monthly basis, the status of discussions with various acquisition targets. These updates generally address the potential targets under consideration and the status of the discussions, if any, with the respective acquisition targets. These updates continued throughout the period of time when GGI was evaluating various acquisition targets.
GGI entered into a non-disclosure agreement with Company A on March 26, 2021. GGI decided to not pursue an opportunity with Company A because the parties were unable to reach an agreement on preliminary principal terms, including, but not limited to, the valuation and capital needs of Company A. GGI entered into a non-disclosure agreement with Company B on May 24, 2021. GGI decided to not pursue an opportunity with Company B because GGI decided it was no longer interested in pursuing the opportunity. GGI entered into a non-disclosure agreement with Company C on June 1, 2021. GGI ultimately decided to not progress with Company C when discussions between GGI and Polestar progressed sufficiently, such that GGI decided to focus efforts towards a potential business combination with Polestar.
On May 25, 2021, representatives of The Gores Group were contacted by representatives of Citigroup, Polestars financial advisor, to discuss a potential business combination involving Polestar. As part of those discussions, GGI and Polestar agreed to negotiate a non-disclosure agreement and establish next steps with respect to a potential business combination. Following those discussions, representatives of The Gores Group acting on behalf of GGI provided a draft customary non-disclosure agreement to representatives of Polestar.
On May 27, 2021, GGI and Polestar executed a customary non-disclosure agreement, pursuant to which, among other things, GGI agreed to hold certain information furnished to it by Polestar in confidence.
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On June 8, 2021, representatives of The Gores Group acting on behalf of GGI as well as representatives of Deutsche Bank Securities Inc. (Deutsche Bank), financial advisor to GGI, met with Mr. Thomas Ingenlath, Chief Executive Officer of Polestar, and other members of Polestars management team, to introduce the parties and discuss Polestars business and future prospects.
On June 11, 2021, representatives of The Gores Group acting on behalf of GGI as well as representatives of Deutsche Bank met with certain members of the Polestar management team to discuss certain financial information and projections provided by Polestar, including the assumptions, forecasts and key drivers underlying such financial information and projections, and to discuss general due diligence topics in connection with pursuing a potential business combination.
On June 14, 2021, representatives of The Gores Group, acting on behalf of GGI, determined that pursuing a potential business combination with Polestar was advisable and thereafter delivered a proposed letter of intent and term sheet to representatives of Polestar (the Preliminary Proposal). The Preliminary Proposal contemplated, among other things, (i) implied equity consideration of approximately $22.6 billion, (ii) fully committed additional equity capital from private investors in connection with the potential business combination (the Potential Private Placement) ranging from $250 million to $770 million, (iii) that the GGI Sponsor and one or more of its related investors would commit 10% to 25% of the Potential Private Placement (iv) earn out shares in the post-combination company equal to 6.0% of the post-combination company shares, issuable in four equal tranches over a five-year period starting from 180 days following the closing of the potential business combination, if the public trading price of the post-combination company shares equaled or exceeded $13.00, $15.50, $18.00 and $20.50 for 20 trading days within any 30-day trading period during such five-year period and (v) that the post-combination company would be structured as a newly formed foreign private issuer.
On June 17, 2021, representatives of Polestar provided representatives of GGI with revisions to the term sheet, which contemplated, among other things, (i) implied equity consideration of an amount to be determined, (ii) a Potential Private Placement of $450 million, (iii) that the GGI Sponsor and one or more of its related investors would commit $112.5 million to the Potential Private Placement, (iv) that any portion of the amount committed by the GGI Sponsor and one or more of its related investors not used for the Potential Private Placement would be used to backstop redemptions of Public Stockholders and (v) that the earn out shares in the post-combination company, equal to 7.5% of the post-combination company shares, would be issuable in three equal tranches over a ten-year period starting from the closing of the potential business combination, if the public trading price of the post-combination company shares equaled or exceeded $12.50, $15.00 and $17.50 for 20 trading days within any 30-day trading period during such ten-year period.
On June 18, 2021, representatives of GGI, acting on behalf of GGI, provided representatives of Polestar with revisions to the term sheet, which contemplated, among other things, (i) implied equity consideration of $26.003 billion and (ii) that the earn out shares would be issuable in five equal tranches over a five-year period starting from 180 days following the closing of the potential business combination, if the public trading price of the post-combination company shares equaled or exceeded $13.00, $15.50, $18.00, $20.50 and $23.00 for 20 trading days within any 30-day trading period during such five-year period.
On June 22, 2021, representatives of Polestar provided representatives of GGI with revisions to the term sheet, which contemplated, among other things, (i) that the post-combination company would be structured as a newly formed foreign private issuer incorporated in Hong Kong and (ii) that the post-combination company would have a dual class voting structure where certain existing Polestar shareholders would hold shares in the post-combination company entitling such shareholders to 10 votes per share.
On June 23, 2021 GGI contacted KPMG, GGIs independent registered public accounting firm, to discuss the retention of KPMG in connection with the potential business combination, including to conduct accounting and tax due diligence of Polestar and provide tax structuring advice. GGI formally engaged KPMG to provide such services thereafter.
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Additionally on June 23, 2021, GGI and Polestar executed the negotiated term sheet (the Term Sheet). The Term Sheet contemplated, among other things, (i) implied equity consideration of $26.003 billion, (ii) fully committed funds from a Potential Private Placement for a minimum of $450 million, (iii) that the GGI Sponsor and one or more of its related investors would commit $112.5 million to the Potential Private Placement, (iv) that any portion of the amount committed by the GGI Sponsor and one or more of its related investors not used for the Potential Private Placement would be used to backstop redemptions of Public Stockholders, (v) that earn out shares, equal to 7.5% of the post-combination company shares, would be issuable in five equal tranches over a five-year period starting from 180 days following the closing of the potential business combination, if the public trading price of the post-combination company shares equaled or exceeded $13.00, $15.50, $18.00, $20.50 and $23.00 for 20 trading days within any 30-day trading period during such five year period, (vi) that the post-combination company would be structured as a newly formed foreign private issuer in Hong Kong and (vii) that the post-combination company would have a dual class voting structure where certain existing Polestar shareholders would hold shares in the post-combination company entitling such shareholders to 10 votes per share. The Term Sheet also contemplated an exclusivity period through August 22, 2021 (the Term Sheet Exclusivity Period). During the negotiations of the Term Sheet, GGI did not consider financing arrangements other than a Potential Private Placement involving the private placement of equity securities, as The Gores Group believes that cash generated from additional equity invested at the time of the consummation of a potential business combination is preferable to other financing arrangements, based on the experience of the GGI Sponsor and The Gores Group in transactions of this nature and such entities relationships with potential equity investors.
Following execution of the Term Sheet, during the remainder of the week of June 23, 2021, representatives of GGI, KPMG and Weil, Gotshal & Manges LLP (Weil), counsel to GGI with respect to the potential business combination, and representatives of Polestar and Citigroup, financial advisor to Polestar, and Kirkland & Ellis LLP (K&E), counsel to Polestar, had multiple conversations regarding advancing work streams for the potential business combination. Also during that week, representatives of Weil and K&E convened a meeting to discuss initial legal work streams in connection with the potential business combination, including the drafting of legal documents, commencing legal due diligence and the timeline of the potential business combination. Also that week, representatives of GGI, including Weil and Hannes Snellman, counsel to GGI, commenced diligence on Polestar. During the weeks that followed, representatives of GGI, KPMG, Weil, Polestar and K&E engaged in numerous discussions regarding due diligence matters.
On June 24, 2021, Mr. Alec Gores, on behalf of GGI, met with Mr. Håkan Samuelsson, Chief Executive Officer and Chairman of the Executive Board of Volvo Cars, to introduce the parties and discuss Volvo Cars interests regarding the potential business combination with Polestar.
On July 6 and 7, 2021, representatives of The Gores Group acting on behalf of GGI, held meetings with certain members of Polestars management team, including Mr. Ingenlath, Ms. Carla De Geyseleer, a Polestar board member, and Mr. Samuelsson to discuss various diligence topics related to Polestars business, including Polestars business model, growth prospects and strategy as well as to discuss overall timing of the potential business combination.
On July 7, 2021, Mr. Gores, on behalf of GGI, met with Mr. Ingenlath, Ms. De Geyseleer, Mr. Samuelsson and Mr. Björn Annwall, Chief Financial Officer of Volvo Cars, to continue to discuss Volvo Cars interests regarding the potential business combination with Polestar.
From July 12, 2021 through September 26, 2021, representatives of The Gores Group, including Mr. Gores, acting on behalf of GGI, met periodically with Mr. Samuelsson, Mr. Annwall, Ms. De Geyseleer and Mr. Ingenlath to discuss the process of the potential business combination.
On July 15, 2021, K&E provided an initial draft of the Business Combination Agreement to Weil. The initial draft of the Business Combination Agreement contemplated, among other things: (i) formation of a new listco in
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Hong Kong, which would be a foreign private issuer and constitute the post-combination company, together with a merger of a newly formed merger subsidiary of the post-combination company with and into GGI; (ii) that Parent would effect a pre-closing reorganization; (iii) no survival of the representations, warranties and covenants contained therein and, relatedly, no post-Business Combination stockholder indemnity; (iv) earnout shares issuable pursuant to certain previously agreed upon milestones related to the public trading price of shares of the post-combination company; (v) no adjustment to the merger consideration for post-Business Combination working capital, cash or indebtedness; (vi) covenants regarding claims against GGIs trust account; and (vii) a Potential Private Placement with an amount to be determined.
From July 15, 2021 through September 26, 2021, representatives of Weil and K&E negotiated the terms of, and exchanged several drafts of, the definitive agreements for the potential business combination, including the Business Combination Agreement. In addition, during this same period, representatives of GGI, Polestar, Weil and K&E conducted various virtual and telephonic conferences to discuss, negotiate and resolve the open issues related to the potential business combination.
On July 22, 2021, Mr. Mark Stone, GGIs Chief Executive Officer, met with Mr. Ingenlath, other members of Polestars management team and Ms. De Geyseleer to discuss general due diligence topics in connection with the potential business combination as well as general timing considerations of the potential business combination.
On July 22, 2021, GGI executed placement agent agreements with each of Guggenheim Securities, LLC (Guggenheim Securities) Morgan Stanley & Co. LLC (Morgan Stanley), Deutsche Bank and Citigroup Global Markets Inc. (Citigroup) to serve as co-placement agents in connection with the Potential Private Placement. Thereafter, representatives of GGI, Deutsche Bank and Citigroup began the preparation of the investor presentation with respect to the Potential Private Placement. Morgan Stanley, Citigroup and Deutsche Bank also acted as underwriters in the GGI IPO and will collectively forfeit $28,000,000 in deferred commissions in the event an initial business combination is not completed by GGI by March 25, 2023.
On July 22 and 23, 2021, the GGI Board received presentations from two investment banks regarding an engagement as financial advisor to GGI to render an opinion with respect to the fairness, from a financial point of view, of the consideration to be received by GGIs stockholders in the potential business combination, in which representatives of The Gores Group, Guggenheim, and Weil participated by invitation of the GGI Board. After considering the presentations from both investment banks, the independent directors of the GGI Board decided to select Barclays Capital Inc. (Barclays) for such engagement, subject to confirmation that Barclays did not have any disabling conflicts with respect to the potential business combination.
On July 25, 2021, representatives of The Gores Group, including Mr. Gores, acting on behalf of GGI, met with Mr. Li Shufu, founder and Chairman of Geely, Mr. Daniel Li, Chief Executive Officer of Geely and Ms. De Geyseleer to introduce the parties and discuss the potential business combination.
From July 28, 2021 through August 12, 2021, representatives of GGI, Guggenheim Securities, Morgan Stanley, Deutsche Bank and Citigroup and members of Polestars management team held meetings with potential investors in the Potential Private Placement to discuss the terms of the potential business combination and details surrounding the Potential Private Placement. Each potential investor was informed in advance that the information that would be discussed may constitute material non-public information, and each potential investor agreed to be bound by certain confidentiality obligations as well as a prohibition on trading the securities of GGI or using the information for purposes other than such potential investors investment in connection with the potential business combination. During the meetings, representatives of GGI, Guggenheim Securities, Morgan Stanley, Deutsche Bank and Citigroup and members of Polestars management team reviewed with potential investors certain information regarding Polestar and the post-combination company, including certain financial projections regarding Polestar.
From August 13, 2021 through September 4, 2021, representatives of GGI, The Gores Group, acting on behalf of GGI, Polestar and Volvo Cars met periodically to discuss various aspects of the potential business combination
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in light of valuation and market environment feedback from certain potential investors in the Potential Private Placement. In particular, the parties discussed (i) the potential for an adjustment of the valuation of Polestar to reflect implied equity consideration of $20 billion, (ii) an adjustment in the aggregate amount raised pursuant to the Potential Private Placement, (iii) the potential for adjustments to the equity commitments of GGI and (iv) a potential equity commitment from Volvo Cars.
On August 19, 2021, the GGI Board held a meeting telephonically in which representatives of GGI, The Gores Group, Guggenheim and Weil were also in attendance by invitation of the GGI Board. During this meeting, representatives of GGI provided the GGI Board with an update on the status of the discussions with respect to the potential business combination with Polestar, including discussions on Polestars business model, management, growth potential and competition as well as an update of the Potential Private Placement. Additionally, representatives of GGI summarized for the GGI Board a call with Morgan Stanley regarding the China market and the electric vehicle sector generally as well as valuations related thereto.
Also on August 19, 2021, K&E circulated a draft letter agreement pursuant to which GGI and Polestar agreed to extend the Term Sheet Exclusivity Period until September 30, 2021, which was formally executed on August 20, 2021.
From August 19, 2021 through September 3, 2021, representatives of GGI and representatives of Polestar held numerous discussions related to the structuring of the potential business combination, including that the post-combination company would be structured as a foreign private issuer incorporated in the United Kingdom (in lieu of Hong Kong).
On or around September 1, 2021, representatives of K&E contacted representatives of Weil to discuss certain tax implications with respect to the issuance of Post-Combination Company Warrants in exchange for GGI Warrants in the potential business combination. To mitigate the impact of such implications, representatives of K&E and Weil discussed a proposed amendment to the terms of the GGI Warrants to provide that the GGI Warrants would convert upon the closing of the potential business combination into preferred shares of the post-combination company, exercisable for Class A ordinary shares of the post-combination company on terms substantially similar to the GGI Warrants.
From September 5, 2021 through September 7, 2021, representatives of GGI, The Gores Group, acting on behalf of GGI, Polestar and Volvo Cars held numerous discussions regarding next steps to address the feedback received from certain potential investors in the Potential Private Placement. As a result of these discussions, GGI and Polestar revised the valuation of Polestar to reflect (i) implied equity consideration of approximately $20 billion, (ii) a fully committed Potential Private Placement of $250 million, (iii) that Volvo Cars would commit $100 million in the Potential Private Placement and (iv) that the GGI Sponsor and one or more of its related investors would commit to backstop any uncommitted amounts of the Potential Private Placement.
From September 8, 2021 through September 21, 2021, representatives of GGI, Guggenheim Securities, Morgan Stanley, Deutsche Bank and Citigroup and members of Polestars management team continued to hold meetings with potential investors in the Potential Private Placement to discuss the terms of the potential business combination and details surrounding the Potential Private Placement. The updated valuation agreed to between GGI and Polestar, reflecting implied equity consideration of approximately $20 billion, was communicated to potential investors in the Potential Private Placement. The feedback and responses received from potential investors regarding a potential business combination between GGI and Polestar at the adjusted valuation were generally positive.
On September 9, 2021, Barclays provided a written memo to the GGI Board disclosing certain relationships between Barclays and GGI, Polestar, Volvo Cars and Geely.
On September 9, 2021, K&E provided a revised draft of the Business Combination Agreement to Weil. The revised draft of the Business Combination Agreement contemplated, among other things (i) that Volvo Cars or its
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affiliate would subscribe for certain convertible preferred shares of the post-combination company (the Potential Preference Shares) concurrently with the closing of the potential business combination, (ii) the formation of a new listco in the United Kingdom, which would be a foreign private issuer and constitute the post-combination company, together with a merger of a newly formed merger subsidiary of the post-combination company with and into GGI, (iii) that Parent would effect a pre-closing reorganization that would result in Polestar Singapore and Polestar Sweden becoming a wholly owned subsidiaries of the post-combination company and (iv) the percentage dilution of the proposed equity plan.
On September 10, 2021, K&E circulated a term sheet with proposed terms for the Potential Preference Shares. The term sheet contemplated a contribution by Volvo Cars in the post-combination company of $500 million for Potential Preference Shares, which would mandatorily convert into Class A ordinary shares of the post-combination company, but only to the extent that Volvo Cars (alone or taken together with all other entities controlled by Geely), after such conversion holds, directly or indirectly, less than 50% of the outstanding voting power of the post-combination company. The term sheet also contemplated that proceeds of such subscription will be used to satisfy certain accounts payable that are or will be due and payable by certain subsidiaries of Parent to Volvo Cars.
On September 14, 2021, Weil circulated a further revised draft of the Business Combination Agreement to K&E. The revised draft of the Business Combination Agreement contemplated that GGI would solicit the requisite approval from GGI warrant holders to amend the terms of the GGI Warrants, and provided that in the event the requisite warrant holder approval is obtained, the GGI Warrants would convert into preferred shares of the post-combination company exercisable for Class A ordinary shares of the post-combination company on terms substantially similar to the GGI Warrants. In the event the requisite warrant holder approval is not obtained, the GGI Warrants would be converted into an American depository warrant of the post-combination company, issued against the deposit of an underlying warrant exercisable for Class A ordinary shares of the post-combination company.
On September 17, 2021, the GGI Board held a meeting telephonically in which representatives of GGI, Weil and Barclays were also in attendance by invitation of the GGI Board. Representatives of Barclays reviewed with the GGI Board the outstanding information required to complete its financial analyses and an overview of the electric vehicle sector. Also at the GGI Board meeting, the GGI Board considered the matters set forth in Barclays relationship disclosure memo and determined, in its business judgment, that none of the matters set forth in Barclays independence disclosure letter would impact Barclays independence with respect to the potential business combination. Accordingly, the GGI Board unanimously approved the engagement of Barclays as financial advisor to GGI to render an opinion with respect to the fairness, from a financial point of view, of the consideration to be received by GGIs stockholders in the potential business combination. An engagement letter with Barclays was formally executed on the same day.
On September 25, 2021, the GGI Board held a meeting telephonically in which representatives of The Gores Group, Weil, Guggenheim, Davis Polk & Wardwell LLP, as counsel to Guggenheim Partners, LLC and Barclays were also in attendance. Representatives of Barclays reviewed with the GGI Board its financial analysis of the merger consideration to be received by holders of shares of GGI Class A Common Stock, other than the GGI Sponsor and its affiliates (the Excluded Holders) and delivered to the GGI Board its opinion to the effect that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the Class A Share Merger Consideration to be received by the holders of shares of GGI Class A Common Stock, other than the Excluded Holders, in the Merger pursuant to the Business Combination Agreement, after giving effect to the Pre-Closing Reorganization, was fair to the holders of shares of GGI Class A Common Stock, other than the Excluded Holders. Thereafter, representatives of Weil reviewed with the GGI Board the structure and terms of the Business Combination, including the Business Combination Agreement and other definitive agreements, copies of which were provided to the GGI Board in advance of the meeting. The GGI Board also discussed potential issues and the relative likelihood of risks that may arise with respect to the Peoples Republic of China in relation to Polestar and the potential business combination. The GGI Board concluded that the potential business combination with Polestar was the best potential business combination for GGI based on its
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evaluation of Polestar and other potential acquisition targets. In reaching this conclusion, the GGI Board took into account the criteria utilized by GGI to evaluate acquisition opportunities, and determined that the potential business combination met such criteria and was being accomplished under terms attractive to GGI and its stockholders. After discussion and upon a motion duly made and seconded, the GGI Board unanimously resolved that, among other things, the following be approved: (i) the Business Combination Agreement, (ii) each of the Related Agreements, (iii) the Business Combination and (iv) the Potential Private Placement.
On the morning of September 27, 2021, the parties executed the Business Combination Agreement and other documentation related thereto and the PIPE Investors, the GGI Sponsor and the Volvo Cars Preference Subscriber executed the Subscription Agreements.
Following the execution of the Business Combination Agreement, on September 27, 2021 and before the stock market opened in the United States, GGI and Polestar issued a joint press release announcing the execution of the Business Combination Agreement.
Following the execution of the Business Combination Agreement, certain affiliates of The Gores Group, on behalf of GGI Sponsor and Snita, contacted certain potential investors, including certain affiliates and employees of The Gores Group, that were previously contacted in connection with the PIPE Investment (the "Contacted PIPE Investors") to discuss a potential assignment of GGI Sponsors and Snitas commitment to purchase Class A ADSs under the Sponsor Subscription Agreement and the Volvo Cars PIPE Subscription Agreement, respectively. In addition, The Gores Group, acting on behalf of GGI, and Polestar discussed potential amendments to the Business Combination Agreement to reflect such assignments. During the weeks of December 6, 2021 and December 13, 2021, Weil and K&E exchanged drafts of an amendment to the Business Combination Agreement and certain Related Agreements to reflect the assignment of a portion of GGI Sponsors and Snitas PIPE Investment to the Contacted PIPE Investors and certain other administrative amendments (the Transaction Amendments). On December 17, 2021, the GGI Board unanimously approved the Transaction Amendments, and the parties thereto subsequently executed the Transaction Amendments on the same day.
Following the execution of the foregoing amendments to the Business Combination Agreement, certain affiliates of The Gores Group, on behalf of GGI Sponsor and Snita, again contacted the Contacted PIPE Investors to discuss a potential additional assignment of GGI Sponsors and Snitas commitment to purchase Class A ADSs under the Sponsor Subscription Agreement and the Volvo Cars PIPE Subscription Agreement, respectively. In addition, The Gores Group, acting on behalf of GGI, and Polestar discussed potential amendments to the Business Combination Agreement to reflect such assignments. During the weeks of March 4, 2022 through March 21, 2022, Weil and K&E exchanged drafts of an amendment to the Business Combination Agreement and certain Related Agreements to reflect the assignment of a portion of GGI Sponsors and Snitas PIPE Investment to the Contacted PIPE Investors and certain other administrative amendments (the March Transaction Amendments). On March 24, 2022, the GGI Board unanimously approved the March Transaction Amendments, and the parties thereto subsequently executed the March Transaction Amendments on the same day.
Following the execution of the foregoing amendments to the Business Combination Agreement, during the week of April 18, 2022, the parties discussed a potential amendment to the Business Combination Agreement to extend the Termination Date (as defined in the Business Combination Agreement) from May 27, 2022 to June 24, 2022. During the week of April 18, 2022, Weil and K&E exchanged drafts of an amendment to the Business Combination Agreement to reflect the extension of the Termination Date (the April Amendment). On April 21, 2022, the GGI Board unanimously approved the April Amendment, and the parties thereto subsequently executed the April Amendment on the same day.
Recommendation of the GGI Board and Reasons for the Business Combination
GGI was formed for the purpose of effecting an initial business combination with one or more businesses. GGI sought to do this by utilizing the networks and industry experience of both the GGI Sponsor and the GGI Board to identify and consummate an initial business combination with one or more businesses within or outside of the United States, although GGI was not limited to a particular industry or sector.
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In particular, the GGI Board considered the following positive factors, although not weighted or in any order of significance:
| Competitive Advantage in the Fast Growing EV Industry. The GGI Board took into account that Polestar already has a global market presence in the Electric Vehicle (EV) industry, favorably positioning Polestar to capitalize on the highest pockets of growth in a rapidly accelerating EV market. Specifically, the GGI Board considered that Polestar currently operates in 14 markets across three continents and that Polestar already has two award winning cars on the road, including the 47 awards Polestar 2 had won as of the signing of the Business Combination Agreement. The GGI Board also recognized that Polestar is one of only two global premium pure play EV companies already in mass production. |
| Focus on Design, Performance, Technology and Sustainability. The GGI Board noted that Polestars focus on design, performance, technology, and sustainability differentiates Polestar from other EV companies. |
| Ability to Leverage Strategic Partnerships. The GGI Board considered that Polestars ability to leverage partnerships with Volvo Cars and Geely in areas such as manufacturing, procurement, safety testing, customer delivery and after-sales support both de-risks Polestars ability to execute on its business plan and allows Polestar to focus more of its efforts on core areas of differentiation, such as avant-garde designs, sports-oriented performance, rapid adoption of latest technologies and development of industry-leading sustainability solutions. The GGI Board also noted that Polestars contract manufacturing arrangements with Volvo Cars and Geely allow Polestar to immediately benefit from operating leverage, have contracted access to production capacity required to execute its business plan, and maintain an asset-light operating model with less capital intensity than other OEMs. |
| Significant, Long-Term Growth Potential. The GGI Board took into account Polestars anticipated growth, with Polestar expecting to enter a period of rapid growth starting with the launch of its first premium electric SUV, the Polestar 3, in 2022. The GGI Board further noted Polestars plans to launch production of three new models by 2024, and to expand its global distribution footprint to approximately 30 markets by 2023 with over 150 locations and 800 service points. Additionally, the GGI Board noted that with Polestars planned launch of its three additional models, Polestar is expected to cover a substantial majority of the premium/luxury market. |
| Proven Leadership Team with Deep Technology, Operations and Electric Vehicle Experience. The GGI Board noted that the Polestar management team has deep technology, operations and EV experience, and that the Polestar management team is expected to remain with the Post-Combination Company upon the Closing. Additionally, the GGI Board believes that Polestars proven management team and strategy will help enable Polestar to deliver continued strategic growth. |
| Opinion of GGIs Financial Advisor. The GGI Board took into account the opinion of Barclays, dated September 25, 2021, to the GGI Board to the effect that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the Class A Share Merger Consideration to be received by the holders of shares of GGI Class A Common Stock, other than the GGI Sponsor and its affiliates (the Excluded Holders), in the Merger pursuant to the Business Combination Agreement, after giving effect to the Pre-Closing Reorganization, is fair to the holders of shares of GGI Class A Common Stock, other than the Excluded Holders, as more fully described under the caption The Business CombinationOpinion of GGIs Financial Advisor. |
| Other Alternatives. The GGI Board believed, after a review of other business combination opportunities reasonably available to GGI, that the proposed Business Combination represents the best potential business combination for GGI based on its evaluation of Polestar and other potential acquisition targets. |
| Due Diligence. The GGI Board took into account the results of its due diligence investigation of Polestar conducted by GGIs management team and GGIs financial and legal advisors. |
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| Stockholder Approval. The GGI Board considered the fact that, in connection with the Business Combination, GGI stockholders have the option to (i) remain shareholders of the Post-Combination Company, (ii) sell their shares of GGI Class A Common Stock or (iii) redeem their shares of GGI Class A Common Stock for the per share amount held in the Trust Account pursuant to the terms of the Current GGI Certificate. |
| Negotiated Terms of the Business Combination Agreement. The GGI Board considered the terms and conditions of the Business Combination Agreement and the Business Combination. |
| Governance of the Post-Combination Company. The GGI Board evaluated the governance profile of the Post-Combination Company that was agreed upon in connection with the negotiation of the other terms and conditions of the Business Combination, including the requirement that, for the three years following the Closing, the Post-Combination Company Board must be comprised of a majority of independent directors. However, the Post-Combination Company may, as a controlled company under Nasdaq listing rules, avail itself of the exemption from having a board of directors that consists of a majority of independent directors after such three year period. See Management of the Post-Combination Company-Controlled Company. |
| Independent Director Role. The GGI Board is comprised of a majority of independent directors who are not affiliated with the GGI Sponsor and its affiliates, including The Gores Group and Gores Guggenheim. In connection with the Business Combination, GGIs independent directors, Mr. Randall Bort, Ms. Elizabeth Marcellino and Ms. Nancy Tellem, took an active role in evaluating the proposed terms of the Business Combination, including the Business Combination Agreement, the Related Agreements and the amendments to the Current GGI Certificate to take effect in connection with the Business Combination, and unanimously approved, as members of the GGI Board, the Business Combination Agreement and the Business Combination. |
The GGI Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination, including, but not limited to, the following:
| Benefits May Not Be Achieved. The risk that the potential benefits of the Business Combination may not be fully achieved, or may not be achieved within the expected timeframe. |
| Stockholder Vote. The risk that GGI stockholders may fail to provide the votes necessary to effect the Business Combination. |
| Redemption Risk. The risk that a significant number of GGI stockholders may elect to redeem their shares prior to the consummation of the Business Combination pursuant to the Current GGI Certificate, which may potentially make the Business Combination more difficult to complete. |
| Closing Conditions. The fact that consummation of the Business Combination is conditioned on the satisfaction of certain closing conditions that are not within GGIs control. |
| Litigation. The possibility of litigation challenging the Business Combination or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the Business Combination. |
| Fees and Expenses. The fees and expenses associated with completing the Business Combination. |
| Liquidation of GGI. The risks and costs to GGI if the Business Combination is not completed, including the risk of diverting GGIs managements focus and resources from other initial business combination opportunities, which, if the Business Combination is not consummated, could result in GGI being unable to effect an initial business combination by March 25, 2023 and force GGI to liquidate and the GGI Public Warrants to expire worthless. |
| GGI Public Stockholders Holding a Minority Position in the Post-Combination Company. The risk that GGI Public Stockholders will hold a minority position in the Post-Combination Company |
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(approximately 3.8% of the Post-Combination Company Shares by virtue of their ownership of Class A ADSs, assuming the no redemption scenario and excluding the impact of the exercise of any Class C ADSs or ADWs), which may reduce the influence that GGIs current stockholders have on the management of Polestar. |
| Risks Related to Polestars Business in China. The risks associated with Polestars reliance on manufacturing facilities based in China and its strategy to grow its business in China. |
| Risks Related to Polestars Partnerships. The risks associated with Polestar being unable to maintain agreements or partnerships with its existing strategic partners, including Geely and Volvo Cars, or enter into new agreements or partnerships. |
| Other Risks. Various other risks associated with the Business Combination, the business of Polestar and ownership of the Post-Combination Companys shares described under the section titled Risk Factors. |
In addition to considering the factors described above, the GGI Board also considered that:
| Interests of Certain Persons. Some of GGIs officers and directors may have interests in the Business Combination as individuals that are in addition to, and that may be different from, the interests of GGIs stockholders (see The Business CombinationInterests of Certain Persons in the Business CombinationInterests of the GGI Initial Stockholders and GGIs Directors and Officers). GGIs independent directors reviewed and considered these interests during the negotiation of the Business Combination and in evaluating and unanimously approving, as members of the GGI Board, the Business Combination Agreement and the Business Combination. |
The GGI Board concluded that the potential benefits it expected GGI and its stockholders to achieve as a result of the Business Combination outweighed the potentially negative factors associated with the Business Combination. Accordingly, the GGI Board unanimously determined that the Business Combination Agreement and the Business Combination, were advisable, fair to, and in the best interests of GGI and its stockholders.
Certain Engagements in Connection with the Business Combination and Related Transactions
Citigroup Global Markets Inc. (Citigroup) was engaged by Polestar as exclusive financial advisor to Polestar and is acting as a placement agent in connection with the Subscription Investments. Deutsche Bank Securities Inc. (Deutsche Bank) is acting as financial advisor and lead capital markets advisor to GGI. Morgan Stanley & Co. LLC (Morgan Stanley), Guggenheim Securities, LLC (Guggenheim Securities) and Barclays Capital Inc. (Barclays) are acting as financial advisors to GGI. Each will receive compensation in connection with their respective engagements.
In addition, each of Deutsche Bank, Guggenheim Securities and Morgan Stanley was engaged by GGI as a co-placement agent with Citigroup in connection with the Subscription Investments, and each of Deutsche Bank, Guggenheim Securities, Morgan Stanley and Citigroup will receive fees and expense reimbursement in connection therewith. Pursuant to engagement letters between GGI and each of the four placement agents, each of Deutsche Bank, Guggenheim Securities, Morgan Stanley and Citigroup will receive transaction fees equal in the aggregate to 3% of the gross proceeds raised by the placement agents in connection with the Subscription Investments, subject to the terms and conditions of their respective engagement letters with GGI. Based on an anticipated $62.5 million to be raised by the placement agents in the Subscription Investment (through the PIPE Investments), it is anticipated that each placement agent will receive an equal portion of an aggregate of $1.88 million. The Deferred Discount payable in connection with the consummation of the Business Combination will remain constant and will not be adjusted based on the number of shares that are redeemed, unless otherwise determined by GGI in its discretion As such, the deferred underwriting fee would represent approximately 3.5%, 3.7%, 4.0% and 560.0% of the value of the cash remaining in the Trust Account assuming the no redemption
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scenario, the illustrative redemption scenario, the contractual maximum redemption scenario and the charter redemption limitation scenario, respectively (based on Trust Account balances of $800,056,447, $750,000,005, $700,000,008 and $5,000,003 in the no redemption scenario, illustrative redemption scenario, contractual maximum redemption scenario and charter redemption limitation scenario, respectively).
In addition, each of Citigroup, Deutsche Bank, Guggenheim Securities and Morgan Stanley (together with their respective affiliates) is a full service financial institution engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, wealth management, investment research, principal investing, lending, financing, hedging, market making, brokerage and other financial and non-financial activities and services. From time to time, each of Citigroup, Deutsche Bank, Guggenheim Securities and Morgan Stanley and their respective affiliates has provided various investment banking and/or other commercial dealings unrelated to the Business Combination to GGI, Polestar and their respective affiliates, and has received customary compensation in connection therewith. In addition, each of Citigroup, Deutsche Bank, Guggenheim Securities and Morgan Stanley and their respective affiliates may provide investment banking and other commercial dealings to GGI, Polestar and their respective affiliates in the future, for which they would expect to receive customary compensation.
In addition, in the ordinary course of its business activities, each of Citigroup, Deutsche Bank, Guggenheim Securities and Morgan Stanley and their respective affiliates, officers, directors and employees may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of GGI and Polestar, or their respective affiliates. Each of Citigroup, Deutsche Bank, Guggenheim Securities and Morgan Stanley and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Guggenheim Securities may be considered an affiliate of GGI as a result, among other matters, of direct or indirect investments in GGI or its affiliates (Principal Investments) by affiliates of Guggenheim Securities (Guggenheim Investors). As a result, it is possible that Guggenheim Securities and its affiliates may be or may be perceived as being adverse to the interests of GGI or Polestar. Pursuant to the engagement letter between GGI and Guggenheim Securities, GGI, on its own behalf and on behalf of its affiliates, expressly acknowledged the benefits to GGI of the activities of Guggenheim Securities and its affiliates in this regard and waived and released, to the fullest extent permitted by law, any claims that GGI or any of its affiliates may have had against Guggenheim Securities, its affiliates and its and their respective personnel and representatives with respect to any actual or perceived conflict of interest that may arise from the existence of Guggenheim Securities engagement and provision of its services pursuant to the engagement letter in the context of such Principal Investments and any related activities. Also pursuant to the engagement letter between GGI and Guggenheim Securities, GGI acknowledged and agreed for itself and its affiliates that any Guggenheim Investors (a) would be under no obligation or duty as a result of Guggenheim Securities engagement and provision of its services pursuant to the engagement letter or otherwise to take any action or refrain from taking any action, or to exercise or not exercise any rights or remedies, that such Guggenheim Investors may be entitled to take or exercise in respect of any Principal Investments and related activities, and (b) may manage their exposure and take any action or refrain from taking any action with respect to any such Principal Investments and related activities without regard to Guggenheim Securities engagement in connection with the engagement letter. Guggenheim Securities is entitled to take or refrain from taking any action and exercise or refrain from exercising any rights and remedies available to it under the engagement letter regardless of any such Principal Investments and related activities.
Opinion of GGIs Financial Advisor
GGI engaged Barclays Capital Inc. (Barclays) to act as its financial advisor with respect to the Business Combination, pursuant to an engagement letter dated September 17, 2021. On September 25, 2021, Barclays
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rendered its oral opinion (which was subsequently confirmed in writing) to the GGI Board that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the Class A Share Merger Consideration to be received by the holders of shares of GGI Class A Common Stock, other than GGI Sponsor and its affiliates (the Excluded Holders), in the Merger pursuant to the Business Combination Agreement, after giving effect to the Pre-Closing Reorganization, is fair to the holders of shares of GGI Class A Common Stock, other than the Excluded Holders.
The full text of Barclays written opinion, dated as of September 25, 2021, is attached as Annex H to this Proxy Statement/Prospectus. Barclays written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Barclays in rendering its opinion. You are encouraged to read the opinion carefully in its entirety. The following is a summary of Barclays opinion and the methodology that Barclays used to render its opinion. This summary is qualified in its entirety by reference to the full text of the opinion.
Barclays opinion, the issuance of which was approved by Barclays Valuation and Fairness Opinion Committee, is for the use and benefit of the GGI Board and is rendered to the GGI Board in connection with its consideration of the Business Combination. Barclays opinion is not intended to be and does not constitute a recommendation to any security holder of GGI as to how such security holder should vote or act with respect to the Business Combination, including, without limitation, whether any such security holder should redeem their securities of GGI or whether any party should participate in the PIPE Investment or the transactions contemplated by the Sponsor Subscription Investment, the Volvo Cars PIPE Subscription Investment or the Volvo Cars Preference Subscription Investment (such investments collectively, the Private Placements). The terms of the Business Combination were determined through arms-length negotiations between GGI and Polestar and were approved by the GGI Board. Barclays did not recommend any specific form of consideration to GGI or that any specific form of consideration constituted the only appropriate consideration for the Business Combination. Barclays was not requested to address, and its opinion does not in any manner address, GGIs underlying business decision to proceed with or effect the Business Combination or the likelihood of the consummation of the Business Combination. In addition, Barclays expressed no opinion on, and its opinion does not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors or employees of any parties to the Business Combination, or any class of such persons, relative to the Class A Share Merger Consideration to be received by the holders of shares of GGI Class A Common Stock, other than Excluded Holders, in the Merger pursuant to the Business Combination Agreement, after giving effect to the Pre-Closing Reorganization, or otherwise. Barclays opinion does not address the relative merits of the Business Combination as compared to any other transaction or business strategy in which GGI might engage. Barclays is not legal, tax, accounting, environmental, technology, science, or regulatory advisors, and Barclays did not express any views or opinions as to any legal, tax, accounting, environmental, technology, science, or regulatory matters relating to GGI, Polestar, ListCo, the Business Combination, or otherwise. Barclays understood and assumed that GGI has obtained or will obtain such advice as it deems necessary or appropriate from qualified legal, tax, accounting, environmental, technology, science, regulatory, and other professionals. GGI has advised Barclays, and Barclays assumed, that the Business Combination will qualify as a tax-free reorganization for all applicable tax purposes in all applicable jurisdictions. No limitations were imposed by GGIs board of directors upon Barclays with respect to the investigations made or procedures followed by it in rendering its opinion.
In arriving at its opinion, Barclays, among other things:
| reviewed and analyzed a draft of the Business Combination Agreement, dated as of September 24, 2021 and the specific terms of the Business Combination; |
| reviewed and analyzed certain publicly available business and financial information that Barclays deemed to be generally relevant concerning Polestar and GGI; |
| reviewed and analyzed financial and operating information with respect to the business, operations and prospects of GGI and Polestar furnished to Barclays by GGI and Polestar, including the ListCo |
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Projections prepared by management of Polestar, as reviewed and approved by GGI and approved for Barclays use by GGI; |
| reviewed and analyzed the balance sheet of ListCo as of June 30, 2021, taking into account the pro forma effects of the Business Combination prepared by management of Polestar, as reviewed and approved by GGI and approved for Barclays use by GGI; |
| reviewed and analyzed the capitalization of GGI as of September 23, 2021, the expected pro forma capitalization of ListCo immediately following the completion of the Pre-Closing Reorganization but prior to the completion of the Merger and the Private Placements and the expected pro forma capitalization of ListCo immediately following the completion of the Business Combination, in each case, prepared by management of GGI and approved for Barclays use by GGI; |
| reviewed and analyzed a comparison of the projected financial performance of ListCo and its subsidiaries with those of other companies and businesses that Barclays deemed relevant; |
| had discussions with the managements of GGI and Polestar concerning the business, operations, assets, liabilities, financial condition and prospects of GGI, Polestar and ListCo and its subsidiaries; and |
| has undertaken such other studies, analyses and investigations as Barclays deemed appropriate. |
In arriving at its opinion, Barclays assumed and relied upon the accuracy and completeness of the financial and other information used by Barclays without any independent verification of such information (and had not assumed responsibility or liability for any independent verification of such information). Barclays also relied upon the assurances of the managements of GGI and Polestar that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the ListCo Projections, upon the advice of GGI, Barclays assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the managements of GGI and Polestar as to the future financial performance of ListCo and its subsidiaries and that ListCo and its subsidiaries will perform in accordance with such projections. Barclays assumed no responsibility for and Barclays expressed no view as to any such projections or estimates or the assumptions on which they are based. In arriving at its opinion, Barclays did not conduct a physical inspection of the properties and facilities of Polestar or GGI and has not made or obtained any evaluations or appraisals of the assets or liabilities of Polestar or GGI. Barclays did not evaluate the solvency or creditworthiness of GGI, Parent, ListCo, Polestar or any other party to the Business Combination, the fair value of GGI, Parent, ListCo, Polestar or any of their respective assets or liabilities, or whether GGI, Parent, ListCo, Polestar or any other party to the Business Combination is paying or receiving reasonably equivalent value in the Business Combination under any applicable foreign, state, or federal laws relating to bankruptcy, insolvency, fraudulent transfer, or similar matters, nor has Barclays evaluated, in any way, the ability of GGI, Parent, ListCo, Polestar or any other party to the Business Combination to pay its obligations when they come due. In addition, Barclays relied, with the consent of GGIs management, on the assessments of GGI as to ListCos and its subsidiaries ability to retain key employees, customers, suppliers, commercial relationships, and strategic partners and other key existing and contemplated future agreements, relationships and arrangements, including, without limitation, with Volvo Cars, PSD Investment Limited and their respective affiliates. In addition, Barclays (i) assumed that each Class A ADS, each Post-Closing Company Class A Share, each Post-Closing Company Class B Share and each Post-Closing Company Preference Share has a value of $10.00 per share (with such $10.00 value being based on the GGI IPO and GGIs approximate cash per share of GGI Class A Common Stock outstanding (but excluding, for the avoidance of doubt, the dilutive impact of outstanding shares of GGI Class F Common Stock or any GGI Warrants)), (ii) did not evaluate or take into account the Earn Out Shares and (iii) evaluated the fairness, from a financial point of view, to the holders of shares of GGI Class A Common Stock, other than the Excluded Holders, of the Class A Share Merger Consideration to be received by the holders of shares of GGI Class A Common Stock, other than the Excluded Holders, in the Merger pursuant to the Business Combination Agreement, after giving effect to the Pre-Closing Reorganization, based solely on a comparison of (a) the sum of (x) $20,003,000,000 (the Equity Value), (y) the number of Class A ADS to be issued as part of the Class A Share Merger Consideration multiplied by $10.00 and
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(z) the aggregate cash purchase price to be paid to ListCo by the investors in the Private Placements (for the avoidance of doubt, other than with respect to the Volvo Cars Preference Subscription Investment) and (b) the implied aggregate equity value reference ranges for ListCo and its subsidiaries that Barclays believes are indicated by its financial analyses of ListCo and its subsidiaries.
In addition, Barclays was not authorized by GGI to and did not, (a) initiate any discussions with, or solicit any indications of interest from any third parties with respect to any alternatives to the Business Combination, (b) participate in the structuring or negotiation of the Business Combination, (c) advise the GGI Board, GGI or any other party with respect to alternatives to the Business Combination or (d) identify or introduce to the GGI Board, GGI or any other party any prospective investors, lenders or other participants in the Business Combination. Barclays opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date of its opinion. Barclays assumed no responsibility for updating or revising its opinion based on events or circumstances that may occur after the date of its opinion. Barclays opinion addresses only the fairness, from a financial point of view, to the holders of shares of GGI Class A Common Stock, other than the Excluded Holders, of the Class A Share Merger Consideration to be received by the holders of shares of GGI Class A Common Stock, other than the Excluded Holders, in the Merger pursuant to the Business Combination Agreement, after giving effect to the Pre-Closing Reorganization. Barclays expressed no opinion as to, and its opinion did not address, any other terms, aspects, or implications of the Business Combination or the Business Combination Agreement or any related agreements, including, without limitation, (i) the Earn Out Shares, the Parent Lock-Up Agreement, the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement or the Registration Rights Agreement, (ii) other than assuming the consummation thereof in accordance with the Business Combination Agreement, the Pre-Closing Reorganization or the Private Placements, (iii) any term or aspect of the Business Combination that is not susceptible to financial analysis, (iv) the fairness of the Business Combination, or all or any portion of the consideration in connection therewith, to any other security holders of GGI (including, without limitation, the Excluded Holders or holders of GGI Public Warrants or GGI Private Placement Warrants), Polestar, Parent, ListCo or any other person or any creditors or other constituencies of GGI, Polestar, Parent, ListCo or any other person, (v) the fairness of any portion or aspect of the Business Combination to any one class or group of GGIs or any other partys security holders or other constituencies relative to any other class or group of GGIs or such other partys security holders or other constituencies (including, without limitation, the fairness of the consideration to be received in the Merger by the Excluded Holders relative to the holders of shares of GGI Class A Common Stock, other than the Excluded Holders), (vi) the appropriate capital structure of ListCo or whether ListCo should be issuing debt or equity securities or a combination of both, and (vii) the prices at which securities of ListCo or GGI may trade, be purchased or sold at any time, including following announcement or consummation of the Business Combination. Barclays opinion should not be viewed as providing any assurance that the market value of the securities of ListCo to be held by the holders of shares of GGI Class A Common Stock or any other security holders of GGI after the consummation of the Business Combination will be in excess of the market value of the shares of GGI Class A Common Stock or other securities of GGI owned by such security holders at any time prior to the announcement or consummation of the Business Combination. In addition, Barclays made no representation or warranty regarding the adequacy of the opinion or the analyses underlying the opinion for the purpose of GGIs compliance with the terms of its constituent documents, the rules of any securities exchange or any other general or particular purpose.
Barclays assumed that the executed Business Combination Agreement would conform in all material respects to the last draft reviewed by Barclays. Additionally, Barclays assumed the accuracy of the representations and warranties contained in the Business Combination Agreement and all agreements related thereto. Barclays also assumed, at the direction of GGIs management, that all material governmental, regulatory and third party approvals, consents and releases for the Business Combination will be obtained within the constraints contemplated by the Business Combination Agreement and that the Business Combination will be consummated in accordance with the terms of the Business Combination Agreement without waiver, modification or amendment of any material term, condition or agreement thereof. Barclays did not express any opinion as to any tax or other consequences that might result from the Business Combination, nor did Barclays opinion address
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any legal, tax, regulatory or accounting matters, as to which Barclays understood that GGI had obtained such advice as it deemed necessary from qualified professionals.
In connection with rendering its opinion, Barclays performed certain financial, comparative and other analyses as summarized below. In arriving at its opinion, Barclays did not ascribe a specific range of values to the shares of GGI Class A Common Stock but rather made its determination as to fairness, from a financial point of view, to the holders of shares of GGI Class A Common Stock, other than the Excluded Holders, in the Merger pursuant to the Business Combination Agreement, after giving effect to the Pre-Closing Reorganization, is fair to the holders of shares of GGI Class A Common Stock, other than the Excluded Holders on the basis of various financial and comparative analyses. The preparation of a fairness opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to summary description.
In arriving at its opinion, Barclays did not attribute any particular weight to any single analysis or factor considered by it but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the context of the circumstances of the particular transaction. Accordingly, Barclays believes that its analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.
Summary of Material Financial Analyses
The following is a summary of the material financial analyses used by Barclays in preparing its opinion to the GGI Board. The summary of Barclays analyses and reviews provided below is not a complete description of the analyses and reviews underlying Barclays opinion. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of analysis and review and the application of those methods to particular circumstances, and, therefore, is not readily susceptible to summary description.
For the purposes of its analyses and reviews, Barclays made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of GGI or any other parties to the Business Combination. No company, business or transaction considered in Barclays analyses and reviews is identical to GGI, Polestar, ListCo or the Business Combination, and an evaluation of the results of those analyses and reviews is not entirely mathematical. Rather, the analyses and reviews involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or other values of the companies, businesses or transactions considered in Barclays analyses and reviews. None of GGI, Polestar, ListCo, Barclays or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses and reviews and the ranges of valuations resulting from any particular analysis or review are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of companies, businesses or securities do not purport to be appraisals or reflect the prices at which the companies, businesses or securities may actually be sold. Accordingly, the estimates used in, and the results derived from, Barclays analyses and reviews are inherently subject to substantial uncertainty.
For purposes of its financial analyses, Barclays calculated a pro forma equity value for ListCo, as of immediately after the Closing, implied by the terms of the Business Combination by calculating the sum of (x) the Equity Value, (y) the number of Class A ADS to be issued as part of the Class A Share Merger Consideration multiplied by $10.00 and (z) the aggregate cash purchase price to be paid to ListCo by the investors in the Private Placements (for the avoidance of doubt, other than with respect to the Volvo Cars Preference Subscription Investment). The calculation resulted in an implied ListCo equity value of $21,253 million (the ListCo
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Transaction Equity Value). Further, Barclays calculated the pro forma aggregate ownership percentage of the holders of shares of GGI Class A Common Stock, other than the Excluded Holders in ListCo based on the ListCo Transaction Equity Value by calculating the quotient of (i) the number of Class A ADS to be issued to the holders of shares of GGI Class A Common Stock, other than the Excluded Holders as part of the Class A Share Merger Consideration multiplied by $10.00 (equal to $800 million) (the GGI Public Holders Share Consideration Value) and (ii) the ListCo Transaction Equity Value. The calculation resulted in an implied pro forma ownership percentage in ListCo for the holders of shares of GGI Class A Common Stock, other than the Excluded Holders of 3.8% (the GGI Public Holders ListCo Transaction Pro Forma Ownership Percentage). Then, Barclays performed a selected comparable companies analysis and a discounted cash flow analysis in order to derive various (a) implied pro forma equity value ranges for ListCo and (b) the corresponding implied pro forma ownership percentage in ListCo for the holders of shares of GGI Class A Common Stock assuming a constant GGI Public Holders Share Consideration Value of $800 million and then compared these implied equity value and pro forma ownership percentage reference ranges with the ListCo Transaction Equity Value and GGI Public Holders ListCo Transaction Pro Forma Ownership Percentage, respectively.
The summary of the financial analyses and reviews summarized below include information presented in tabular format. In order to fully understand the financial analyses and reviews used by Barclays, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses and reviews. Considering the data in the tables below without considering the full description of the analyses and reviews, including the methodologies and assumptions underlying the analyses and reviews, could create a misleading or incomplete view of Barclays analyses and reviews.
Selected Comparable Company Analysis
In order to assess how the public market values shares of similar publicly traded companies and to provide a range of relative implied equity values of ListCo by reference to those companies, which could then be used to calculate implied pro forma ownership percentage ranges in ListCo with respect to the holders of shares of GGI Class A Common Stock, Barclays reviewed and compared specific financial and operating data relating to Polestar with selected companies that Barclays, based on its experience in the electric vehicle industry, deemed comparable to Polestar. The selected comparable companies with respect to Polestar were:
| Lucid Group, Inc. |
| Tesla, Inc. |
| NIO Inc. |
| XPeng Inc. |
Barclays calculated and compared various financial multiples and ratios of Polestar and the selected comparable companies. As part of its selected comparable company analysis, Barclays calculated and analyzed each companys ratio of its enterprise value (TEV) (calculated as market value of the relevant companys diluted common equity based on its closing stock price as of September 23, 2021, the second to last trading date prior to the delivery of Barclays opinion, plus, as of the relevant companys most recently reported quarter end (with pro forma adjustments for any publicly announced corporate actions following the most recent reporting quarter), preferred stock, net debt and, where applicable, book value of noncontrolling interests) to its projected revenue based on Wall Street analyst consensus forecasts for the 2022, 2023 and 2024 calendar years, respectively.1 All of these calculations were performed, and based on publicly available financial data. The results of this selected comparable company analysis are summarized below in the following TEV / Revenue multiples:
Benchmark |
High | Low | Median | Average | ||||||||||||
2022E Revenue |
15.6x | 5.4x | 9.6x | 10.1x | ||||||||||||
2023E Revenue |
10.8x | 3.4x | 5.2x | 6.2x | ||||||||||||
2024E Revenue |
9.1x | 2.1x | 3.5x | 4.9x |
1 | Other than with respect to NIO Inc., for which projected revenue for the 2024 calendar year was not available. |
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Barclays selected the comparable companies listed above because their businesses and operating profiles are reasonably similar to those of Polestar. However, because no selected comparable company is exactly the same as Polestar, Barclays believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected comparable company analysis. Accordingly, Barclays also made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of Polestar and the selected comparable companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing sizes, growth prospects, profitability levels and degree of operational risk between Polestar and the companies included in the selected company analysis. Based upon these judgments, Barclays selected a range of (i) an enterprise value/2022E revenue multiple reference range of 8.6x 10.6x to Polestar projected revenue in calendar year 2022, (ii) an enterprise value/2023E revenue multiple reference range of 4.2x 6.2x to Polestar projected revenue in calendar year 2023 and (iii) an enterprise value/2024E revenue multiple reference range of 2.5x 4.5x to Polestar projected revenue in calendar year 2024, in each case, based on the ListCo Projections. Barclays further calculated the respective (i) implied ranges of Listco equity value by subtracting from the implied ListCo enterprise ranges the pro forma net debt of ListCo, as of June 30, 2021, provided by management of Polestar, as reviewed and approved by GGI and authorized for Barclays use by GGI and (ii) implied ranges of pro forma ownership percentages in ListCo held by the holders of shares of GGI Class A Common Stock in ListCo based on these implied ListCo equity value ranges by comparing the GGI Public Holders Share Consideration Value to the implied ListCo equity value reference ranges. The following summarizes the result of these calculations:
Benchmark |
Implied ListCo Equity Value Reference |
ListCo Transaction |
Implied Pro Forma ListCo Ownership Percentage |
GGI Public Holders ListCo Transaction Pro Forma Ownership Percentage | ||||
2022E Revenue |
$28,640 million - $34,980 million | $21,253 million | 2.3% - 2.8% | 3.8% | ||||
2023E Revenue |
$29,440 million - $42,810 million | $21,253 million | 1.9% - 2.7% | 3.8% | ||||
2024E Revenue |
$34,270 million - $60,770 million | $21,253 million | 1.3% - 2.3% | 3.8% |
Barclays noted that on the basis of the selected comparable company analysis, the GGI Public Holders ListCo Transaction Pro Forma Ownership Percentage of 3.8% was above the ranges of implied pro forma ListCo ownership percentages.
Discounted Cash Flow Analysis
In order to estimate the present value of ListCos equity value, Barclays performed a discounted cash flow analysis of ListCo. A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating the present value of estimated future cash flows of the asset. Present value refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.
To calculate the estimated enterprise value of ListCo using the discounted cash flow method, Barclays added (i) ListCos projected after-tax unlevered free cash flows for the six months ending December 31, 2021 and fiscal years 2022 through 2025 based on the ListCo Projections, discounted to its present value using a range of selected discount rates to (ii) the terminal value of ListCo, as of September 23, 2021, discounted to its present value using a range of selected discount rates. The after-tax unlevered free cash flows were calculated by taking net income, adding back net financial items, depreciation and amortization and subtracting investments in intangible assets, investments in plant, property and equipment and change in net working capital. The value of ListCo at the end of the forecast period, or terminal value, was estimated by selecting a range of terminal value multiples based on projected ListCo revenue for the 12-month period ending December 31, 2025 (based on the
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ListCo Projections) of 5.5x to 7.5x and applying such range to the ListCo Projections. The 5.5x to 7.5x range was chosen based on Barclays professional judgment, taking into account the results from the selected comparable company analysis and the trailing 5-year average enterprise value to latest 12-month revenue ratios of the selected comparable companies. The range of after-tax discount rates of 12.5% to 17.5% was selected based on an analysis of the weighted average cost of capital of ListCo and the comparable companies. Barclays then calculated a range of implied equity value of ListCo by subtracting estimated net debt as of June 30, 2021 from the estimated enterprise value using the discounted cash flow method. Barclays further calculated the implied ranges of pro forma ownership percentages in ListCo held by the holders of shares of GGI Class A Common Stock based on this implied ListCo equity value range by comparing the GGI Public Holders Share Consideration Value to the implied ListCo equity value reference range. The following summarizes the result of these calculations:
Implied ListCo Equity Value |
ListCo Transaction Equity Value |
Implied Pro Forma ListCo Ownership Percentage |
GGI Public Holders ListCo Transaction Pro Forma Ownership Percentage |
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$48,910 million - $80,530 million |
$ | 21,253 million | 1.0% -1.6% | 3.8 | % |
Barclays noted that on the basis of the discounted cash flow analysis, the GGI Public Holders ListCo Transaction Pro Forma Ownership Percentage of 3.8% was above the range of implied pro forma ListCo ownership percentages calculated using ListCo Projections.
General
Barclays is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, Private Placements and valuations for estate, corporate and other purposes. GGIs board of directors selected Barclays because of its familiarity with Polestar and the industry in which it operates, its qualifications, reputation and experience in the valuation of businesses and securities in connection with mergers and acquisitions generally, as well as substantial experience in transactions comparable to the Business Combination.
Barclays is acting as financial advisor to GGI in connection with the Business Combination and will receive a fee for its services of $1 million, all of which is payable upon the consummation of the Business Combination. In addition, GGI has agreed to reimburse a portion of Barclays expenses and indemnify Barclays for certain liabilities that may arise out of the engagement. In the past two years, Barclays has not performed any investment banking services for GGI, the GGI Sponsor, their respective affiliates, the GGI Sponsors portfolio companies or Polestar Sweden, but may perform such services in the future, and in the past two years, has not received, but expects to receive, customary fees for any such future services. In addition, Barclays and its affiliates in the past have provided, currently are providing, or in the future may, provide investment banking services to Volvo Cars, Geely, affiliates of each of which are significant shareholders of Parent, or certain of their respective affiliates and have received or in the future may receive customary fees for rendering such services, including having acted or acting as arranger, bookrunnner and/or lender for Volvo Cars, Geely or certain of their respective affiliates in connection with financing transactions. Specifically, in the past two years, Barclays has received fees for investment banking and financial advisory services provided to (a) Volvo Cars and certain of its affiliates in the aggregate amount of less than $1 million and (b) Geely and certain of its affiliates in the aggregate amount of less than $1 million.
Barclays and its affiliates engage in a wide range of businesses from investment and commercial banking, lending, asset management and other financial and non-financial services. In the ordinary course of its business, Barclays and affiliates may actively trade and effect transactions in the equity, debt and/or other securities (and
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any derivatives thereof) and financial instruments (including loans and other obligations) of GGI, ListCo, Volvo Cars and Geely for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions and investments in such securities and financial instruments.
Certain Financial Projections Provided to the GGI Board
Polestar provided GGI with its internally prepared projections for the fiscal years ending December 31, 2021 through December 31, 2025 in connection with GGIs evaluation of Polestar. In addition, GGI utilized the projections provided by Polestar to calculate Unlevered Free Cash Flow for the fiscal years ending December 31, 2021 through December 31, 2025. The projections were not prepared with a view towards public disclosure or compliance with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, but, in the view of Polestars management, was prepared on a reasonable basis and reflects the best available estimates and judgments at the time they were provided to GGI by Polestar, except with respect to Unlevered Free Cash Flow, which was calculated by GGI management. Polestar does not, as a matter of general practice, publicly disclose long-term forecasts or internal projections of Polestars future performance, revenue, financial condition or other results. The projections set forth below were prepared on the basis of projections provided to GGI by Polestar, solely for use by GGI and the GGI Board in connection with the proposed Business Combination and are subjective in many respects and are therefore susceptible to varying interpretations and the need for periodic revision based on actual experience and business developments. You are cautioned that the projections may be materially different than actual results.
The accompanying prospective financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of Polestars management, was prepared on a reasonable basis, reflected the best available estimates and judgments at the time the prospective financial information was provided to GGI by Polestar, and presented, to the best of managements knowledge and belief, the expected course of action and the expected future financial performance of Polestar. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of these projections are cautioned not to place undue reliance on the prospective financial information.
The projections, including revenue, gross profit, Adjusted EBIT, Adjusted EBT, Adjusted EBITDA and Unlevered Free Cash Flow are forward-looking statements that are based on growth assumptions that are inherently subject to significant uncertainties and contingencies, many of which are beyond Polestars control. While all projections are necessarily speculative, Polestar believes that the prospective financial information in the projections covering multiple years by its nature is more uncertain with each successive year. There will be differences between actual and projected results, and actual results may be materially greater or materially less than those contained in the projections. Furthermore, the projections do not take into account any circumstances or events occurring after the date they were prepared. Nonetheless, a summary of the projections is provided in this proxy statement/prospectus because they were made available to GGI and the GGI Board in connection with its review of the proposed Business Combination. The inclusion of the projections in this proxy statement/prospectus should not be regarded as an indication that Polestar, GGI or its respective representatives considered or consider the projections to be a reliable prediction of future events.
The projections were requested by, and disclosed to, GGI and to the GGI Board for use as a component in its overall evaluation of Polestar. Additionally, the projections were reviewed and approved by GGI and provided to Barclays by GGI for its use in connection with its financial analyses and opinion to the GGI Board, as described in the section titled The Business CombinationOpinion of GGIs Financial Advisor and as set forth as Annex H to this proxy statement/prospectus. Accordingly, such projections are included in this proxy statement/prospectus on that account.
Neither GGI nor Polestar has warranted the accuracy, reliability, appropriateness or completeness of the projections to anyone, including to the GGI Board. Neither GGI, Polestars management nor any of GGIs or
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Polestars representatives has made or makes any representation to any person regarding the ultimate performance of the Post-Combination Company compared to the information contained in the projections, and none of them intends to or undertakes any obligation to update or otherwise revise the projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events in the event that any or all of the assumptions underlying the projections are shown to be in error. Accordingly, the projections should not be looked upon as guidance of any sort. ListCo will not refer back to these projections in its future periodic reports filed under the Exchange Act.
Neither Polestars independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.
The key elements of the projections prepared by Polestar management, and of Unlevered Free Cash Flow as prepared by GGI management, are summarized below:
For the year ended December 31, | ||||||||||||||||||||
2021E | 2022E | 2023E | 2024E | 2025E | ||||||||||||||||
(in millions of $, except for volumes and percentages) | ||||||||||||||||||||
Global volumes |
29,000 | 65,000 | 123,751 | 224,723 | 289,920 | |||||||||||||||
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Total Revenue |
$ | 1,594 | $ | 3,171 | $ | 6,685 | $ | 13,249 | $ | 17,783 | ||||||||||
% Growth |
| 99.0 | % | 110.8 | % | 98.2 | % | 34.2 | % | |||||||||||
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Total Cost of Goods Sold |
(1,450 | ) | (2,657 | ) | (5,242 | ) | (10,585 | ) | (13,878 | ) | ||||||||||
Gross Profit |
$ | 144 | $ | 514 | $ | 1,443 | $ | 2,664 | $ | 3,906 | ||||||||||
% Margin |
9.0 | % | 16.2 | % | 21.6 | % | 20.1 | % | 22.0 | % | ||||||||||
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Total Operating Expenditures |
($ | 1,106 | ) | ($ | 1,118 | ) | ($ | 1,409 | ) | ($ | 1,973 | ) | ($ | 2,316 | ) | |||||
Adjusted EBITDA(1)(7) |
($ | 696 | ) | ($ | 425 | ) | $ | 338 | $ | 1,155 | $ | 2,143 | ||||||||
% Margin |
NM | NM | 5.1 | % | 8.7 | % | 12.0 | % | ||||||||||||
Less: Depreciation and Amortization |
($ | 266 | ) | ($ | 178 | ) | ($ | 305 | ) | ($ | 464 | ) | ($ | 553 | ) | |||||
Adjusted EBIT(2)(7) |
($ | 962 | ) | ($ | 603 | ) | $ | 34 | $ | 691 | $ | 1,589 | ||||||||
Less: Net Financial Items(3) |
(53 | ) | (62 | ) | (77 | ) | (82 | ) | (29 | ) | ||||||||||
Adjusted EBT(4)(7) |
($ | 1,016 | ) | ($ | 665 | ) | ($ | 43 | ) | $ | 609 | $ | 1,561 | |||||||
Less: Income Taxes |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
Net Income |
($ | 1,016 | ) | ($ | 665 | ) | ($ | 43 | ) | $ | 609 | $ | 1,561 | |||||||
Plus: Net Financial Items(3) |
53 | 62 | 77 | 82 | 29 | |||||||||||||||
Plus: Depreciation and Amortization |
266 | 178 | 305 | 464 | 553 | |||||||||||||||
Less: Investments in Intangible Assets(5) |
(481 | ) | (339 | ) | (216 | ) | (305 | ) | (410 | ) | ||||||||||
Less: Investments in Plant, Property and |
(192 | ) | (247 | ) | (333 | ) | (390 | ) | (248 | ) | ||||||||||
Less: Change in Net Working Capital(5) |
(168 | ) | (596 | ) | (157 | ) | (335 | ) | (118 | ) | ||||||||||
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Unlevered Free Cash Flow(6)(7) |
($ | 1,536 | ) | ($ | 1,607 | ) | ($ | 367 | ) | $ | 125 | $ | 1,367 |
(1) | Adjusted EBITDA represents net income before income taxes, net financial items and depreciation and amortization. |
(2) | Adjusted EBIT represents net income before income taxes and net financial items. |
(3) | Net financial items represents interest expense. |
(4) | Adjusted EBT represents net income before income taxes. |
(5) | Does not take into account the effects of the approximate $101 million reduction in investments in intangible assets and the approximate $397 million positive adjustment to change in net working capital for the year ending December 31, 2021, attributable to proceeds from the approximate $498 million from the Volvo Cars Preference Subscription Agreement, which are reflected in the ListCo Projections below. |
(6) | Unlevered Free Cash Flow is calculated by taking net income, adding back net financial items, depreciation and amortization and subtracting investments in intangible assets, investments in plant, property and equipment and change in net working capital. |
(7) | Adjusted EBIT, Adjusted EBT, Adjusted EBITDA and Unlevered Free Cash Flow are non-GAAP financial measures. |
In addition, GGI (a) subtracted from the projections received from Polestar management and reviewed and approved by GGI with respect to the year ending December 31, 2021 Polestars actual financial results for the six month period ending June 30, 2021 received from Polestar management to provide an estimate for the six month
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period ending December 31, 2021 and (b) reflected an increase in Unlevered Free Cash Flow for fiscal year ending December 31, 2022 of approximately $498 million in connection with the Volvo Cars Preference Amount (the projections prepared by Polestar management and reviewed and approved by GGI for the years ending December 31, 2021 through 2025, taking into account the foregoing, the ListCo Projections). GGI provided the ListCo Projections to Barclays for purposes of a discounted cash flow analysis performed by Barclays in connection with rendering its fairness opinion.
Six months ending December 31, |
Fiscal Year Ending December 31, | |||||||||||||||||||
2021E | 2022E | 2023E | 2024E | 2025E | ||||||||||||||||
(in millions of $, except for percentages) | ||||||||||||||||||||
Total Revenue |
$ | 1,054 | $ | 3,171 | $ | 6,685 | $ | 13,249 | $ | 17,783 | ||||||||||
% Growth |
| | 110.8 | % | 98.2 | % | 34.2 | % | ||||||||||||
Adjusted EBITDA(1)(6) |
(440 | ) | (425 | ) | 338 | 1,155 | 2,143 | |||||||||||||
% Margin |
nm | nm | 5.1 | % | 8.7 | % | 12.0 | % | ||||||||||||
% Growth |
nm | nm | nm | 241.5 | % | 85.6 | % | |||||||||||||
Less: Depreciation & Amortization |
(144 | ) | (178 | ) | (305 | ) | (464 | ) | (553 | ) | ||||||||||
% Revenue |
13.7 | % | 5.6 | % | 4.6 | % | 3.5 | % | 3.1 | % | ||||||||||
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Adjusted EBIT(2)(6) |
(584 | ) | (603 | ) | 34 | 691 | 1,589 | |||||||||||||
Less: Taxes |
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Adjusted Unlevered Net Income(3)(6) |
(584 | ) | (603 | ) | 34 | 691 | 1,589 | |||||||||||||
Plus: Depreciation and Amortization |
144 | 178 | 305 | 464 | 553 | |||||||||||||||
Less: Investments in Intangible Assets |
(481 | ) | (339 | ) | (216 | ) | (305 | ) | (410 | ) | ||||||||||
Less: Investments in Plant, Property and Equipment |
(174 | ) | (247 | ) | (333 | ) | (390 | ) | (248 | ) | ||||||||||
Less: Change in Net Working Capital(4) |
(223 | ) | (198 | ) | (157 | ) | (335 | ) | (118 | ) | ||||||||||
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Unlevered Free Cash Flow(5)(6) |
($ | 1,318 | ) | ($ | 1,209) | ($ | 367 | ) | $ | 125 | $ | 1,367 |
(1) | Adjusted EBITDA represents net income before income taxes, net financial items and depreciation and amortization. |
(2) | Adjusted EBIT represents net income before income taxes and net financial items. |
(3) | Adjusted Unlevered Net Income represents net income before net financial items. |
(4) | Assumes an approximate $101 million reduction in investments in intangible assets and an approximate $397 million positive adjustment to change in net working capital for the six months ending December 31, 2021, attributable to proceeds from the approximate $498 million from the Volvo Cars Preference Subscription Agreement. |
(5) | Unlevered Free Cash Flow is calculated by taking net income, adding back net financial items, depreciation and amortization and subtracting investments in intangible assets, investments in plant, property and equipment and change in net working capital. |
(6) | Adjusted EBITDA, Adjusted EBT, Adjusted Unlevered Net Income and Unlevered Free Cash Flow are non-GAAP financial measures. |
Material Assumptions Underlying the Financial Projections
Polestar has a limited operating history and Polestars financial projections do not reflect historic operating trends. In general, Polestars financial projections for the years ending December 31, 2021 through 2025 reflect numerous assumptions, including assumptions with respect to the general business, economic, market and regulatory environment in which it operates and various other factors, all of which are difficult to predict and many of which are beyond Polestars control as discussed in Risk Factors, Polestars Managements Discussion and Analysis of Financial Condition and Results of Operations and General InformationCautionary Note Regarding Forward-Looking Statements. Specifically, Polestars financial projections make assumptions about Polestars ability to successfully expand its global operations and generate revenues as well as its ability to realize the cost benefits associated with its asset light business model and its ability to leverage the industrial infrastructure of Volvo Cars and Geely.
Polestar commenced operations in 2017 and launched the Polestar 1 in 2019. However, the Polestar 1 was not intended to be a mass production vehicle and only a limited number of Polestar 1 car models were sold. Polestar discontinued manufacture of the Polestar 1 at the end of 2021. Polestar launched the Polestar 2 in 2020 and expects to launch and start to sell three new vehicle models going forward, starting with the Polestar 3 expected to launch in 2022 and followed by the Polestar 4 (expected to launch in 2023) and Polestar 5 (expected to launch
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in 2024). Sales of the Polestar 2 accounted for the majority of the approximately 29,000 vehicle sales in 2021. Polestars assumptions with respect to sales volumes during the period from December 31, 2021 through 2025 reflect the anticipated development and launch of future Polestar models, as follows:
| Polestar anticipates sales of approximately 65,000 vehicles in 2022, principally or wholly comprised of Polestar 2 vehicles. |
| Polestar anticipates sales of approximately 124,000 vehicles in 2023, comprised primarily of Polestar 2 and 3 vehicles and a limited number of Polestar 4 vehicles. |
| Polestar anticipates sales of 225,000 vehicles in 2024, including the addition of Polestar 5 vehicles; and |
| Polestar anticipates sales of approximately 290,000 vehicles in 2025. |
Polestars estimates of anticipated sales volume reflect managements assumptions regarding the total addressable market in the global premium car market, Polestars performance in the geographic regions where it competes and demand for its different car models. Polestars revenue assumptions reflect the anticipated growth in sales volume as well as the fact that new model vehicles, specifically; the Polestar 3, 4 and 5 are positioned in the higher priced SUV Premium vehicle segment and are expected to generate higher revenue per vehicle than the Polestar 2 which is positioned in a lower priced C/D Premium vehicle segment. Polestar anticipates that the proportion of Polestar vehicles sold in each year as a percentage of aggregates sales volume will decline from approximately 75% in 2023 to approximately 40% in 2025. In addition, Polestars revenue assumptions also reflect growing aftersales as the total Polestar car fleet and customer base grows.
In addition to Polestars assumptions with respect to growing sales volumes and associated increases in revenue, Polestars financial projections also include assumptions with respect to operating expenses and changes in net working capital. Assumptions regarding operating expenses are reflected in the calculation of Adjusted EBITDA, Adjusted EBIT and Adjusted EBT prepared by GGI management while assumptions regarding changes in net working capital are reflected in the calculation of Unlevered Free Cash Flow prepared by GGI management. Polestars financial projections assume that Polestar will be able to reduce or constrain growth in fixed costs as a result of its asset light business model, including its ability to leverage Volvo Cars and Geelys industrial infrastructure and reduce or constrain growth in variable costs by leveraging its shared operating structure with Volvo Cars and Geely to reduce marketing and distribution costs. For example, Polestars cost efficiency assumptions reflect its agreements with Volvo Cars and Geely, including in connection with the purchase of batteries that are installed in Polestar vehicles and the shared platforms it is using with Volvo Cars and Geely. See Certain Relationships and Related Person Transactions Polestar Relationships and Related Party TransactionsAgreements with Volvo and Geely.
Polestars fixed and variable costs have also reflected significant investments in the designing of its new vehicle models, in brand awareness and in the development of internal and external business structures that will support the launch of new vehicle models and the expected growth in production and sales volumes. While Polestars financial projections assume that Polestar will continue to make similar investments in the future, Polestar expects that future investments will be supported by concurrent and positive operating results and will not be made prior to registering significant revenue growth.
Growth in revenue from the development and launch of future Polestar models, alongside operational efficiencies from Polestars asset light business model, including its ability to leverage Volvo Cars and Geelys industrial infrastructure, are expected to enable Polestar to generate positive net income commencing the year ending December 31, 2024.
The financial projections also assume that, after 2023, growth in net working capital as a result of growing production volumes will be partly offset by increased fixed costs associated with Polestar commencing local contract manufacturing in the United States. In addition, assumptions with respect to Change in Net Working Capital in the calculation of Unlevered Free Cash Flow reflect an approximate $101 million reduction in investments in intangible assets and the anticipated settlement of payables owed to related parties, including an approximately $397 million positive adjustment for the year ending December 31, 2021 attributable to the
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anticipated approximately $498 million of funds to be received by the Post-Combination Company pursuant to the Volvo Cars Preference Subscription Agreement as contemplated at the time of the Polestar financial projections were prepared (and not reflecting the amendment to the Volvo Cars Preference Subscription Agreement).
Polestars financial projections may be materially different than actual results, should certain of the assumptions mentioned above prove to be wrong, particularly if there are delays in the launch schedule of Polestars future vehicle models, if Polestar sells less vehicles than expected, if benefits linked to economies of scale are less than expected and if synergies from the cooperation with Volvo Cars and Geely do not materialize.
Polestar management has continued to evaluate its projections in light of current developments and trends, and has provided additional commentary and information with respect to revenue, gross profit and operating expenditure as compared to its financial projections. You should read the information below together with the Polestar Financial Statements and the related notes thereto included elsewhere in this proxy statement/prospectus and the trends discussed in Polestar Managements Discussion and Analysis of Financial Condition and Results of Operations.
Revenue, Gross Profit and Operating Expenditure Trends as Compared to the Financial Projections
Following Polestar managements preparation of financial projections for the GGI Board, in January 2022 Polestar further evaluated its financial projections, including as a result of changes in trends affecting its business. Further, in April 2022, Polestar finalized its audited financial statements for the year ended December 31, 2021, which are included elsewhere in this proxy statement/prospectus.
In connection with such evaluation in January 2022 and the subsequent completion of Polestars financial statements for the year ended December 31, 2021, Polestar has also considered the potential impact of such trends and results on its previously projected revenue, gross profit and operating expenditures, as included in Polestars financial projections provided to the GGI Board in connection with GGIs evaluation of Polestar and summarized on pages 205 and 206 in this proxy statement/prospectus for the years ended December 31, 2021 and each of the years ending December 31, 2022 through 2025. These considerations along with their reasons and potential impact on Polestars financial projections for the years ending December 31, 2021 and each of the years ending December 31, 2022 through 2025 are set forth below. For additional information on these trends, please see Polestars Managements Discussion and Analysis of Financial Condition and Results of OperationsFactors Affecting Future Results of Operations.
Revenue from Carbon Credits
Due to recent changes in market demand for carbon credits, Polestars revenue from the sale of carbon credits was approximately $20.8 million lower for the year ended December 31, 2021 as compared to the $27.1 million in revenue generated from sales of carbon credits during the year ended December 31, 2020. Based on prevailing market conditions for carbon credits and the demand for carbon credits during the year ended December 31, 2021, Polestar also expects revenue from the sale of carbon credits for the year ending December 31, 2022 to be negligible, and that demand for carbon credits from Volvo Cars and third party OEMs will continue to be lower than anticipated over each of the fiscal years covered by Polestars financial projections. Although it is possible market demand for carbon credits may change in the future due to more stringent regulations or other external factors, Polestar has evaluated the impact of these recent trends by entirely removing revenue from the sale of carbon credits from previously projected revenue. This approach results in a reduction in projected revenue of approximately $81 million for the year ending December 31, 2022, with this amount being partially offset by certain additional revenue streams, and an overall net reduction in revenue of $36 million (approximately 1.1% of previously presented 2022 projected revenue) for the same fiscal year. The impact of removing all revenue from the sale of carbon credits for each of the years ending December 31, 2023, 2024 and 2025 is approximately $133 million, $233 million and $195 million, respectively. These amounts expressed as a percentage of previously presented projected revenues in the Polestar financial projections for each of the years ending December 31, 2023, 2024 and 2025 are approximately 2.0%, 1.8% and 1.1%.
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Gross Profit on Sales of Vehicles and Carbon Credits
Polestar delivered 28,677 vehicles during the year ended December 31, 2021 (of which 2,836 vehicles included buy-back agreements and 2,081 internal vehicle deliveries), as assumed in its financial projections provided to the GGI Board in connection with GGIs evaluation of Polestar and summarized on pages 205 and 206 in this proxy statement/prospectus and continues to expect it will deliver approximately 65,000 vehicles during the year ending December 31, 2022. As part of evaluating the assumptions underlying its previous projections, provided to the GGI Board in connection with GGIs evaluation of Polestar and summarized on pages 205 and 206 in this proxy statement/prospectus Polestar considered sales mix by geography, product configuration (e.g., single-motor vs. dual-motor) and channel (e.g., private consumer vs. fleet sales) in light of recent trends. For example, Polestar continues to see strong vehicle sales trends in the United States, a market where it currently incurs additional duty costs to import vehicles, which is expected to result in increased total cost of goods sold. As a result, Polestar expects the combined impact of such changes in sales mix and the reduction of revenue from the sale of carbon credits described above will reduce gross profit by approximately $130 million for the fiscal year ending December 31, 2022. Further, as discussed above, the impact on revenue for each of the years ending December 31, 2023, 2024 and 2025 resulting from removal of revenue from the sale of carbon credits is expected to result in corresponding impacts to gross profit equal to the reduction in projected revenue.
Costs associated with the Business Combination and Listing on Nasdaq
Costs associated with the Business Combination and on-going costs associated with being a Nasdaq listed foreign private issuer after the completion of the Business Combination are and will be reflected in Polestars results of operations for the years ended December 31, 2021 and 2022. After re-evaluating such costs, Polestar now expects its projected operating expenditures to be higher than that assumed in the previously provided Polestar financial projections provided to the GGI Board in connection with GGIs evaluation of Polestar and summarized on pages 205 and 206 in this proxy statement/prospectus for each of the years ending December 31, 2022 through 2025, including operating expenditures for the year ending December 31, 2022 of approximately $50 million higher than the $1,118 million assumed in the Polestar financial projections provided to the GGI Board in connection with GGIs evaluation of Polestar and summarized on pages 205 and 206 in this proxy statement/prospectus. These costs relate to Sarbanes Oxley compliance, digital capabilities, recognition of estimated stock-based compensation and higher D&O insurance premiums than previously anticipated.
Other Operating Expenditures
Polestar intends to continue its rapid market expansion plan during 2022 and further invest in the development of its technology, sales locations and digital capabilities to provide customers with enhanced purchasing and ownership experiences. Polestar now expects projected operating expenditures for the year ending December 31, 2022 to increase over the amounts previously assumed in the Polestar financial projections, including an increase of approximately $70 million over projected operating expenditures for the year ending December 31, 2022.
The impact of the abovementioned factors on revenues, cost of sales and operating expenditures is expected to have an impact on Adjusted EBIT and Net Income by ($250) million and ($230) million, respectively, for the year ended December 31, 2022. Similar factors may also have an impact on Adjusted EBIT and Net Income in 2023 through 2025.
Other Cash Flow Considerations
In addition to the considerations set forth above, the timing of certain expenditures may result in further differences in actual results from Polestars financial projections provided to the GGI Board in connection with GGIs evaluation of Polestar and summarized on pages 205 and 206 in this proxy statement/prospectus for the years ended December 31, 2021 and each of the years ending December 31, 2022 through 2025. For example, capital expenditures accrued and invoiced were approximately $430 million for the year ended December 31, 2021. However, only approximately $130 million of this amount was paid in cash due to timing. The remaining amount of this capital expenditure is expected to be paid in cash during the year ending December 31, 2022,
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which would result in a corresponding increase in cash used for investing activities in the same year. Additionally, Polestar intends to continue to rapidly invest in its product portfolio, which may result in differences in capital expenditure amounts in comparison to those set forth in Polestars financial projections provided to the GGI Board in connection with GGIs evaluation of Polestar and summarized on pages 205 and 206 in this proxy statement/prospectus.
Separately, Polestars financial projections assume the repayment of approximately $540 million of related-party payables during the year ended December 31, 2021. However, on March 24, 2022, ListCo and Snita entered into an amendment to the Volvo Cars Preference Subscription Agreement to increase the aggregate Volvo Cars Preference Amount from approximately $498 million to approximately $589 million, which will be used to satisfy certain related-party payables. These related-party payables are due and payable by certain subsidiaries of Parent to Volvo Cars. Subsequent to preparing Polestars financial projections provided to the GGI Board in connection with GGIs evaluation of Polestar and summarized on pages 205 and 206 in this proxy statement/prospectus, Volvo Cars has also elected to extend the terms of these payables due from Polestar as part of their ongoing support to Polestar and its growth strategy. As a result, Polestar now anticipates repaying this amount of related-party payables during the year ending December 31, 2023, which would result in a corresponding increase in cash used for operating activities during the same year. Additionally, as part of considering sales mix (e.g., geography, product configuration and channel) as referenced above, Polestar contemplated the impact of these sales mix assumptions on the timing of cash flows (cash-conversion cycles), given changes in sales mix can directly impact the overall timing of cash flows. For example, an increase in fleet sales could extend cash-conversion cycles due to these customers typically receiving longer payment terms than private or direct-to-consumer customers.
Independent Director Oversight
The GGI Board is comprised of a majority of independent directors who are not affiliated with the GGI Sponsor and its affiliates, including The Gores Group and Guggenheim. In connection with the Business Combination, GGIs independent directors, Randall Bort, Elizabeth Marcellino and Nancy Tellem, took an active role in evaluating the proposed terms of the Business Combination, including the Business Combination Agreement, the Related Agreements and the Post-Combination Articles to take effect in connection with the Closing. As part of their evaluation of the Business Combination, GGIs independent directors were aware of the potential conflicts of interest with the GGI Sponsor and its affiliates, including Guggenheim and The Gores Group, that could arise with regard to the proposed terms of the Business Combination Agreement and Related Agreements. The GGI Board did not deem it necessary to, and did not form, a special committee of the GGI Board to exclusively evaluate and negotiate the proposed terms of the Business Combination, as the GGI Board is comprised of a majority of independent and disinterested directors and did not deem the formation of a special committee necessary or appropriate. GGIs independent directors reviewed and considered these interests during the negotiation of the Business Combination and in evaluating and unanimously approving, as members of the GGI Board, the Business Combination Agreement and the Business Combination.
Satisfaction of 80% Test
It is a requirement under the Current GGI Certificate and Nasdaq listing requirements that GGIs initial business combination must occur with one or more target businesses that together have a fair market value equal to at least 80% of the balance of the funds in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the execution of a definitive agreement for GGIs initial business combination. As of September 27, 2021, the date of the execution of the Business Combination Agreement, the balance of the Trust Account was approximately $800,036,186 (excluding $28,000,000 of deferred underwriting commissions and taxes payable on the income earned on the Trust Account) and 80% thereof represents approximately $640,028,949. In reaching its conclusion that the Business Combination meets the 80% asset test, the GGI Board reviewed the enterprise value of the Polestar Group of approximately $21.3 billion, which was implied based on the terms of the transaction agreed to by the parties in negotiating the Business Combination Agreement. In determining whether the enterprise value described above
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represents the fair market value of the Polestar Group, the GGI Board considered all of the factors described above in this section and the fact that the purchase price for Polestar was the result of an arms length negotiation. As a result, the GGI Board concluded that the fair market value of the business acquired was significantly in excess of 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account).
Interests of Certain Persons in the Business Combination
Interests of the GGI Initial Stockholders and GGIs Directors and Officers
When considering the GGI Boards recommendation to vote in favor of approving the Business Combination Proposal, the Warrant Amendment Proposal and the other proposals described in this proxy statement/prospectus, GGIS stockholders and warrant holders should keep in mind that the GGI Sponsor and GGIs directors and officers have interests in such proposals that may be different from, or in addition to (and which may conflict with), the interests of GGI stockholders and warrant holders generally. The GGI Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination, and in recommending to GGI stockholders and GGI warrant holders that they approve the proposals to be presented to GGI stockholders and GGI warrant holders, respectively. GGI stockholders and GGI warrant holders should take these interests into account in deciding whether to approve the proposals set forth in this proxy statement/prospectus.
These interests include, among other things:
| the fact that the GGI Initial Stockholders have agreed not to redeem any Founder Shares or GGI Class A Common Stock held by them in connection with a stockholder vote to approve a proposed initial business combination; |
| the fact that the GGI Initial Stockholders have agreed to waive their rights to conversion price adjustments with respect to any Founder Shares they may hold in connection with the consummation of the Business Combination and therefore, the Founder Shares will convert on a one-for-one basis into Class A ADSs at the Closing; |
| the fact that the GGI Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if GGI fails to complete an initial business combination by March 25, 2023; |
| the fact that the GGI Sponsor paid an aggregate of $25,000 for 21,562,500 Founder Shares at approximately $0.001 per share, and, after giving effect to the cancellation of 1,562,500 Founder Shares on May 9, 2021, the remaining 20,000,000 Founder Shares will become worthless if GGI fails to complete an initial business combination by March 25, 2023. In particular, in exchange for serving on the GGI Board, GGIs independent directors, Mr. Bort, Ms. Marcellino and Ms. Tellem, each received 25,000 Founder Shares at their original purchase price of $0.001 per share from the GGI Sponsor. Because these Founder Shares will become worthless if GGI fails to complete an initial business combination by March 25, 2023, GGIs independent directors may have a conflict of interest in determining whether a particular business is an appropriate business with which to effectuate GGIs initial business combination; |
| the fact that after giving effect to the cancellation of 1,562,500 Founder Shares on May 9, 2021 and the forfeiture of up to 1,540,835 shares of GGI Class F Common Stock pursuant to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, the remaining 18,459,165 Founder Shares that will be exchanged for Class A ADSs at the Closing will have a significantly higher value than their aggregate purchase price, which if unrestricted and freely tradable would be valued at approximately $185 million (however, given the restrictions on such shares, GGI believes such shares have a lesser value); |
| the fact that, given the differential in the purchase price that the GGI Sponsor paid for the Founder Shares as compared to the price of the GGI Public Units and the substantial number of Class A ADSs that the GGI Sponsor will receive upon exchange of the Founder Shares at the Closing, the GGI Sponsor and its affiliates may earn a positive rate of return on their investment even if the Class A ADSs trade below the price initially paid for the GGI Public Units in the GGI IPO and GGI Public Stockholders experience a negative rate of return following the completion of the Business Combination; |
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| the fact that the GGI Sponsor paid an aggregate of approximately $18,000,000 for its 9,000,000 GGI Private Placement Warrants, and that such GGI Private Placement Warrants will expire worthless if an initial business combination is not consummated by March 25, 2023. The GGI Private Placement Warrants are identical to the GGI Public Warrants sold as part of the GGI Public Units except that, so long as they are held by the GGI Sponsor or its permitted transferees: (i) they will not be redeemable by GGI, except as described in the Existing Warrant Agreement; (ii) they (including the GGI Class A Common Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the GGI Sponsor until 30 days after the completion of an initial business combination; (iii) they may be exercised by the holders on a cashless basis; and (iv) they are subject to registration rights. For additional information regarding the GGI Private Placement Warrants and the GGI Public Warrants, please see the Existing Warrant Agreement, attached hereto as Annex C; |
| the fact that, in connection with the Business Combination, each GGI Private Placement Warrant will, in the event the Warrant Amendment Proposal is approved prior to the Effective Time, be converted into the right to receive one Class C-2 ADS, issued against the deposit of an underlying Post-Combination Company Class C-2 Share, which will be exercisable to acquire a Post-Combination Company Class A Share in the form of a Class A ADS on substantially the same terms as the GGI Private Placement Warrants; |
| the fact that, in connection with the Business Combination, each GGI Private Placement Warrant will, in the event the Warrant Amendment Proposal is not approved prior to the Effective Time, be converted into the right to receive one PP ADW, issued against the deposit of an underlying Post-Combination Company Warrant, which will be exercisable to acquire a Post-Combination Company Class A Share in the form of a Class A ADS on substantially the same terms as the GGI Private Placement Warrants; |
| the continued right of the GGI Sponsor to hold the Class A ADSs to be issued to the GGI Sponsor upon exercise of Class C-2 ADSs or ADWs following the Business Combination, subject to certain lock-up periods; |
| the fact that if the Trust Account is liquidated, including in the event GGI is unable to complete an initial business combination within the required time period, the GGI Sponsor has agreed to indemnify GGI to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which GGI has entered into an acquisition agreement or claims of any third party (other than the independent public accountants) for services rendered or products sold to GGI, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account; |
| the continued indemnification of the existing directors and officers of GGI and the continuation of the directors and officers liability insurance after the Business Combination; |
| the fact that the GGI Sponsor and GGIs officers and directors will lose their entire investment in GGI and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by March 25, 2023, including the expected reimbursement at the closing of an initial business combination of approximately $615,000 of an aggregate of approximately $948,000 of expenses incurred by GGI Sponsor and its affiliates as of March 1, 2022; |
| the fact that the GGI Sponsor made available to GGI a loan of up to $4,000,000 pursuant to a promissory note, of which a net amount of $2,500,000 was advanced by the GGI Sponsor to GGI as of March 1, 2022, and that the note will mature on the earlier of March 11, 2023 and the date on which GGI consummates an initial business combination; |
| the fact that GGI has entered into the Sponsor Subscription Agreement, pursuant to which the GGI Sponsor has agreed to purchase approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs at a purchase price of $9.09 per share on the date of Closing, and the GGI Sponsor has the right to syndicate its commitment to acquire such Class A ADSs in advance of the Closing; |
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| the fact that Guggenheim Securities, LLC, an affiliate of the GGI Sponsor and Andrew Rosenfield, is acting as a joint placement agent in connection with the Subscription Investments and will receive a portion of a transaction fee equal to 3% of the gross proceeds raised by the placement agents in connection with the Subscription Investments, and as a financial advisor to GGI for no additional fee; |
| the fact that the GGI Sponsor and GGIs officers and directors would beneficially own the following number of Class A ADSs at the Closing: |
Name of Person/Entity |
Number of Class A ADSs(1) | Value of Class A ADSs(2) | ||||||
Gores Guggenheim Sponsor LLC(3) |
19,350,374 | $ | 193,503,740 | |||||
GGP Sponsor Holdings LLC(3) |
19,350,374 | $ | 193,503,740 | |||||
Alec Gores(3) |
19,350,374 | $ | 193,503,740 | |||||
Andrew Rosenfield(3) |
19,350,374 | $ | 193,503,740 | |||||
Mark Stone(4) |
171,841 | $ | 1,718,410 | |||||
Andrew McBride |
20,892 | $ | 208,920 | |||||
Randall Bort |
25,000 | $ | 250,000 | |||||
Elizabeth Marcellino |
25,000 | $ | 250,000 | |||||
Nancy Tellem(5) |
40,670 | $ | 406,700 |
(1) | Does not reflect beneficial ownership of Class A ADSs subject to exercise of Post-Combination Company Class C Shares or Post-Combination Company Warrants, because such shares or warrants, as applicable, are not exercisable within 60 days of the date of this proxy statement/prospectus. |
(2) | Assumes a value of $10.00 per share, the deemed value of the GGI Common Stock in the Business Combination. |
(3) | Represents shares held by Gores Guggenheim Sponsor LLC which is jointly controlled indirectly by Mr. Gores and GGP Sponsor Holdings LLC. GGP Sponsor Holdings LLC is controlled by Mr. Rosenfield. Each of Mr. Gores and GGP Sponsor Holdings LLC may be deemed to beneficially own 19,350,374 Class A ADSs and ultimately exercises voting and dispositive power of the securities held by Gores Guggenheim Sponsor LLC. Voting and disposition decisions with respect to such securities are jointly made by Mr. Gores and GGP Sponsor Holdings LLC. Each of Mr. Gores, GGP Sponsor Holdings LLC and Mr. Rosenfield disclaim beneficial ownership of these securities except to the extent of any pecuniary interest therein. |
(4) | Reflects Class A ADSs to be purchased by Mark Stone and his immediate family as December PIPE Investors. |
(5) | Includes 15,670 Class A ADSs to be purchased by Nancy Tellem as a December PIPE Investor. |
| the fact that, pursuant to the Business Combination Agreement, the Post-Combination Company Board will include one independent director as reasonably determined by the GGI Sponsor and consented to by Parent. In addition, pursuant to the Post-Combination Articles, the Post-Combination Company Board will be subject to restrictions on its ability to convene a general meeting which proposes a resolution to remove an independent director, subject to certain conditions, and pursuant to the Shareholder Acknowledgement Agreement, Parent and the Parent Shareholders are subject to undertakings that restrict on their ability to vote in favor of the removal of independent directors on the Post-Combination Company Board, and the GGI Sponsor will have third party beneficiary rights to enforce such undertakings; |
| the fact that the GGI Initial Stockholders have entered into the Registration Rights Agreement as Registration Rights Holders, which provides such Registration Rights Holders and their permitted transferees with registration rights in respect of certain Post-Combination Company securities, ADSs and ADWs at the Closing; |
| the fact that the GGI Initial Stockholders have agreed to vote any shares of GGI Common Stock owned by them in favor of the Business Combination Proposal; |
| the fact that GGI, Parent, ListCo and the GGI Initial Stockholders have entered into the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, pursuant to which the GGI Initial Stockholders have, among other things, agreed to (i) vote their GGI Class F Common Stock in favor of each of the proposals at the Special Meeting and referenced in this proxy statement/prospectus, and against any alternative business combination, (ii) waive all adjustments to the conversion ratio set forth in the Current GGI Certificate with respect to the GGI Class F Common Stock, (iii) be bound by certain transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants, and (iv) not to transfer any Class A ADSs issued pursuant to the Business |
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Combination Agreement in respect of shares of GGI Class F Common Stock during the period beginning on the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein; and |
| the fact that GGI will reimburse the GGI Sponsor for the fees and expenses it incurs in connection with the Business Combination; provided, that such fees and expenses, together with all of GGIs other fees and expenses in connection with the Business Combination, are not in excess of $60 million in the aggregate. |
In the aggregate, the GGI Sponsor and its affiliates have approximately $218,000,000 at risk that depends upon the completion of a business combination. Specifically, $200,000,000 of such amount is the value of the GGI Sponsors and its affiliates GGI Class F Common Stock (assuming a value of $10.00 per share, the deemed value of the GGI Common Stock in the Business Combination), and $18,000,000 of such amount is the value of the GGI Private Placement Warrants held by the GGI Sponsor (based on the purchase price of $2.00 per GGI Private Placement Warrant). There are no fees contingent upon a business combination payable to the GGI Sponsors affiliates upon consummation of the Business Combination. The foregoing interests present a risk that the GGI Sponsor and its affiliates will benefit from the completion of a business combination, including in a manner that may not be aligned with GGI Public Stockholders. As such, the GGI Sponsor may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to GGI Public Stockholders rather than liquidate.
These interests may influence the GGI Board in making their recommendation that GGI stockholders vote in favor of the approval of the Business Combination Proposal and the other proposals to be voted on at the Stockholder Special Meeting, and their recommendation that the GGI warrant holders vote in favor of the proposals to be voted on at the Warrant Holder Meeting.
Sources and Uses for the Business Combination
The following tables summarize the sources and uses for funding the Business Combination:
Sources & Uses
No Redemption Scenario (Assuming no redemption of the outstanding shares of GGI Class A Common Stock)
Sources |
Uses |
|||||||||
GGI Cash(1) |
$ | 800,056,447 | Polestar Rollover(3) | $ | 20,003,000,000 | |||||
Subscription Investments(2) |
$ | 250,000,001 | Cash Proceeds to Polestar(1)(4) | $ | 995,056,448 | |||||
Polestar Rollover(3) |
$ | 20,003,000,000 | GGI Transaction Costs | $ | 55,000,000 | |||||
|
|
|
|
|||||||
Total Sources(5) |
$ | 21,053,056,448 | Total Uses(5) | $ | 21,053,056,448 | |||||
|
|
|
|
(1) | Amount represents the Trust Account balance as of December 31, 2021. Assumes no GGI stockholder has exercised its redemption rights to receive cash from the Trust Account. This amount will be reduced by the amount of cash used to satisfy any redemptions. |
(2) | Amount represents the PIPE Investment, the Sponsor Subscription Investment and Volvo Cars PIPE Subscription Investment. |
(3) | Amount represents $20,003,000,000 of stock consideration, and includes all Post-Combination Company Class A Shares in respect of the Parent Convertible Notes outstanding as of immediately prior to the Closing, all of which will be converted into Post-Combination Company Class A Shares at the Closing and approximately 58,882,610 Post-Combination Company Class A Shares in respect of Post-Combination Company Preference Shares to be purchased by Snita upon and subject to the Closing under the Volvo Cars Preference Subscription Agreement, all of which are currently contemplated to be converted into Post-Combination Company Class A Shares at Closing. Dollar amount represents the number of shares existing Parent Shareholders will receive valued at a share price of $10.00. This amount is not impacted by the number of redemptions. |
(4) | Cash proceeds to Polestar is calculated based on the assumed approximately $800 million in GGI cash and $250 million raised from the Subscription Investment less $55 million for estimated GGI transaction costs. |
(5) | Totals may differ due to rounding. |
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Sources & Uses
Contractual Maximum Redemption Scenario (assuming approximately 12.5% redemption of the outstanding shares of GGI Class A Common Stock)
Sources |
Uses |
|||||||||
GGI Cash(1) |
$ | 700,000,008 | Polestar Rollover(3) | $ | 20,003,000,000 | |||||
Subscription Investments(2) |
$ | 250,000,001 | Cash Proceeds to Polestar(1)(4) | $ | 895,000,009 | |||||
Polestar Rollover(3) |
$ | 20,003,000,000 | GGI Transaction Costs | $ | 55,000,000 | |||||
|
|
|
|
|||||||
Total Sources(5) |
$ | 20,953,000,009 | Total Uses(5) | $ | 20,953,000,009 | |||||
|
|
|
|
(1) | Amount represents the Trust Account balance as of December 31, 2021. Assumes approximately 12.5% of the outstanding shares of GGI Class A Common Stock have been redeemed by the GGI stockholders to receive cash from the Trust Account, reducing the amount of GGI cash by approximately $100 million. |
(2) | Amount represents the PIPE Investment, the Sponsor Subscription Investment and Volvo Cars PIPE Subscription Investment. |
(3) | Amount represents $20,003,000,000 of stock consideration, and includes all Post-Combination Company Class A Shares in respect of the Parent Convertible Notes outstanding as of immediately prior to the Closing, all of which will be converted into Post-Combination Company Class A Shares at the Closing and approximately 58,882,610 Post-Combination Company Class A Shares in respect of Post-Combination Company Preference Shares to be purchased by Snita upon and subject to the Closing under the Volvo Cars Preference Subscription Agreement, all of which are currently contemplated to be converted into Post-Combination Company Class A Shares at Closing. Dollar amount represents the number of shares existing Parent Shareholders will receive valued at a share price of $10.00. This amount is not impacted by the number of redemptions. |
(4) | Cash proceeds to Polestar is calculated based on the assumed approximately $700 million in GGI cash and $250 million raised from the Subscription Investment less $55 million for estimated GGI transaction costs. |
(5) | Totals may differ due to rounding. |
Certain Information Relating to GGI and Polestar
GGI Board and Executive Officers before the Business Combination
The following individuals currently serve as directors and executive officers of GGI:
Name |
Age | Title | ||||
Alec Gores |
68 | Chairman | ||||
Mark Stone |
57 | Chief Executive Officer | ||||
Andrew M. Rosenfield |
69 | President and Director | ||||
Andrew McBride |
41 | Chief Financial Officer and Secretary | ||||
Randall Bort |
56 | Director | ||||
Elizabeth Marcellino |
63 | Director | ||||
Nancy Tellem |
68 | Director |
Post-Combination Company Board and Executive Officers
The following individuals are expected to serve as directors and executive officers of the Post-Combination Company upon consummation of the Business Combination:
Name |
Age | Title | ||||
Håkan Samuelsson |
70 | Director Nominee (Chairman) | ||||
Thomas Ingenlath |
57 | Chief Executive Officer and Director | ||||
Johan Malmqvist |
46 | Chief Financial Officer | ||||
Dennis Nobelius |
49 | Chief Operating Officer | ||||
Carla De Geyseleer |
53 | Director Nominee | ||||
Karen C. Francis |
59 | Director Nominee | ||||
Donghui (Daniel) Li |
51 | Director Nominee | ||||
Dr. Karl-Thomas Neumann |
60 | Director Nominee | ||||
David Richter |
56 | Director Nominee | ||||
James Rowan |
56 | Director Nominee | ||||
Zhe (David) Wei |
51 | Director Nominee |
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For more information on the directors and management of the Post-Combination Company, please see the section titled Management of the Post-Combination Company.
Employment and Compensation Arrangements
Please see the section titled Management of the Post-Combination Company.
Indemnification and Insurance Obligations of the Post-Combination Company
Please see the section titled Management of the Post-Combination Company.
Listing of Securities
Listing of Class A ADSs and ADWs or Class C ADSs on Nasdaq
Class A ADSs and ADWs or Class C ADSs are not currently traded on a stock exchange. ListCo intends to apply to list the Class A ADSs and the Public ADWs or Class C-1 ADSs on Nasdaq under the symbols PSNY and PSNYW, respectively, upon the Closing. ListCo cannot assure you that the Class A ADSs and the Public ADWs or Class C-1 ADSs will be approved for listing or remain listed on Nasdaq.
Delisting of GGI Class A Common Stock and Deregistration of GGI
GGI Public Shares, GGI Public Units and GGI Public Warrants are currently listed on Nasdaq under the symbols GGPI, GGPIU and GGPIW, respectively. ListCo and GGI anticipate that, following consummation of the Business Combination, the GGI Class A Common Stock, GGI Public Units and GGI Public Warrants will be delisted from Nasdaq, and GGI will be deregistered under the Exchange Act.
Shares Eligible for Future Sale
There are certain restrictions on resales of ListCos securities. Please see the section titled Shares Eligible for Future Sale.
Comparison of Stockholders Rights
There are certain differences in the rights of GGI stockholders and the holders of Post-Combination Company securities, ADSs and ADWs after the Business Combination. Please see the section titled Comparison of Stockholder Rights.
Regulatory Matters
Under the HSR Act and the rules that have been promulgated thereunder, certain transactions may not be consummated until the parties to these transactions each submit a premerger notification filing (the Notification and Report Form) to the FTC and the Antitrust Division and the expiration or termination of the applicable waiting period(s) following the filing of the Notification and Report Form.
GGIs affiliates and ListCo have filed Notification and Report Forms under the HSR Act with the Antitrust Division and the FTC.
At any time before or after consummation of the Business Combination, notwithstanding expiration of the waiting period under the HSR Act, the applicable competition authorities could take such action under applicable antitrust laws as each deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Business Combination. Private parties may also seek to take legal action under the antitrust
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laws under certain circumstances. ListCo and GGIs affiliates cannot assure you that the Antitrust Division, the FTC, any state attorney general, or any other government authority will not attempt to challenge the Business Combination on antitrust grounds, and, if such a challenge is made, ListCo and GGIs affiliates cannot assure you as to its result. Neither ListCo nor GGIs affiliates are aware of any material regulatory approvals or actions that are required for consummation of the Business Combination other than the expiration or early termination of the waiting period under the HSR Act. It is presently contemplated that if any such additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.
Material Tax Consequences
For a detailed discussion of material U.S. federal income tax consequences of the Business Combination and a summary of material UK tax consequences of transferring ADSs and ADWs, see the sections titled Material U.S. Federal Income Tax Considerations and Material United Kingdom Tax Considerations in this proxy statement/prospectus.
Anticipated Accounting Treatment
The Business Combination will be accounted for as a capital reorganization in accordance with IFRS. Under this method of accounting, GGI will be treated as the acquired company for financial reporting purposes, and Polestar Group will be the accounting acquirer. This determination was based on evaluation of the following facts and circumstances:
| Parent Shareholders will have the largest voting interest in the Post-Combination Company under all redemption scenarios; |
| the Post-Combination Company Board will have four members nominated by Parent, compared to only one nominated by the GGI Sponsor. Additionally, Parent will have the ability to appoint the remaining members of the Post-Combination Company Board as deemed necessary; |
| Parents senior management will be the senior management of the Post-Combination Company; |
| Polestar Group operations will substantially comprise the ongoing operations of the Post-Combination Company; and |
| Polestar Group is the larger entity, in terms of substantive operations and employee base. |
The Business Combination, which is not within the scope of IFRS 3 Business Combinations as GGI does not meet the definition of a business, will be accounted for within the scope of IFRS 2 Share-based Payment. For accounting purposes, the transaction will be treated as the equivalent of Parent issuing shares for the net assets of GGI, accompanied by a recapitalization. The net assets of GGI will be stated at historical cost, with no goodwill or other intangible assets recorded. Any excess fair value of Post-Combination Company Shares issued over the fair value of GGIs identifiable net assets acquired represents compensation for the service of a stock exchange listing for its shares and is expensed as incurred.
Foreign Private Issuer
As a foreign private issuer, ListCo is subject to different U.S. securities laws than domestic U.S. issuers. As long as ListCo continues to qualify as a foreign private issuer under the Exchange Act, ListCo will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
| the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; |
| the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and |
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| the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. |
In addition, ListCo is not required to file annual reports and financial statements with the SEC as promptly as U.S. domestic companies whose securities are registered under the Exchange Act, and is not required to comply with Regulation FD, which restricts the selective disclosure of material information.
Further, ListCo is exempt from certain corporate governance requirements of Nasdaq by virtue of being a foreign private issuer. Although foreign private issuer status exempts ListCo from most of Nasdaqs corporate governance requirements, ListCo has decided to voluntarily comply with these requirements, except for the requirement to have a compensation committee and a nominating and corporate governance committee consisting entirely of independent directors.
Furthermore, Nasdaq rules also generally require each listed company to obtain shareholder approval prior to the issuance of securities in certain circumstances in connection with the acquisition of the stock or assets of another company, equity based compensation of officers, directors, employees or consultants, change of control and certain transactions other than a public offering. As a foreign private issuer, ListCo is exempt from these requirements and may elect not to obtain shareholders approval prior to any further issuance of our Class A ADSs other than as may be required by the laws of England and Wales.
Subject to requirements under the Post-Combination Articles and Shareholder Acknowledgment Agreement that the ListCo Board be comprised of a majority of independent directors for the three years following the Closing, ListCo may in the future elect to avail itself of these exemptions or to follow home country practices with regard to other matters. As a result, its shareholders will not have the same protections afforded to shareholders of companies that are subject to all of Nasdaqs corporate governance requirements.
Controlled Company
By virtue of being a controlled company under Nasdaq listing rules, ListCo may elect not to comply with certain Nasdaq corporate governance requirements, including that:
| a majority of the board of directors consist of independent directors (however, pursuant to the Post-Combination Articles and Shareholder Acknowledgment Agreement, for the three years following the Closing, the Post-Combination Company Board must be comprised of a majority of independent directors); |
| the compensation committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; |
| the nominating and governance committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; and |
| there be an annual performance evaluation of the compensation and nominating and corporate governance committees. |
Other than as specified above, ListCo may in the future elect to avail itself of these exemptions. As a result, its shareholders will not have the same protections afforded to shareholders of companies that are subject to all of Nasdaqs corporate governance requirements.
Redemption Rights
Pursuant to the Current GGI Certificate, holders of GGI Public Shares may elect to have their shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate
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amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest not previously released to fund Regulatory Withdrawals and/or to pay franchise and income taxes, by (ii) the total number of then-outstanding GGI Public Shares. However, (x) in no event will GGI redeem shares of GGI Class A Common Stock in an amount that would result in GGIs failure to have net tangible assets equaling or exceeding $5,000,001 and (y) a GGI Public Stockholder, together with any of its affiliates or any other person with whom it is acting in concert or as a group (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the groups shares, in excess of 15% of the shares of GGI Common Stock included in the GGI Public Units sold in the GGI IPO.
If a holder exercises its redemption rights, then such holder will be exchanging its shares of GGI Class A Common Stock for cash and will no longer own shares of the Post-Combination Company. Such a holder will be entitled to receive cash for its GGI Public Shares only if it properly demands redemption, identifies to GGI the beneficial holder of the GGI Public Shares being redeemed and delivers its shares (either physically or electronically) to GGIs Transfer Agent in accordance with the procedures described herein. Please see the section titled Special Meeting of GGI StockholdersRedemption Rights for the procedures to be followed if you wish to redeem your shares for cash.
Appraisal Rights
Appraisal rights or dissenters rights are not available to holders of shares of GGI Common Stock in connection with the Business Combination.
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THE BUSINESS COMBINATION AGREEMENT
GGI is asking GGIs stockholders to adopt the Business Combination Agreement and approve the Business Combination. GGI stockholders should read carefully this proxy statement/prospectus in its entirety for more detailed information concerning the Business Combination Agreement, which is attached as Annexes A-1, A-2, A-3 and A-4 to this proxy statement/prospectus. Please see the subsection titled The Business Combination Agreement below for additional information and a summary of certain terms of the Business Combination Agreement. The following summary is qualified in its entirety by reference to the complete text of the Business Combination Agreement. GGI stockholders are urged to read carefully the Business Combination Agreement in its entirety before voting on the Business Combination Proposal because it is the primary legal document that governs the Business Combination.
In addition, GGI is asking GGI holders of public warrants to approve the Class C Warrant Amendment. GGI warrant holders should read carefully this proxy statement/prospectus in its entirety for more detailed information concerning the Business Combination Agreement and the Class C Warrant Amendment, which is attached as Annex D to this proxy statement/prospectus. Please see the subsection titled Related AgreementsClass C Warrant Amendment below for additional information and a summary of certain terms of the Class C Warrant Amendment.
GGI may consummate the Business Combination only if the Business Combination Proposal is approved by the affirmative vote of the holders of a majority of the outstanding shares of GGI Common Stock entitled to vote thereon at the Stockholder Special Meeting, assuming a quorum is present. Approval of the Warrant Amendment Proposal requires the affirmative vote of the holders of at least 50% of outstanding GGI Public Warrants. The Warrant Amendment Proposal is conditioned on the approval of the Business Combination Proposal, but the Business Combination Proposal is not conditioned on the Warrant Amendment Proposal. Accordingly, the Business Combination can be consummated even if the Warrant Amendment Proposal is not approved.
The Business Combination Agreement
The Business Combination Agreement contains representations, warranties and covenants that the respective parties made to each other as of the date of the Business Combination Agreement or other specific dates. The assertions embodied in those representations, warranties and covenants were made for purposes of the contract among the respective parties and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating the Business Combination Agreement. The representations, warranties and covenants in the Business Combination Agreement are also modified in important part by the underlying disclosure schedules (the Schedules), which are not filed publicly and which are subject to a contractual standard of materiality different from that generally applicable to stockholders and were used for the purpose of allocating risk among the parties rather than establishing matters as facts. ListCo and GGI do not believe that the Schedules contain information that is material to an investment decision.
General Description of the Business Combination Agreement
On September 27, 2021, GGI entered into the Business Combination Agreement with ListCo, Parent, Polestar Singapore, Polestar Sweden and Merger Sub. ListCo is a newly incorporated, direct wholly owned subsidiary of Parent that was incorporated for purposes of consummating the Business Combination, and Merger Sub is a newly incorporated, direct wholly owned subsidiary of ListCo that was incorporated for purposes of consummating the Business Combination. On December 17, 2021, the parties to the Business Combination Agreement amended the Business Combination Agreement to provide for certain administrative changes to reflect the December PIPE Subscription by entering into Amendment No. 1 to the Business Combination Agreement. On March 24, 2022, the parties to the Business Combination Agreement further amended the Business Combination Agreement to provide for certain administrative changes to reflect the March PIPE Subscription Agreements by entering into Amendment No. 2 to the Business Combination Agreement. Pursuant to the Business Combination Agreement, among other things, and subject to the terms and conditions contained in the Business Combination Agreement, Parent will effectuate the Pre-Closing Reorganization prior to the Closing and, at the Closing, the parties will consummate the Business Combination. In connection with the Business Combination, Merger Sub will merge with and into GGI in the Merger, pursuant to which the separate corporate existence of Merger Sub will cease and GGI will become a wholly owned subsidiary of ListCo. In
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addition, ListCo will adopt the Post-Combination Articles, which will become the Post-Combination Companys articles of association following the consummation of the Business Combination.
Subject to the terms of the Business Combination Agreement and customary adjustments set forth therein, the aggregate consideration to be paid to Parent in connection with the Pre-Closing Reorganization (excluding any Earn Out Shares) is expected to be approximately $20,003,000,000 (subject to the adjustments noted below). As consideration to be paid to the holders of GGI securities, each share of GGI Class A Common Stock and GGI Class F Common Stock will be exchanged for one newly issued Class A ADS, and as consideration to be paid to the holders of GGI Warrants (i) if the Warrant Amendment Proposal is approved, then (a) each GGI Public Warrant will be converted into the right to receive one Class C-1 ADS, which will be exercisable for Class A ADS at an exercise price of $11.50 per share; and (b) each GGI Private Placement Warrant will be converted into the right to receive one Class C-2 ADS, which will be exercisable for one Class A ADS at an exercise price of $11.50 per share and (ii) if the Warrant Amendment Proposal is not approved, then each GGI Public Warrant and GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one ADW representing the right to acquire one Class A ADS (or one Post-Combination Company Class A Share if at the time of exercise ListCo no longer uses the ADR Facility) at an exercise price of $11.50 per Class A ADS.
Consideration to Parent Stockholders
Pursuant to the Business Combination Agreement, following the Pre-Closing Reorganization, Parent will hold an aggregate number of Post-Combination Company Shares equal to approximately (a) $20,003,000,000 divided by $10.00, less (b) (i) the aggregate principal amount due in respect of certain convertible notes of Parent outstanding as of immediately prior to the Closing, divided by (ii) the applicable conversion price of such notes, less (c) 58,882,610, which represents the aggregate number of Post-Combination Company Preference Shares to be issued pursuant to the Volvo Cars Preference Subscription Agreement.
As additional consideration for Parents contribution to ListCo of all the issued and outstanding equity securities of Polestar Sweden, Parent will be entitled to receive, subject to the terms provided in the Business Combination Agreement, earn out shares (Earn Out Shares) from the Post-Combination Company, issuable in Post-Combination Company Class A Shares (Earn Out Class A Shares) and Post-Combination Company Class B Shares (Earn Out Class B Shares) up to an aggregate number equal to approximately (a) 0.075 multiplied by (b) the number of issued and outstanding Post-Combination Shares as of immediately after the Effective Time (including Post-Combination Company Shares issued pursuant to the Subscription Agreements), rounded down to the nearest whole number.
Earn Out
Under the Business Combination Agreement, Parent (or in the event that Parent has been dissolved or liquidated, the Parent Shareholders) will be entitled to receive Earn Out Shares if the daily volume weighted average price (based on such trading day) of one share of Post-Combination Company Class A Share (the Volume Weighted Average ADS Price) exceeds certain thresholds for a period of at least 20 days out of 30 consecutive trading days, as may be adjusted, at any time during the five-year period beginning on the 180th day following the Closing.
The Earn Out Shares will be issued by ListCo to Parent (or in the event that Parent has been dissolved or liquidated, the Parent Shareholders) as follows, in each case in accordance with their pro rata share and promptly upon, but no earlier than the second business day after the occurrence of the applicable triggering event: (i) if the Volume Weighted Average ADS Price equals or is greater than $13.00 per share, 20% of the Earn Out Class A Shares and 20% of the Earn Out Class B Shares (the Tier 1 Earn Out Shares); (ii) if the Volume Weighted Average ADS Price equals or is greater than $15.50 per share, 20% of the Earn Out Class A Shares and 20% of the Earn Out Class B Shares (the Tier 2 Earn Out Shares), plus the Tier 1 Earn Out Shares (if not previously issued); (iii) if the Volume Weighted Average ADS Price equals or is greater than $18.00 per share, 20% of the
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Earn Out Class A Shares and 20% of the Earn Out Class B Shares (the Tier 3 Earn Out Shares), plus the Tier 1 Earn Out Shares and the Tier 2 Earn Out Shares (if not previously issued); (iv) if the Volume Weighted Average ADS Price equals or is greater than $20.50 per share, 20% of the Earn Out Class A Shares and 20% of the Earn Out Class B Shares (the Tier 4 Earn Out Shares), plus the Tier 1 Earn Out Shares, the Tier 2 Earn Out Shares and the Tier 3 Earn Out Shares (if not previously issued); and (v) if the Volume Weighted Average ADS Price equals or is greater than $23.00 per share, 20% of the Earn Out Class A Shares and 20% of the Earn Out Class B Shares, plus the Tier 1 Earn Out Shares, the Tier 2 Earn Out Shares, the Tier 3 Earn Out Shares and the Tier 4 Earn Out Shares (if not previously issued). If any of the Volume Weighted Average ADS Price thresholds described in the foregoing clauses (i) through (v) are not achieved within the five-year period beginning on the 180th day following the Closing, ListCo will not be required to issue the Earn Out Shares in respect of such Volume Weighted Average ADS Price threshold. Parent (or in the event that Parent has been dissolved or liquidated, the Parent Shareholders) will be entitled to Earn Out Shares in the event an acceleration event (as described in the Business Combination Agreement) occurs.
Material Adverse Effect
Under the Business Combination Agreement, certain representations and warranties of Polestar are qualified in whole or in part by a material adverse effect standard for purposes of determining whether a breach of such representations and warranties has occurred. Consistent with the Business Combination Agreement, a Material Adverse Effect as used in herein means any change, event, effect, state of facts or occurrence that, individually or in the aggregate with any other change, event, effect, state of facts or occurrence, has had or would reasonably be expected to have a material adverse effect on the business, results of operations or financial condition of Polestar and its subsidiaries, taken as a whole; provided, however, that none of the following will be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur:
| any change, event, effect, state of facts or occurrence arising from or related to |
| (a) general business or economic conditions in or affecting Singapore, China, Sweden, the United Kingdom or the United States, or any other country, or changes therein, or the global economy generally, |
| (b) any national or international political or social conditions in Singapore, China, Sweden, the United Kingdom or the United States, or any other country, including the engagement by Singapore, China, Sweden, the United Kingdom or the United States or any other country in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence in any place of any military or terrorist attack, sabotage or cyberterrorism, |
| (c) changes in conditions of the financial, banking, capital or securities markets generally in Singapore, China, Sweden, the United Kingdom or the United States, or any other country, or changes therein, including changes in interest rates in Singapore, China, Sweden, the United Kingdom or the United States or any other country and changes in exchange rates for the currencies of any countries, |
| (d) changes or proposed changes in any applicable laws (including any quarantine, shelter in place, stay at home, workforce reduction, social distancing, shut down, closure or sequester order, guideline, recommendation or law or any other applicable laws, guidelines or recommendations, in each case, by any governmental authority and in response to COVID-19 (COVID-19 Measures)) or changes or proposed changes in the international financial reporting standards (consistently applied), or any other applicable accounting standards or any authoritative interpretations thereof, in each case, after the date of the Business Combination Agreement, |
| (e) the execution or public announcement of the Business Combination Agreement or the pendency or consummation of the Business Combination (subject to certain carve-outs), |
| (f) any failure in and of itself by Polestar or any of its subsidiaries to meet any internal or published budgets, projections, forecasts, estimates or predictions (although the underlying facts |
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and circumstances resulting in such failure may be taken into account to the extent not otherwise excluded from this definition), |
| (g) any hurricane, tornado, flood, earthquake, tsunami, natural disaster, epidemic, pandemic (including COVID-19) or quarantine, act of God or other comparable event in Singapore, China, Sweden, the United Kingdom or the United States or any other country, or any escalation of the foregoing, |
| (h) changes generally applicable to the industries or markets in which Polestar and its subsidiaries operate or |
| (i) any action taken at the express written request, or with the express written consent, of GGI after the date of the Business Combination Agreement. |
provided, further, that any change, event, effect, state of facts or occurrence resulting from a matter described in any of the foregoing clauses (a) through (d), (g) or (h) may be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur to the extent such change, event, effect, state of facts or occurrence has had or would reasonably be expected to have a disproportionate adverse effect on the business, results of operations or financial condition of Polestar and its subsidiaries, taken as a whole, relative to other similarly situated participants operating in the industries in which Polestar or its subsidiaries operate (including, for the avoidance of doubt, those set forth on the Parent disclosure schedules to the Business Combination Agreement).
Closing and Effective Time of the Business Combination
The Closing is expected to take place electronically through the exchange of documents via e-mail or facsimile as promptly as practicable (and in any event no later than 9:00 a.m., New York time, on the third business day) after the date on which all of the conditions described below under the subsection Conditions to Closing of the Business Combination have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or (to the extent legally permitted) waiver of such conditions at such closing) or at such other time, date and location as the parties to the Business Combination Agreement may agree in writing.
Conditions to Closing of the Business Combination
Conditions to Each Partys Obligations
The respective obligations of each of the parties to the Business Combination Agreement to complete the Business Combination are subject to the satisfaction of the following conditions, any one or more of which may be waived (to the extent legally permitted) by the party for whose benefit such condition exists:
| the applicable waiting period (and any extension thereof) under the HSR Act relating to the Business Combination will have expired, been terminated or obtained (or deemed, by applicable law, to have been obtained); |
| no law or other legal restraint or prohibition issued by any court of competent jurisdiction or other governmental authority preventing the consummation of the Business Combination will be in effect; |
| this proxy statement/prospectus will have become effective in accordance with the provisions of the Securities Act, and no stop order will have been issued by the SEC and remain in effect with respect to this proxy statement/prospectus; |
| the Business Combination Proposal shall have been approved; |
| the Required Parent Shareholder Approval will have been obtained; |
| after completion of the GGI stockholder redemptions and prior to the Closing, GGI will have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act); |
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| the Class A ADSs that constitute the share consideration paid to GGI and Class A ADSs that are issued in connection with the PIPE Investment will have been approved for listing on Nasdaq; |
| the ADWs or the Class C-1 ADSs, as applicable, will have been approved for listing on Nasdaq; and |
| the ListCo Board will have a number of directors and composition of directors determined in accordance with the Business Combination Agreement as of the Closing. |
Additional Conditions to Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Subs Obligations
The obligation of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub to consummate and effect the Business Combination are subject to the satisfaction of the following conditions, any one or more of which may be waived (if legally permitted) by Parent:
| (i) certain representations and warranties of GGI related to corporate organization, due authorization, capitalization and brokers will be true and correct in all material respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all material respects as of such earlier date), (ii) certain representations and warranties related to the capitalization of GGI will be true and correct in all respects (except for de minimis inaccuracies) as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all respects (except for de minimis inaccuracies) as of such earlier date), (iii) the representation and warranty related to the absence of certain changes will be true and correct in all respects as of the Closing Date as though made on and as of the Closing Date and (iv) the other representations and warranties of GGI (other than the representations and warranties related to corporate organization, due authorization, capitalization and brokers, and the representation and warranty related to the absence of certain changes) will be true and correct (without giving effect to any limitations as to materiality or any similar limitation set forth in the Business Combination Agreement) in all respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all respects as of such earlier date), except where the failure of such representations and warranties to be true and correct, individually and in the aggregate has not had a GG Material Adverse Effect (as defined in the Business Combination Agreement); |
| the covenants and agreements of GGI contained in the Business Combination Agreement to be performed prior to the Closing will have been performed in all material respects; |
| the sum of (a) the amount in the Trust Account (after taking into account payments required to be made in connection with any stockholder redemptions), (b) the Sponsor Investment Amount, (c) the Volvo Cars PIPE Investment Amount and (d) the PIPE Investment Amount will be no less than $950,000,000, prior to the payment of any unpaid or contingent liabilities and fees and expenses of GGI (including, as applicable, any GG Transaction Expenses (as defined in the Business Combination Agreement)) as of the Closing; and |
| GGI will have delivered, or caused to be delivered, to Polestar, ListCo and Parent a certificate, duly executed by an authorized officer of GGI, dated as of the Closing Date, to the effect that the conditions specified in the first two bullets above are satisfied. |
Conditions to GGIs Obligations
The obligations of GGI to consummate and effect the Merger and the other transactions contemplated by the Business Combination Agreement are subject to the satisfaction of the following conditions, any one or more of which may be waived (if legally permitted) by GGI:
| (i) certain representations and warranties of the Parent and Polestar related to corporate organization, due authorization, capitalization and brokers will be true and correct (without giving effect to any |
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limitation as to materiality set forth therein) in all material respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all material respects as of such earlier date), (ii) certain representations and warrants of the Parent and Polestar related to the capitalization of Parent, Polestar and ListCo will be true and correct in all respects (except for de minimis inaccuracies) as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all respects (except for de minimis inaccuracies) as of such earlier date), (iii) the representations and warranties related to the absence of certain changes with respect to Parent and Polestar and the UK takeover code will be true and correct in all respects as of the Closing Date as though made on and as of the Closing Date and (iv) the representations and warranties of Polestar, ListCo and Merger Sub (other than the representations and warranties of Parent and Polestar related to corporate organization, due authorization, capitalization and brokers, and certain representations and warranties of Parent, Polestar and ListCo relating to capitalization of equity securities, the absence of certain changes and the UK takeover code) will be true and correct (without giving effect to any limitation as to materiality or Material Adverse Effect or any similar limitation set forth in the Business Combination Agreement) in all respects as of the Closing Date, as though made on and as of the Closing Date (except to the extent that any such representation and warranty is expressly made as of an earlier date, in which case such representation and warranty will be true and correct in all respects as of such earlier date), except where the failure of such representations and warranties to be true and correct, individually and in the aggregate has not had a Material Adverse Effect; |
| the covenants and agreements of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub contained in the Business Combination Agreement to be performed prior to the Closing will have been performed in all material respects; |
| the Pre-Closing Reorganization will have been completed; and |
| Parent will have delivered, or caused to be delivered, to GGI a certificate duly executed by an authorized officer of Parent, dated as of the Closing Date, to the effect that the conditions specified in the first two bullets above are satisfied. |
Representations and Warranties
Under the Business Combination Agreement, Parent and Polestar made customary representations and warranties about it and its subsidiaries relating to:
| corporate organization; |
| due authorization; |
| governing documents and subsidiaries; |
| consents; |
| capitalization; |
| capitalization of subsidiaries; |
| financial statements; |
| undisclosed liabilities; |
| litigation; |
| compliance with laws; |
| material contracts; |
| company benefit plans; |
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| labor matters; |
| taxes; |
| insurance; |
| permits; |
| property; |
| intellectual property; |
| IT security; |
| data privacy; |
| environmental matters; |
| absence of changes; |
| transactions with affiliates; |
| brokers; |
| consents and requisite governmental approvals; |
| no violations; |
| business activities; |
| Investment Company Act; |
| UK Takeover Code; and |
| accuracy of Polestars information provided in this proxy statement/prospectus. |
Under the Business Combination Agreement, GGI made customary representations and warranties relating to:
| corporate organization; |
| due authorization; |
| consents and requisite government approvals; |
| no violations; |
| capitalization; |
| Trust Account; |
| SEC filings; |
| internal controls; |
| listing; |
| financial statements; |
| no undisclosed liabilities; |
| litigation; |
| compliance with laws; |
| business activities; |
| contracts; |
| employee benefit plans; |
| taxes; |
| absence of changes; |
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| transactions with affiliates; |
| Investment Company Act; |
| recommendation of GGI; |
| brokers; and |
| accuracy of GGIs information provided in this proxy statement/prospectus. |
Covenants of the Parties
Conduct of Businesses Prior to the Completion of the Business Combination. Parent and Polestar have agreed that, except as disclosed on the Parent disclosure schedules, contemplated by the Business Combination Agreement or any other transaction document (including with respect to the Pre-Closing Reorganization), consented to by GGI in writing (which consent will not be unreasonably withheld, conditioned or delayed) or required by law or COVID-19 Measures, prior to the Closing, Parent and Polestar will, and will cause their respective subsidiaries to, use commercially reasonable efforts to (i) conduct and operate the business of Polestar and its subsidiaries in the ordinary course; (ii) preserve intact the current business organization and ongoing businesses of Polestar and its subsidiaries and maintain the existing relations and goodwill of Polestar and its subsidiaries with customers, suppliers, joint venture partners, distributors and creditors of Polestar and its subsidiaries; and (iii) keep available the services of their present officers and other key employees. Without limiting the generality of the foregoing, except as set forth on the Parent disclosure schedules, contemplated by the Business Combination Agreement or any other transaction document (including with respect to the Pre-Closing Reorganization), consented to by GGI in writing (which consent will not be unreasonably withheld, conditioned or delayed) or required by law or COVID-19 Measures, Parent, with respect to Polestar and its subsidiaries, will not, and will cause Polestar and its subsidiaries not to, prior to the Closing:
| (A) merge, consolidate, combine or amalgamate Polestar or any of its subsidiaries with any person or (B) purchase or otherwise acquire (whether by merging or consolidating with, purchasing any equity security in or a material portion of the assets of, or by any other manner) any corporation, partnership, association or other business entity or organization or division thereof for an aggregate purchase price in excess of $50,000,000; |
| (A) authorize for issuance, issue, sell, transfer, pledge, encumber, dispose of or deliver any additional equity securities of Parent or any of its subsidiaries, or adjust, split, combine, subdivide, recapitalize, reclassify or otherwise effect any change in respect of any of the equity securities of Polestar or its subsidiaries, or (B) repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any equity securities of Polestar or its subsidiaries, except with respect to the foregoing clauses (A) and (B), (1) for the acquisition by Polestar or any of its subsidiaries of any equity securities of Polestar or its subsidiaries in connection with the forfeiture or cancellation of such equity securities or (2) for transactions between Polestar and any of its wholly owned subsidiaries or between wholly owned subsidiaries of Polestar; |
| adopt any amendments, supplements, restatements or modifications to the governing documents of Polestar or its subsidiaries, except, with respect to the Polestars subsidiaries, (A) in the ordinary course of business, (B) as would not materially restrict the operations of such subsidiary and (C) as would not have an adverse impact on GGI; |
| other than the issuance of shares by a wholly owned subsidiary of Polestar to Polestar or another of Polestar wholly owned subsidiaries, (A) make, declare or pay any dividend or distribution (whether in cash, stock or property) to Parent Shareholders in their capacities as Parent Shareholders, or (B) transfer, issue, sell, grant or otherwise directly or indirectly dispose of, or subject to a lien (other than certain permitted liens), (1) any equity securities of Polestar or its subsidiaries or (2) any options, warrants, stock units, rights of conversion or other rights, agreements, arrangements or commitments obligating Polestar or its subsidiaries to issue, deliver or sell any equity securities of Polestar or its subsidiaries; |
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| (A) issue or sell any debt securities or rights to acquire any debt securities of Polestar or any of its subsidiaries or guarantee any debt securities of another Person, or (B) incur, create, assume, refinance, guarantee or otherwise become liable for (whether directly, contingently or otherwise) any indebtedness, other than (1) ordinary course trade payables that are not past due or (2) indebtedness in an aggregate amount less than $1,000,000,000; |
| make any loans, advances or capital contributions to, or guarantees for the benefit of, or any investments in, any person (including to any of Parents or its subsidiaries officers, employees, directors, agents or consultants), make any material change in its existing borrowing or lending arrangements relating to such loans, advances, capital contributions or investments for or on behalf of such persons, or enter into any keep well or similar agreement to maintain the financial condition of any other person, other than (A) the reimbursement of expenses of employees in the ordinary course of business and (B) loans solely between or among any of Polestar and its subsidiaries; |
| (A) sell, transfer, assign, abandon, lease, license, sublicense or convey or otherwise dispose of any material assets (excluding certain intellectual property of Polestar), properties or business of Polestar or its subsidiaries, other than dispositions of obsolete or worthless assets and other than in the ordinary course of business or (B) create, subject or incur any lien on any material assets, properties or business of Polestar or its subsidiaries (other than certain permitted liens or in connection with the incurrence of indebtedness otherwise permitted by the Business Combination Agreement); |
| (A) transfer, sell, assign, abandon, license or sublicense (other than grant non-exclusive licenses in the ordinary course of business), let expire (other than expiration of intellectual property rights in accordance with its maximum statutory term) or otherwise dispose of any intellectual property material to Polestar or any of its subsidiaries or (B) disclose any trade secrets material to Polestar or any of its subsidiaries (other than pursuant to a written confidentiality agreement entered into in the ordinary course of business); |
| other than in the ordinary course of business, (A) materially amend, modify or terminate, or waive or release any material rights, claims or benefits under, any material contract (excluding, for the avoidance of doubt, any expiration or automatic extension or renewal of any material contract pursuant to its terms or entering into additional work or purchase orders pursuant to, and in accordance with the terms of, any material contract) or (B) enter into any contract that would constitute a material contract had it been entered into prior to the date of the Business Combination Agreement; |
| except as required under the terms of any Polestar benefit plan or labor agreement, (A) materially amend or modify, adopt, enter into or terminate any Polestar benefit plan or any benefit or compensation plan, policy, program or contract that would be a material Polestar benefit plan if in effect as of the date of the Business Combination Agreement, (B) materially increase or agree to materially increase the compensation or benefits payable to any current or former director, manager, officer, individual service provider or employee with annual base compensation exceeding $150,000 (in each case, other than ordinary course merit-based increases, consistent with past practice), (C) take any action to accelerate any payment, right to payment or benefit, vesting of any right to payment of benefit, or the funding of any payment, right to payment or benefit, payable or to become payable to any current or former director, manager, officer, employee, individual independent contractor or other individual service provider of Polestar or any of its subsidiaries or (D) issue or grant any equity securities to an employee, director or other individual service provider; |
| (A) waive, release, compromise, settle or satisfy any pending or threatened proceeding or (B) enter into any settlement, conciliation or similar contract, in each case of clauses (A) and (B), the performance of which would involve the payment by Polestar or any of its subsidiaries, in each case, in excess of $10,000,000, or that imposes, or by its terms will impose at any point in the future, any material, non-monetary obligations on Polestar or any of its subsidiaries; |
| make any capital expenditures (or commit to make any capital expenditures) that in the aggregate exceed $100,000,000, other than any capital expenditure (or series of related capital expenditures) |
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consistent in all material respects with Polestars annual capital expenditure budget made available to GGI; |
| make any material change in financial accounting methods, principles or practices, except insofar as may have been required by a change in GAAP or IFRS (including pursuant to standards, guidelines and interpretations of the Financial Accounting Standards Board or any similar organization) or applicable law; |
| authorize, recommend, propose or announce an intention to adopt, or otherwise effect, a plan of complete or partial liquidation, dissolution, restructuring, recapitalization, reorganization or similar transaction involving Polestar or any of its subsidiaries; |
| enter into any agreement that materially restricts the ability of Polestar or any of its subsidiaries (including, following the Closing, ListCo and any of its subsidiaries) to engage or compete in any material line of business, or enter into any agreement that restricts the ability of Polestar or its subsidiaries (including, following the Closing, ListCo and any of its subsidiaries) to enter a new material line of business; |
| enter into, renew or amend in any material respect any Company Related Party Contract (as defined in the Business Combination Agreement); |
| enter into any material new line of business outside of (A) the business currently conducted by Polestar and its subsidiaries as of the date of the Business Combination Agreement, (B) any business contemplated to be conducted in accordance with the Polestars annual budget made available to GGI or (C) any business directly related to the research, design, manufacture, production, sale or lease of electric vehicles and/or electric vehicle technology; or |
| enter into any contract to take, or cause to be taken, or resolve to take, any of the actions prohibited under the foregoing. |
GGI has agreed to a more limited set of restrictions on its business prior to the effective time of the Business Combination. Specifically, GGI has agreed to not, prior to the Closing, except as disclosed on the GGI disclosure schedules, contemplated by the Business Combination Agreement or any other transaction document, required by law or COVID-19 Measures, or with the written consent of Parent (which consent will not be unreasonably withheld, conditioned or delayed):
| declare, set aside, make or pay a dividend on, or make any other distribution or payment in respect of, any equity securities of GGI, or repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any outstanding equity securities of GGI, other than, for the avoidance of doubt, in connection with GGI stockholder redemptions; |
| (A) merge, consolidate, combine or amalgamate GGI with any person or (B) purchase or otherwise acquire (whether by merging or consolidating with, purchasing any Equity Security in or any portion of the assets of any corporation, partnership, association or other business entity or organization or division thereof); |
| adjust, split, combine, subdivide, recapitalize, reclassify or otherwise effect any change in respect of any of GGIs equity securities; |
| adopt any amendments, supplements, restatements or modifications to GGIs trust agreement or GGIs governing documents; |
| transfer, issue, sell, grant or otherwise directly or indirectly dispose of, or subject to a lien (other than certain permitted liens) (A) any of equity securities of GGI or (B) any options, warrants, rights of conversion or other rights, agreements, arrangements or commitments obligating GGO to issue, deliver or sell any of its equity securities; |
| incur, guarantee or otherwise become liable for any indebtedness, other than the incurrence of indebtedness pursuant to working capital loans in an aggregate amount not to exceed $2,000,000; |
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| hire or engage any manager, officer, employee or other individual service provider with compensation exceeding $250,000; |
| make any loans or advances to, or capital contributions to, or guarantees for the benefit of, or any investments in, any other person; |
| enter into any contract, except for contracts contemplated by the Business Combination Agreement or contracts related to the Business Combination; |
| engage in any activities or business, other than activities or business (A) conducted by GGI as of the date of the Business Combination Agreement (B) in connection with or incident or related to GGIs organization, incorporation or formation, as applicable, or continuing corporate (or similar) existence or as contemplated by any SEC reports, (C) contemplated by, or incident or related to, the Business Combination Agreement, the performance of covenants or agreements thereunder or the consummation of the Business Combination or (D) that are (1) administrative or ministerial and (2) immaterial in nature; |
| adopt or enter into any benefit plan or any benefit or compensation plan, policy, program or contract that would be a benefit plan if in effect as of the date of the Business Combination Agreement; |
| adopt or enter into a plan of complete or partial liquidation, dissolution, restructuring, recapitalization, reorganization or similar transaction involving GGI (other than as contemplated by the Business Combination Agreement or any other transaction document); or |
| enter into any agreement to do any of the actions prohibited under the foregoing. |
Efforts to Consummate. GGI and Parent agreed to, and GGI agreed to cause its affiliates to, and Parent agreed to cause its subsidiaries to, (i) use reasonable best efforts to assemble, prepare and file notifications or any information (and, as needed, to supplement such notifications or information) as may be reasonably necessary to obtain as promptly as reasonably practicable all governmental and regulatory consents required to be obtained in connection with the Business Combination, and, in the case of any notifications to be filed under the HSR Act, to submit such notifications no later than 15 business days after the date of the Business Combination Agreement, (ii) use reasonable best efforts to deliver the notices to, and/or obtain certain consents of, the third parties set forth on the Parent disclosure schedules, in each case as set forth therein, in connection with the Business Combination, (iii) use reasonable best efforts to take, or cause to be taken, and to do, or cause to be done, all things reasonably necessary or advisable to consummate and make effective as promptly as practicable the Business Combination, including using reasonable best efforts to obtain all material approvals of governmental authorities that any of GGI, Parent, ListCo, Polestar or their respective affiliates are required to obtain in order to consummate the Business Combination; provided that in no event shall GGI, Parent, ListCo, Polestar or any of their respective affiliates be obligated to bear any expense, pay any fee (except as otherwise set forth in the Business Combination Agreement, and excluding any expenses or fees payable to the SEC in connection with the Business Combination, including this proxy statement/prospectus) or grant any concession in connection with obtaining any such approvals, and that each party agreed to bear its out-of-pocket costs and expenses in connection with obtaining any such approvals and (iv) take such other action as may reasonably be necessary or as any other party may reasonably request to satisfy the conditions of the other parties set forth in the Business Combination Agreement or otherwise to comply with the Business Combination Agreement. Each party agreed to promptly inform the other parties of any substantive communication between itself and any governmental authority regarding the Business Combination.
Without limiting the foregoing, each party agreed not to, and each party agreed to cause its affiliates not to, enter into any agreement with any governmental authority not to consummate the Business Combination, except with the prior consent of the other parties. In connection with obtaining any such approvals, nothing in the Business Combination Agreement obligates any party or any of its affiliates to agree to, and Parent, with respect to Polestar and its subsidiaries, will not without GGIs written consent, agree with any governmental authority to (i) sell, license or otherwise dispose of, or hold separate or agree to sell, license or otherwise dispose of, any entities, assets or facilities of Polestar or any of its subsidiaries or any entity, facility or asset of GGI and any of
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its affiliates, (ii) terminate, amend or assign existing relationships and contractual rights or obligations of any party or any of its affiliates, (iii) amend, assign or terminate existing licenses or other contracts of any party or any of its affiliates or (iv) enter into new licenses or other contracts in respect of any party or any of its affiliates. The parties further agreed that no party will agree to any of the foregoing measures with respect to any other party or any of its affiliates, except with such other parties prior written consent (not to be unreasonably withheld, conditioned or delayed).
Except to the extent otherwise constituting a Company Transaction Expense (as defined in the Business Combination) under the Business Combination Agreement, whether or not the Business Combination is consummated, Parent and GGI agreed to each be responsible for 50% of the filing fees paid or payable to any governmental authority (including filing fees under the HSR Act or any other applicable law) in connection with the Business Combination other than filing fees under the HSR Act for the acquisitions by PIPE Investors for the PIPE Investment or Earn Out Holders for the Earn Out Shares (which will be the sole responsibility of the PIPE Investors or Earn Out Holders, as appropriate).
From and after the date of the Business Combination Agreement until the earlier of the Closing or termination of the Business Combination Agreement in accordance with its terms, the parties agreed to give legal counsel for the other parties a reasonable opportunity to review in advance, and additionally agreed to consider in good faith the views of the other in connection with, any proposed material written communication to any governmental authority relating to the Business Combination. Each of the parties agreed not to participate in any substantive meeting or discussion, either in person, videoconference, or by telephone with any governmental authority in connection with the Business Combination unless, to the extent not prohibited by such governmental authority, it consults with the other parties in advance. Notwithstanding the foregoing, any materials shared may be redacted before being provided to the other parties (i) to remove references concerning the valuation of Polestar, (ii) as necessary to comply with contractual arrangements and (iii) as necessary to avoid disclosure of other competitively sensitive information or to address reasonable privilege or confidentiality concerns.
Without limiting the foregoing, GGI, Parent, Polestar Singapore, Polestar Sweden and ListCo agreed to use reasonable best efforts to (i) consummate the transactions contemplated by the Subscription Agreements and the Volvo Cars Preference Subscription Agreement on the terms and conditions described therein, including maintaining in effect the Subscription Agreements and the Volvo Cars Preference Subscription Agreement, (ii) satisfy on a timely basis all conditions and perform in all material respects all covenants applicable to them in the Subscription Agreements and the Volvo Cars Preference Subscription Agreement and otherwise comply with their obligations thereunder, (iii) in the event that all conditions in the Subscription Agreements and the Volvo Cars Preference Subscription Agreement (other than conditions whose satisfaction is controlled by the parties or their affiliates and other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction of such conditions at Closing) have been satisfied, consummate the transactions contemplated by the Subscription Agreements and the Volvo Cars Preference Subscription Agreement at the time contemplated thereby, (iv) confer with each other regarding scheduling of the Closing Date (as defined in the Subscription Agreements and the Volvo Cars Preference Subscription Agreement), (v) deliver notices to counterparties to the Subscription Agreements and the Volvo Cars Preference Subscription Agreement at least five business days prior to the Closing to cause them to fund their obligations at least two business days prior to the date that the Closing is scheduled to occur hereunder and (vi) enforce their rights, as applicable, under the Subscription Agreements and the Volvo Cars Preference Subscription Agreement in the event that all conditions in the Subscription Agreements and the Volvo Cars Preference Subscription Agreement (other than conditions whose satisfaction is controlled by the parties or any of their affiliates and other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction of such conditions of Closing) have been satisfied, to cause (A) each PIPE Investor to pay the subscription price set forth in its PIPE Subscription Agreement, (B) GGI Sponsor to pay the subscription price set forth in the Sponsor Subscription Agreement, (C) Snita to pay the subscription price set forth in the Volvo Cars PIPE Subscription Agreement and (D) Snita to pay the subscription price set forth in the Volvo Cars Preference Subscription Agreement.
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GGI Stockholder Special Meeting. GGI agreed to, as promptly as practicable following the time at which this proxy statement/prospectus is declared effective under the Securities Act and, in any event within 45 days of the effectiveness of this proxy statement/prospectus, (a) duly give notice of the Stockholder Special Meeting (b) cause this proxy statement/prospectus to be mailed to the GGI stockholders and (c) duly convene and hold the Stockholder Special Meeting, in each case, in accordance with the governing documents of GGI and applicable law, for the purposes of approving the Business Combination Proposal and, if applicable, any approvals related thereto and providing its stockholders with the opportunity to elect to effect the GGI stockholder redemptions. GGI also agreed, through the GGI Board, to recommend to its stockholders except as permitted by the Business Combination Agreement, (i) the adoption and approval of the Business Combination Agreement, the transaction documents to which GGI is or will be a party and the Business Combination, including the Merger, (ii) the adoption and approval of any other proposals as either the SEC or Stock Exchange (or the respective staff members thereof) may indicate are necessary in its comments to this proxy statement/prospectus or in correspondence related thereto, and of any other proposals reasonably agreed by GGI, ListCo, Polestar and Parent as necessary or appropriate in connection with the consummation of the Business Combination and (iii) the adjournment of the Stockholder Special Meeting, if necessary, to permit further solicitation of proxies because there are not sufficient votes to approve and adopt any of the foregoing; provided that GGI may postpone or adjourn the Stockholder Special Meeting (A) to solicit additional proxies for the purpose of approving the Business Combination Proposal, (B) for the absence of a quorum or (C) to allow reasonable time for the filing or mailing of any supplemental or amended disclosures that GGI has determined, based on the advice of outside legal counsel, is reasonably likely to be required under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by the GGI Stockholders prior to the Stockholder Special Meeting; provided, further, that in no event may GGI adjourn the Stockholder Special Meeting for more than 15 business days later than the most recently adjourned meeting or to a date more than 30 business days after the original date of the Stockholder Special Meeting or, without the consent of Parent, to a date that is beyond the Termination Date (as defined in the Business Combination Agreement).
GGI Warrantholder Approval. GGI, ListCo, Polestar and Parent agreed to, as promptly as reasonably practicable following the date of the Business Combination Agreement and in accordance with the terms and pursuant to the documentation and timing to be mutually agreed upon (such agreement not to be unreasonably withheld, conditioned or delayed by any of the parties), solicit the requisite approval of the Warrant Amendment Proposal. In the event that the requisite approval of the Warrant Amendment Proposal is obtained prior to the Effective Time, each GGI Public Warrant that is outstanding immediately prior to the Effective Time will be automatically cancelled and extinguished and converted into the right to receive one Class C-1 ADS representing one Post-Combination company Class C-1 Share and each GGI Private Placement Warrant that is outstanding immediately prior to the Effective Time will be automatically cancelled and extinguished and converted into the right to receive one Class C-2 ADS representing one Post-Combination Company Class C-2 Share. In the event that the requisite approval of the Warrant Amendment Proposal is not obtained prior to the Effective Time, each GGI Warrant that is outstanding immediately prior to the Effective Time will be automatically cancelled and extinguished and converted into the right to receive one ADW. GGI agreed to obtain the consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed) prior to incurring any third-party fees (other than outside legal counsel) in connection with obtaining the requisite approval of the Warrant Amendment Proposal.
No Change of GGI Recommendation. Except as permitted by the Business Combination Agreement, the GGI Board, including any committee thereof, may not withhold, withdraw, qualify or modify (or publicly propose or resolve to withhold, withdraw, qualify or modify) the GGI Recommendation in a manner adverse to Parent, ListCo or Polestar. Notwithstanding anything in the Business Combination Agreement to the contrary, if, at any time prior to approval of the Business Combination Proposal, the GGI Board determines in good faith, after consultation with its outside legal counsel and financial advisor, that in response to a GGI Intervening Event, the failure to make a change in the GGI Recommendation would be inconsistent with the GGI Boards fiduciary duties under applicable law, the GGI Board may, prior to the approval of the Business Combination Proposal, make a change in the GGI Recommendation; provided, however, that GGI agreed to not make, or agree or
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resolve to make, a change in the GGI Recommendation unless (i) GGI delivers to Parent a written notice (a GGI Intervening Event Notice) advising Parent that the GGI Board proposes to take such action and containing the material facts underlying the GGI Boards determination that a GGI Intervening Event has occurred and that failure to make a change in the GGI Recommendation would be inconsistent with its fiduciary duties under applicable law and (ii) at or after 5:00 p.m., New York time, on the fourth business day immediately following the day on which GGI delivered the GGI Intervening Event Notice (such period from the time the GGI Intervening Event Notice is provided until 5:00 p.m., New York time, on the fourth business day immediately following the day on which GGI delivered the GG Intervening Event Notice (it being understood that any material development with respect to a GGI Intervening Event will require a new notice but with an additional three business day (instead of four business days) period from the date of such notice) (the GGI Intervening Event Notice Period), the GGI Board reaffirms in good faith (after consultation with its outside legal counsel and financial advisor) that the failure to make a change of the GGI Recommendation would be inconsistent with its fiduciary duties under applicable law. If requested by Parent, GGI agreed to use its reasonable best efforts to cause its representatives to, during the GGI Intervening Event Notice Period, engage in good faith negotiations with Parent and its representatives to make such adjustments in the terms and conditions of the Business Combination Agreement so that the failure to make a change of GGI Recommendation would not be inconsistent with the GGI Boards fiduciary duties under applicable law.
Exclusive Dealing. From the date of the Business Combination Agreement until the earlier of the Closing or the termination of the Business Combination Agreement in accordance with its terms, each of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub have agreed not to, and have agreed to cause their representatives not to, directly or indirectly:
| solicit, initiate, encourage (including by means of furnishing or disclosing information), knowingly facilitate (including by commencing due diligence), discuss or negotiate, directly or indirectly, any inquiry, proposal or offer (written or oral) with respect to any transaction or series of related transactions under which any person(s) (other than Parent, ListCo, Polestar or any of their respective subsidiaries; provided, that, solely with respect to Parent, any such transaction or series of related transactions does not adversely impact the expected benefits to GGI of the Business Combination, including the Pre-Closing Reorganization), directly or indirectly, acquires or otherwise purchases all or a material portion of the assets, equity securities or businesses of Parent or any of its controlled affiliates (whether by merger, consolidation, liquidation, recapitalization, purchase, exchange or issuance of equity securities, lease or purchase of assets, tender offer or otherwise) (a Polestar Alternate Transaction); |
| furnish or disclose any non-public information to any person in connection with, or that could reasonably be expected to lead to, a Polestar Alternate Transaction; |
| enter into any contract or other arrangement or understanding regarding a Polestar Alternate Transaction; |
| make any filings with the SEC in connection with a public offering of any equity securities or other securities of Polestar (or any affiliate or successor of Polestar); or |
| otherwise cooperate in any way with, or assist or participate in, or knowingly facilitate or encourage any effort or attempt by any person (other than GGI) to do or seek to do any of the foregoing or seek to circumvent certain provisions of the Business Combination Agreement or further a Polestar Alternate Transaction. |
Parent, ListCo, Polestar Singapore and Polestar Sweden also agreed to, and agreed to promptly after the execution of the Business Combination Agreement, cause each of its subsidiaries to and use its reasonable best efforts to cause its and their representatives to, (A) cease any solicitations, discussions or negotiations with any person (other than the parties and their respective representatives) conducted prior to the execution of the Business Combination Agreement in connection with any Polestar Alternate Transaction or any inquiry or request for information that could reasonably be expected to lead to, or result in, a Polestar Alternate Transaction
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and (B) terminate access to any physical or electronic data room maintained by or on behalf of Parent, Polestar or any if its subsidiaries and instruct each person that has prior to the date of the Business Combination Agreement executed a confidentiality agreement in connection with its consideration of acquiring Parent or Polestar to return or destroy all confidential information furnished to such person by or on behalf of it or any of its subsidiaries prior to the date of the Business Combination Agreement.
From the date of the Business Combination Agreement until the earlier of the Closing or the termination of the Business Combination Agreement in accordance with its terms, GGI agreed to not, and agreed to cause its representatives not to, directly or indirectly:
| solicit, initiate, encourage (including by means of furnishing or disclosing information), knowingly facilitate (including by commencing due diligence), discuss or negotiate, directly or indirectly, any inquiry, proposal or offer (written or oral) with respect to any transaction or series of related transactions under which (a) GGI or any of its controlled affiliates, directly or indirectly, (i) acquires or otherwise purchases any other person(s), (ii) engages in a business combination with any other person(s) or (iii) acquires or otherwise purchases all or a material portion of the assets, equity securities or businesses of any other person(s) (in the case of each of clauses (i), (ii) and (iii), whether by merger, consolidation, liquidation, recapitalization, purchase, exchange or issuance of equity securities, purchase of assets, tender offer or otherwise) or (b) (i) GGI or any of its controlled affiliates issues any equity securities to, or negotiates a similar investment with, any one or more persons or (ii) any one or more persons acquire or otherwise purchase all or a material portion of the assets or businesses of GGI (a GGI Alternate Transaction); |
| furnish or disclose any non-public information to any person in connection with, or that could reasonably be expected to lead to, a GGI Alternate Transaction; |
| enter into any contract or other arrangement or understanding regarding a GGI Alternate Transaction; or |
| otherwise cooperate in any way with, or assist or participate in, or knowingly facilitate or encourage any effort or attempt by any person (other than the Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub) to do or seek to do any of the foregoing or seek to circumvent certain sections of the Business Combination Agreement or further a GGI Alternate Transaction. |
GGI also agreed to, and agreed to promptly after the execution of the Business Combination Agreement cause its representatives (in each such persons capacity as a representative of GGI) to, (A) cease any solicitations, discussions or negotiations related to any GGI Alternate Transaction with any person (other than the parties and their respective representatives) conducted prior to the execution of the Business Combination Agreement in connection with any GGI Alternate Transaction or any inquiry or request for information that could reasonably be expected to lead to, or result in, a GGI Alternate Transaction and (B) instruct each person that has prior to the date of the Business Combination Agreement executed a confidentiality agreement in connection with its consideration of a GGI Alternate Transaction to return or destroy all confidential information furnished to such person by or on behalf of GGI or any of its representatives prior to the date of the Business Combination Agreement.
Stock Exchange Listing. Parent agreed to cause ListCo to, and ListCo agreed to, use its reasonable best efforts to cause the Class A ADSs that constitute the share consideration paid to GGI Stockholders and either the Class C-1 ADSs or ADWs, as applicable, issuable in accordance with the Business Combination Agreement to be approved for listing on Nasdaq (and GGI, Parent, Polestar Singapore, Polestar Sweden and Merger Sub agreed to reasonably cooperate in connection therewith), subject only to official notice of issuance, as promptly as practicable after the date of the Business Combination Agreement, and in any event prior to the Closing Date and to cause ListCo to satisfy any applicable initial and continuing listing requirements of Nasdaq.
GGI D&O Indemnification and Insurance. Each party agreed that (i) all rights to indemnification or exculpation now existing in favor of the directors, officers, members, managers and employees of GGI, as provided in GGIs
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governing documents or otherwise in effect as of the date of the Closing, in either case, solely with respect to any matters occurring on or prior to the Closing, will survive the Business Combination and will continue in full force and effect from and after the Closing for a period of six years and (ii) ListCo agreed to, and agreed to cause the surviving SPAC entity to, perform and discharge all obligations to provide such indemnity and exculpation during such six-year period in each case to the maximum extent permitted by applicable law. To the maximum extent permitted by applicable law, during such six-year period, ListCo agreed to, and agreed to cause the surviving SPAC entity to, advance expenses in connection with such indemnification as provided in GGIs governing documents. The indemnification and liability limitation or exculpation provisions of GGIs governing documents will not, during such six-year period, be amended, repealed or otherwise modified after the Closing in any manner that would adversely affect the rights thereunder of individuals who, as of the Closing or at any time prior to the Closing, were directors or officers of GGI (the GGI D&O Persons) to be so indemnified, have their liability limited or be exculpated with respect to any matters occurring on or prior to Closing and relating to the fact that such GGI D&O Person was a director or officer of GGI prior to the Closing, unless such amendment, repeal or other modification is required by applicable law.
ListCo will not have any obligation under Section 6.03 of the Business Combination Agreement (GG D&O Indemnification and Insurance) to any GGI D&O Person when and if a court of competent jurisdiction will ultimately determine (and such determination will have become final and non-appealable) that the indemnification of such GGI D&O Person in the manner contemplated hereby is prohibited by applicable law.
Parent agreed to cause ListCo to, and ListCo agreed to, purchase, at or prior to the Closing, and maintain, or cause to be maintained, in effect for a period of six years after the Closing Date, without any lapse in coverage, a tail policy providing directors and officers liability insurance coverage for the benefit of those persons who are covered by any comparable insurance policies of GGI as of the date of the Business Combination Agreement with respect to matters occurring on or prior to the Closing. Such tail policy will provide coverage on terms (with respect to coverage and amount) that are substantially the same as (and no less favorable in the aggregate to the insured than) the coverage provided under the GGIs directors and officers liability insurance policies as of the date of the Business Combination Agreement; provided that ListCo will not be obligated to pay a premium for such tail policy in excess of 300% of the most recent annual premium paid by GGI prior to the date of the Business Combination Agreement and, in such event, ListCo agreed to purchase the maximum coverage available for 300% of the most recent annual premium paid by GGI prior to the date of the Business Combination Agreement.
If ListCo or any of its respective successors or assigns (i) will merge or consolidate with or merge into any other corporation or entity and will not be the surviving or continuing corporation or entity of such consolidation or merger or (ii) will transfer all or substantially all of their respective properties and assets as an entity in one or a series of related transactions to any person, then in each such case, proper provisions will be made so that the successors or assigns of ListCo will assume all of the obligations set forth in Section 6.03 of the Business Combination Agreement.
The GGI D&O Persons entitled to the indemnification, liability limitation, exculpation and insurance set forth in Section 6.03 of the Business Combination Agreement are intended to be third-party beneficiaries of such section of the Business Combination Agreement.
Company Party D&O Indemnification and Insurance. Each party agreed that (i) all rights to indemnification or exculpation now existing in favor of the directors, officers, members, managers and employees of any Company Party (as defined in the Business Combination Agreement), as provided in such Company Partys governing documents or otherwise in effect as of the date of the Closing, in either case, solely with respect to any matters occurring on or prior to the Closing, will survive the Business Combination and will continue in full force and effect from and after the Closing for a period of six years and (ii) ListCo agreed to cause each other Company Party to perform and discharge all obligations to provide such indemnity and exculpation during such six-year period in each case to the maximum extent permitted by applicable law. To the maximum extent permitted by applicable law, during such six-year period, ListCo agreed to cause each Company Party to advance expenses in
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connection with such indemnification as provided in the Company Parties Governing Documents. The indemnification and liability limitation or exculpation provisions of the Company Parties Governing Documents will not, during such six-year period, be amended, repealed or otherwise modified after the Closing in any manner that would adversely affect the rights thereunder of individuals who, as of the Closing or at any time prior to the Closing, were directors or officers of any Company Party (the Company Party D&O Persons) to be so indemnified, have their liability limited or be exculpated with respect to any matters occurring on or prior to Closing and relating to the fact that such Company Party D&O Person was a director or officer of any Company Party prior to the Closing, unless such amendment, repeal or other modification is required by applicable law.
ListCo will not have any obligation under Section 6.04 of the Business Combination Agreement (Company Party D&O Indemnification and Insurance) to any Company Party D&O Person when and if a court of competent jurisdiction will ultimately determine (and such determination will have become final and non-appealable) that the indemnification of such Company Party D&O Person in the manner contemplated hereby is prohibited by applicable law.
Parent agreed to cause ListCo to, and ListCo agreed to, purchase, at or prior to the Closing, and maintain, or cause to be maintained, in effect for a period of six years after the Closing Date, without any lapse in coverage, a tail policy providing directors and officers liability, employment practices liability and fiduciary liability insurance coverage for the benefit of those persons who are covered by any comparable insurance policies of any Company Party as of the date of the Business Combination Agreement with respect to matters occurring on or prior to the Closing. Such tail policy will provide coverage on terms (with respect to coverage and amount) that are substantially the same as (and no less favorable in the aggregate to the insureds than) the coverage provided under the Company Parties directors and officers liability, employment practices liability and fiduciary liability insurance policies as of the date of the Business Combination Agreement; provided that ListCo will not be obligated to pay a premium for such tail policy in excess of 300% of the most recent annual premium paid by such Company Party prior to the date of the Business Combination Agreement and, in such event, the Company Parties agreed to purchase the maximum coverage available for 300% of the most recent annual premium paid by such Company Party prior to the date of the Business Combination Agreement.
If ListCo or any of its respective successors or assigns (i) will merge or consolidate with or merge into any other corporation or entity and will not be the surviving or continuing corporation or entity of such consolidation or merger or (ii) will transfer all or substantially all of their respective properties and assets as an entity in one or a series of related transactions to any person, then in each such case, proper provisions will be made so that the successors or assigns of ListCo will assume all of the obligations set forth in Section 6.04 of the Business Combination Agreement.
The Company Party D&O Persons entitled to the indemnification, liability limitation, exculpation and insurance set forth in Section 6.03 of the Business Combination Agreement are intended to be third-party beneficiaries of such section of the Business Combination Agreement.
Other Covenants and Agreements. The Business Combination Agreement contains other covenants and agreements to which the parties have agreed, including covenants related to:
| Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub waiving claims to the Trust Account in the event that the Business Combination does not consummate; |
| Parent delivering Polestar Automotive Holding Limited financial statements required to be included in this proxy statement/prospectus; |
| Parent using reasonable best efforts to deliver to GGI, within 24 hours after the execution and delivery of the Business Combination Agreement, the Required Parent Shareholder Approval; |
| Parent completing (and causing ListCo, Polestar and their respective subsidiaries to complete) the Pre-Closing Reorganization; |
| Parent and ListCo approving and adopting the Equity Plan and the Employee Stock Purchase Plan; |
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| Parent taking all actions necessary to cause certain agreements to be terminated; |
| Parent using commercially reasonable efforts to liquidate voluntarily in the 2022 calendar year and distribute all of its ListCo stock to the Parent Shareholders; |
| ListCo undertaking to (and Parent undertaking to cause ListCo to) re-register as a public company under the UK Companies Act 2006 prior to the Closing; |
| ListCo undertaking to (and Parent undertaking to cause ListCo to) seek confirmation prior to the Closing from the UK Takeover Panel that the UK Takeover Code will not apply to ListCo with effect from the Closing; |
| ListCo complying with the requirements of section 593 of the UK Companies Act 2006 if the Warrant Amendment Proposal is approved (and providing GGI with reasonable evidence of such compliance); |
| GGI promptly notifying Parent of any shareholder litigation related to the Business Combination; |
| GGI keeping current and timely filing all reports required to be filed or furnished with the SEC and otherwise complying in all material respects with its reporting obligations under applicable securities laws; |
| GGI making certain disbursements from the Trust Account in limited circumstances set forth in the trust agreement; |
| GGI, Parent, Polestar Singapore, Polestar Sweden or ListCo not amending or modifying the terms of the PIPE Subscription Agreements; |
| GGI reasonably cooperating with ListCo and using reasonable best efforts to de-list units of GGI from the Nasdaq and de-registering such securities under the Exchange Act; |
| Parent and Polestar agreeing to take all actions necessary to cause certain appointments to the board of Polestar; |
| Polestar and GGI cooperating on the preparation and efforts to make effective this proxy statement/prospectus; |
| Polestar and GGI paying its transfer, documentary, sales, use, stamp, registration, VAT or other similar taxes incurred in connection with the Business Combination; |
| Polestar and GGI providing access, subject to certain specified restrictions and conditions, to the other party and its representatives reasonable access to Polestars and GGIs (as applicable) and its subsidiaries properties, records, systems, contracts and commitments; |
| confidentiality and publicity relating to the Business Combination Agreement and the transactions contemplated thereby; and |
| each of Polestar and GGI to cooperate on executing further documents and performing further acts as reasonably necessary to give full effect to the Business Combination. |
No Survival of Representations, Warranties and Covenants; No Indemnification
None of the representations, warranties, covenants, obligations or other agreements in the Business Combination Agreement or in any certificate, statement or instrument delivered pursuant to the Business Combination Agreement, including any rights arising out of any breach of such representations, warranties, covenants, obligations, agreements and other provisions, will survive the Closing, and all such representations, warranties, covenants, obligations or other agreements, including all such rights, will terminate and expire upon the occurrence of the effective time of the Merger (and there will be no liability after the closing of the Merger in respect thereof), except for (a) those covenants and agreements contained in the Business Combination Agreement that by their terms expressly apply in whole or in part after the closing of the Merger and then only with respect to any breaches occurring after the Closing and (b) the miscellaneous provisions of the Business
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Combination Agreement. Accordingly, Polestar Stockholders will not have any indemnification obligations pursuant to the Business Combination Agreement.
Equity Plans
Under the Business Combination Agreement, prior to the Closing (but after the completion of the Pre-Closing Reorganization), the ListCo Board and the Parent Board will approve and adopt the Equity Plan in the form attached to the Business Combination Agreement as Exhibit G, with such changes as may be agreed in writing between ListCo, GGI and Parent (the Equity Plan). The Equity Plan provides, among other things, a reserve of 10,000,000 Class A ADSs for issuance and provides that the number of Class A ADSs reserved for issuance thereunder will automatically increase annually on January 1 of each calendar year during the term of the Equity Plan (such date, the Evergreen Commencement Date) and ending on and including the ninth anniversary of the Evergreen Commencement Date, in an amount equal to the lesser of (i) 0.5% of the aggregate number of Post-Combination Company Shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of Post-Combination Company Shares as determined by the ListCo Board. As soon as reasonably practicable and permitted following the Closing Date and subject to stockholder approval of the Equity Plan, the Post-Combination Company will take commercially reasonable efforts to file an effective registration statement on Form S-8 (or other applicable form) with respect to the Class A ADSs issuable under the Equity Plan, and the Post-Combination Company will use commercially reasonable efforts to maintain the effectiveness of such registration statement(s) (and maintain the current status of the prospectus or prospectuses contained therein) for so long as awards granted pursuant to the Equity Plan remain outstanding.
Additionally, pursuant to the Business Combination Agreement, prior to the Closing (but after the completion of the Pre-Closing Reorganization), the ListCo Board and the Parent Board will approve and adopt an employee stock purchase plan in the form attached to the Business Combination Agreement as Exhibit H, with changes as may be agreed in writing between ListCo, GGI and Parent and subject to stockholder approval (the Employee Stock Purchase Plan). The Employee Stock Purchase Plan provides, among other things, a reserve of 2,000,000 Class A ADSs for issuance thereunder and provides that the number of Class A ADSs reserved for issuance thereunder will automatically increase annually on the first day of each fiscal year beginning with the Evergreen Commencement Date in an amount equal to the lesser of (i) 0.1% of the aggregate number of Post-Combination Company Shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of Post-Combination Company Shares as determined by the ListCo Board.
Termination
Mutual Termination Rights. The Business Combination Agreement may be terminated and the transactions contemplated thereby abandoned:
| by written consent of Parent and GGI; |
| by Parent or GGI, if the closing has not occurred by June 24, 2022 (provided that there has been no breach of the terminating party that is the primary cause of the failure to consummate prior to such date); |
| by Parent or GGI, if any governmental authority issues any law or order or has taken any other action enjoining, restraining or otherwise prohibiting the transactions (provided that there has been no breach of the terminating party that is the primary cause of such law or order); or |
| by Parent or GGI, if the Stockholder Special Meeting has been held (including any adjournment or postponement thereof) and has concluded, and the pre-Closing GGI Stockholders have duly voted and the Business Combination Proposal was not approved. |
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Parent Termination Right. The Business Combination Agreement may be terminated and the transactions contemplated thereby abandoned:
| by written notice to GGI from Parent if any representation and warranty of GGI is not true and correct or if GGI failed to perform any covenant or agreement on the part of GGI set forth in the Business Combination Agreement, such that the conditions described in the first two bullet points under the heading Conditions to Closing of the Business Combination; Conditions to Parent, Polestar Singapore, Polestar Sweden, ListCo or Merger Subs Obligations would not be satisfied at the closing and such breach or breaches causing such representations or warranties not to be true and correct, or the failures to perform any covenant or agreement, as applicable, is (or are) not cured or cannot be cured prior to the earlier of (i) 30 days after written notice thereof is delivered to GGI by Parent and (ii) June 24, 2022; provided, however, that none of Parent, Polestar Singapore, Polestar Sweden, ListCo or Merger Sub are then in material breach of the Business Combination Agreement. |
GGI Termination Rights. The Business Combination Agreement may be terminated and the transactions contemplated thereby abandoned:
| by written notice to Parent from GGI if any representation and warranty of Parent, Polestar Singapore, Polestar Sweden, ListCo or Merger Sub is not true and correct or if Parent, Polestar Singapore, Polestar Sweden, ListCo or Merger Sub have failed to perform any covenant or agreement on the part of Parent, Polestar Singapore, Polestar Sweden, ListCo or Merger Sub set forth in the Business Combination Agreement, such that the conditions described in the first two bullet points under the heading Conditions to Closing of the Business Combination; Conditions to GGIs Obligations would not be satisfied at the closing and such breach or breaches causing such representations or warranties not to be true and correct, or the failures to perform any covenant or agreement, as applicable, is (or are) not cured or cannot be cured prior to the earlier of (i) 30 days after written notice thereof is delivered to Parent by GGI and (ii) June 24, 2022; provided, however, that GGI is not then in material breach of the Business Combination Agreement; or |
| by GGI, if the Required Parent Shareholder Approval has not been delivered to GGI within 24 hours after the execution of the Business Combination Agreement. |
Effect of Termination
If the Business Combination Agreement is validly terminated, the Business Combination Agreement will become void without any liability on the part of any of the parties unless either GGI or Parent willfully breaches the Business Combination Agreement. However, the Trust Account claims waiver, confidentiality, access to information, publicity, effect of termination and certain other technical provisions will continue in effect notwithstanding termination of the Business Combination Agreement.
Amendments
The Business Combination Agreement may be amended or modified only by a written agreement in writing executed and delivered by GGI, on the one hand, and Parent, ListCo, Polestar Singapore and Polestar Sweden, on the other hand.
Enforcement
The parties to the Business Combination Agreement agree that they will be entitled to an injunction, specific performance or other equitable relief to prevent breaches of the Business Combination Agreement or any other transaction document and to enforce specifically the terms of provisions thereof, without proof of damages, prior to valid termination of the Business Combination Agreement.
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Stock Exchange Listing
An application will be made by ListCo to have the Class A ADSs that constitute the consideration paid to GGI Stockholders and either the Class C-1 ADSs or ADWs, as applicable, to be approved for listing on Nasdaq. It is a condition to both parties obligation to complete the Business Combination that such approval is obtained.
Expenses
Except as otherwise provided in the Business Combination Agreement, all fees and expenses incurred in connection with the Business Combination Agreement, the other transaction documents and the Business Combination, including the fees and disbursements of counsel, financial advisors and accountants, will be paid by the party incurring such fees or expenses; provided that, for the avoidance of doubt, (a) if the Business Combination Agreement is terminated in accordance with its terms, Parent will pay, or cause to be paid, all unpaid Company Transaction Expenses (as defined in the Business Combination Agreement) and GGI will pay, or cause to be paid, all unpaid GG Transaction Expenses and (b) if the Closing occurs, then ListCo will pay, or cause to be paid, all unpaid GG Transaction Expenses up to an amount equal to $60 million and all unpaid Company Transaction Expenses.
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This section describes the material provisions of certain additional agreements that have been or are to be entered into pursuant to the Business Combination Agreement, which are referred to as the Related Agreements, but does not purport to describe all of the terms thereof. The following summary is qualified in its entirety by reference to the complete text of each of the Related Agreements. Forms of the Subscription Agreement, Registration Rights Agreement, the Registration Rights Agreement Amendment, and Parent Lock-Up Agreement are attached hereto as Annexes F, G, Q and L, respectively. GGI stockholders and other interested parties are urged to read such Related Agreements in their entirety prior to voting on the proposals presented at the Stockholder Special Meeting.
Subscription Agreements
PIPE Subscription Agreements
On September 27, 2021, GGI and ListCo entered into the Initial PIPE Subscription Agreements with the Initial PIPE Investors, pursuant to which the Initial PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of approximately 7.43 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.09 per share in a private placement, for an aggregate amount of approximately $67.5 million.
On December 17, 2021, GGI and ListCo entered into the December PIPE Subscription Agreements with the December PIPE Investors, which include certain affiliates and employees of the GGI Sponsor. Pursuant to the December PIPE Subscription Agreements, the December PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of 14.3 million Post-Combination Company Class A Shares in the form of Class A ADSs for an average price of approximately $9.54 per Class A ADS, for an amount of approximately $136.0 million. On March 24, 2022, GGI and ListCo entered into the March PIPE Subscription Agreements with the March PIPE Investors, which include certain affiliates and employees of the GGI Sponsor. Pursuant to the March PIPE Subscription Agreements, the March PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of 2.8 million Post-Combination Company Class A Shares in the form of Class A ADSs for an average price of approximately $9.57 per Class A ADS, for an amount of approximately $27.2 million. The December PIPE Subscription Agreements and the March PIPE Subscription Agreements are substantially similar to the Initial PIPE Subscription Agreements, except with regard to purchase price.
As a result of the December PIPE Assignment and the March PIPE Assignments, the aggregate investment amount and number of Class A ADSs to be purchased pursuant to the Subscription Agreements remains unchanged.
The issuance of the PIPE Shares pursuant to the PIPE Subscription Agreements is contingent upon, among other customary closing conditions, the substantially concurrent consummation of the Business Combination. Pursuant to the PIPE Subscription Agreements, ListCo agreed to file with the SEC (at ListCos sole cost and expense), within 30 calendar days after the date of Closing, the Resale Registration Statement registering the resale of the PIPE Shares, and to use its commercially reasonable efforts to have the Resale Registration Statement declared effective as soon as practicable after the filing thereof.
Sponsor Subscription Agreement
On September 27, 2021, GGI and ListCo entered into the Sponsor Subscription Agreement with GGI Sponsor, pursuant to which, the GGI Sponsor agreed to purchase an additional 2.15 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.09 per share on the date of Closing, for an aggregate investment of approximately $82.5 million. Pursuant to the Sponsor Subscription Agreement, the GGI
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Sponsor has the right to assign its commitment to purchase the Class A ADSs under the Sponsor Subscription Agreement in advance of the Closing. In connection with the December Sponsor Assignment on December 17, 2021, (i) the GGI Sponsor assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $63.0 million to the December PIPE Investors and (ii) GGI, ListCo and the GGI Sponsor amended and restated the Sponsor Subscription Agreement to reflect the December Sponsor Assignment. In connection with the March Sponsor Assignment on March 24, 2022, (i) the GGI Sponsor further assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $11.4 million to certain investors and (ii) GGI, ListCo and the GGI Sponsor amended the Sponsor Subscription Agreement to reflect the March Sponsor Assignment. As a result, pursuant to the Sponsor Subscription Agreement, Sponsor has agreed to purchase approximately 891,000 Class A ADSs for a purchase price of approximately $9.09 per Class A ADS on the date of Closing, for an aggregate investment of approximately $8.1 million. The Sponsor Subscription Agreement is substantially similar to the Initial PIPE Subscription Agreements, except that the GGI Sponsor has the right to syndicate its commitment to acquire the Class A ADSs to be purchased under the Sponsor Subscription Agreement in advance of the Closing.
Volvo Cars Subscription Agreement
On September 27, 2021, GGI and ListCo entered into the Volvo Cars PIPE Subscription Agreement with Snita, a corporation organized under the laws of Netherlands and a wholly owned indirect subsidiary of Volvo Cars, pursuant to which Snita has agreed to purchase an additional 10 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $10.00 per share on the date of Closing. Pursuant to the Volvo Cars Subscription Agreement, Snita has the right to assign its commitment to purchase the Class A ADSs under the Volvo Cars Subscription Agreement in advance of the Closing. In connection with the December Volvo Assignment on December 17, 2021, (i) Snita assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $73.0 million to purchase the Class A ADSs to the December PIPE Investors and (ii) GGI, ListCo and Snita amended and restated the Volvo Car Subscription Agreement to reflect the December Volvo Assignment. In connection with the March Volvo Assignment on March 24, 2022, (i) Snita further assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $15.8 million to certain investors and (ii) GGI, ListCo and Snita amended the Volvo Cars Subscription Agreement to reflect the March Volvo Assignment. As a result, pursuant to the Volvo Cars Subscription Agreement Snita has agreed to purchase approximately 1.1 million Class A ADSs for a purchase price of $10 per Class A ADS on the date of Closing, for an aggregate investment of approximately $11.2 million. The Volvo Cars Subscription Agreement is substantially similar to the Initial PIPE Subscription Agreements, except with regard to purchase price. Snita may, in accordance with the terms of the Volvo Cars Subscription Agreement, syndicate its commitment to acquire the Class A ADSs to be purchased under the Volvo Cars Subscription Agreement in advance of the Closing.
The foregoing descriptions of the Subscription Agreements do not purport to be complete and are qualified in their entirety by the terms and conditions of the PIPE Subscription Agreements, a form of which is attached hereto as Annex F.
Registration Rights Agreement
On September 27, 2021, ListCo, Parent, the Parent Shareholders, the GGI Sponsor and the independent directors of GGI entered into a Registration Rights Agreement, which was amended by the Registration Rights Agreement Amendment No. 1 to provide for certain administrative changes to reflect the Amendment No. 1 to the Business Combination Agreement and the December PIPE Subscription Agreements and further amended by the Registration Rights Agreement Amendment No. 2 to provide for certain administrative changes to reflect the Amendment No. 2 to the Business Combination Agreement and the March PIPE Subscription Agreements, which provides customary demand and piggyback registration rights. Pursuant to the Registration Rights Agreement, ListCo agreed that, as soon as practicable, and in any event within 30 days after the Closing, ListCo will file with the SEC a shelf registration statement. In addition, ListCo will use its reasonable best efforts to
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have the registration statement declared effective as soon as practicable after the filing thereof, but no later than the 60th day (or the 90th day if the registration statement is reviewed by, and received comments from, the SEC) following the filing deadline, in each case subject to the terms and conditions set forth therein.
The foregoing summary of the Registration Rights Agreement is not complete and is qualified in its entirety by the terms and conditions of the Registration Rights Agreement, a form of which is attached hereto as Annexes G-1, G-2 and G-3.
Parent Lock-Up Agreement
On September 27, 2021, Parent, ListCo and the Parent Shareholders entered into the Parent Lock-Up Agreement, a form of which is attached as Annex L to this proxy statement/prospectus. Pursuant to the Parent Lock-Up Agreement, each Parent Shareholder has, subject to certain exceptions, among other things, agreed not to transfer any equity security of ListCo issued to them pursuant to the Business Combination Agreement or other transaction documents contemplated by the Business Combination Agreement during the period commencing the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein.
Sponsor and Supporting Sponsor Lock-Up Agreement
On September 27, 2021, the GGI Sponsor, GGI, Parent, ListCo and the GGI Initial Stockholders entered into the Sponsor and Supporting Sponsor Lock-Up Agreement, attached as Annexes K-1, K-2 and K-3 to this proxy statement/prospectus.
The Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement provides that GGI Sponsor and GGI Initial Stockholders will agree to, among other things: (i) support and vote in favor of all proposals included in this proxy statement/prospectus; (ii) waive all adjustments to the conversion ratio set forth in the Current GGI Certificate with respect to the GGI Class F Common Stock; (iii) be bound by certain pre-closing transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants; and (iv) not transfer any Class A ADSs for six months post-Closing.
GGI Sponsor also agreed to forfeit up to 1,540,835 shares of GGI Class F Common Stock in connection with the Business Combination.
Warrant Amendment Agreement
In the event that the Warrant Amendment Proposal is not approved, at the Closing, GGI, ListCo and Computershare will enter into the Warrant Amendment Agreement, substantially in the form attached as Annex E to this proxy statement/prospectus. The Warrant Amendment Agreement will amend the Existing Warrant Agreement to provide that at the Effective Time, each GGI Public Warrant and GGI Private Placement Warrant will be assumed by ListCo and be converted into the right to receive one ADW, subject to the terms and conditions set forth therein. In addition, under the Warrant Amendment Agreement, GGI will assign to ListCo all of its rights, interests, and obligations in and under the Existing Warrant Agreement as of the Effective Time, subject to the terms and conditions set forth therein.
Class C Warrant Amendment
In the event that the Warrant Amendment Proposal is approved, at the Closing, GGI, ListCo and Computershare will enter into the Class C Warrant Amendment, substantially in the form attached as Annex D to this proxy statement/prospectus. The Class C Warrant Amendment will amend the Existing Warrant Agreement to provide that, at the Effective Time, (i) each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-1 ADS representing one Post-Combination Company Class C-1
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Share representing the right to acquire one Post-Combination Company Class A ADS (or one Post-Combination Company Class A Share if at the time of exercise ListCo no longer uses the ADR Facility) at an exercise price of $11.50 per Class C-1 ADS, subject to adjustment, terms and limitations as described in the Post-Combination Articles, (ii) each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-2 ADS representing one Post-Combination Company Class C-2 Share representing the right to acquire one Class A ADS (or one Post-Combination Company Class A Share if at the time of exercise ListCo no longer uses the ADR Facility) at an exercise price of $11.50 per Class C-2 ADS, subject to adjustment, terms and limitations described in the Post-Combination Articles and (iii) the Existing Warrant Agreement will be terminated and be of no further force or effect promptly following the Effective Time, in the case of each of clauses (i), (ii) and (iii) above, subject to the terms and conditions set forth therein.
Shareholder Acknowledgment
On September 27, 2021, Parent, the Parent Shareholders and ListCo entered into the Shareholders Acknowledgement Agreement, attached as Annexes M-1 and M-2 to this proxy statement/prospectus, which provides, among other things, that Parent and the Parent shareholders undertake that (i) at Closing, the initial Post-Combination Company Board will include nine directors, a majority of whom will be independent directors, (ii) for a period of three years following the Closing, Parent and the Parent shareholders will not vote in favor of the removal any independent directors of the Post-Combination Company unless at least two independent directors vote in favor of such removal, (iii) for a period of three years following the Closing, Parent and the Parent shareholders will not require the Post-Combination Company to convene a general meeting for the purpose of removing an independent director, and (iv) for three years following the Closing, Parent and the Parent shareholders will not to vote in favor of any amendment to the Post-Combination Articles relating to the composition of the Post-Combination Company Board or the appointment or removal of Post-Combination Company directors. The GGI Sponsor will have third party beneficiary rights to enforce the aforementioned undertakings.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
This section describes the material U.S. federal income tax considerations for beneficial owners of GGI Class A Common Stock and GGI Warrants (collectively, the GGI Securities) (i) of electing to have their GGI Class A Common Stock redeemed for cash if the Merger is completed, (ii) of the adoption of the proposed amendments, (iii) of the Merger, and (iv) of the ownership and disposition of AD securities acquired pursuant to the Merger. This discussion applies only to GGI Securities and AD securities held as capital assets for U.S. federal income tax purposes (generally, property held for investment) and does not discuss all aspects of U.S. federal income taxation that might be relevant to holders in light of their particular circumstances or status, including the Medicare contribution tax on net investment income, or holders who are subject to special rules, including:
| brokers or dealers; |
| traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; |
| tax-exempt organizations, qualified retirement plans, individual retirement accounts or other tax deferred accounts; |
| banks or other financial institutions, underwriters, insurance companies, real estate investment trusts or regulated investment companies; |
| U.S. expatriates or former long-term residents of the United States; |
| persons that own (directly, indirectly, or by attribution) 5% or more (by vote or value) of the GGI Securities, or any class of AD securities; |
| persons holding GGI Securities or AD securities as part of a straddle, hedging or conversion transaction, constructive sale, or other arrangement involving more than one position; |
| U.S. holders (as defined below) whose functional currency is not the U.S. dollar; |
| persons who purchase Post-Combination Company Shares as part of the Subscription Investments or the Volvo Cars Preference Subscription Investment; |
| GGI Initial Stockholders; |
| persons that received GGI Securities or AD securities as compensation for services; or |
| controlled foreign corporations or passive foreign investment companies. |
If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds GGI Securities or AD securities, the tax treatment of a partner in such partnership will depend upon the status of the partner and the activities of the partnership. Partners should consult their tax advisors regarding the U.S. federal income tax treatment of the Business Combination and of holding the GGI Securities or AD securities.
This discussion is based on the Code, its legislative history, existing and proposed Treasury regulations promulgated under the Code (the Treasury Regulations), published guidance by the Internal Revenue Service (the IRS) and court decisions, all as of the date hereof, and does not take into account proposed changes in such tax laws. These laws are subject to change, possibly on a retroactive basis. This discussion is necessarily general and does not address all aspects of U.S. federal income taxation, including the effect of the U.S. federal alternative minimum tax, or U.S. federal estate and gift tax, or any state, local or non-U.S. tax laws to a holder of GGI Securities or AD securities. GGI and Parent have not sought and do not intend to seek any rulings from the IRS regarding the Business Combination. There is no assurance that the IRS will not take positions concerning the tax consequences of the Business Combination that are different from those discussed below, or that any such different positions would not be sustained by a court.
ALL HOLDERS OF GGI SECURITIES SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE MERGER AND CONSIDERATIONS RELATING TO THE OWNERSHIP
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AND DISPOSITION OF AD SECURITIES, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE, AND LOCAL AND NON-U.S. TAX LAWS.
U.S. Federal Income Tax Treatment of ListCo
A corporation generally is considered to be a tax resident for U.S. federal income tax purposes in the jurisdiction of its organization or incorporation. Accordingly, under the generally applicable U.S. federal income tax rules, ListCo, which is incorporated under the laws of the United Kingdom, would be classified as a non-U.S. corporation (and, therefore, not a U.S. tax resident) for U.S. federal income tax purposes. Section 7874 of the Code provides an exception to this general rule (more fully discussed below), under which a non-U.S. incorporated entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes. These rules are complex and there is limited guidance regarding their application.
Under Section 7874 of the Code, a corporation created or organized outside the United States (i.e., a non-U.S. corporation) will nevertheless be treated as a U.S. corporation for U.S. federal income tax purposes (and, therefore, as a U.S. tax resident subject to U.S. federal income tax on its worldwide income) if each of the following three conditions are met: (i) the non-U.S. corporation, directly or indirectly, acquires substantially all of the properties held directly or indirectly by one or more U.S. corporations (including through the acquisition of all of the outstanding shares of a U.S. corporation); (ii) the non-U.S. corporations expanded affiliated group does not have substantial business activities in the non-U.S. corporations country of organization or incorporation and tax residence relative to the expanded affiliated groups worldwide activities (this test is referred to as the substantial business activities test); and (iii) after the acquisition, the percentage of the shares of the non-U.S. acquiring corporation held by former shareholders of the acquired U.S. corporation(s) by reason of holding shares in the U.S. acquired corporation(s) (taking into account the receipt of the non-U.S. corporations shares in exchange for each U.S. corporations shares) as determined for purposes of Section 7874 of the Code (the Section 7874 ownership percentage) is at least 80% (by either vote or value) (this test is referred to as the 80% ownership test and the three-prong test described in clauses (i)(iii) above is referred to as the Section 7874(b) expatriation test).
Further, Section 7874 of the Code can limit the ability of U.S. corporations and their U.S. affiliates acquired by surrogate foreign corporations to utilize certain U.S. tax attributes (including net operating losses and certain tax credits) to offset U.S. taxable income resulting from certain transactions. These limitations will potentially apply if the Section 7874(b) expatriation test would be satisfied if the 80% ownership test were applied by substituting 60% for 80%, in which case the taxable income of the U.S. corporations (and any U.S. person considered to be related to the U.S. corporations pursuant to applicable rules) for any given year, within a period beginning on the first date the U.S. corporations properties were acquired directly or indirectly by the non-U.S. acquiring corporation and ending 10 years after the last date the U.S. corporations properties were acquired, will be no less than that persons inversion gain for that taxable year. A persons inversion gain includes gain from the transfer of shares or any other property (other than property held for sale to customers) and income from the license of any property that is either transferred or licensed as part of the acquisition or after the acquisition to a non-U.S. related person. In general, the effect of this provision is to deny the use of net operating losses, foreign tax credits or other tax attributes to offset the inversion gain. In addition, dividends paid by ListCo would not qualify for qualified dividend income treatment. Further, the Tax Cuts and Jobs Act imposed additional requirements on a U.S. corporation that has failed the substantial business activities test and met the 60% ownership test, including that such U.S. corporation must include, as base erosion payments that may be subject to a minimum tax, any amounts treated as reductions in gross income paid to a related non-U.S. person within the meaning of Section 59A of the Code.
Based upon the terms of the Pre-Closing Reorganization pursuant to the Business Combination Agreement and the Merger, the rules for determining share ownership under Section 7874 of the Code and the Treasury Regulations promulgated thereunder, and certain factual assumptions, Parent currently expects that the Section 7874 ownership percentage should be less than 60% after the Merger. Accordingly, ListCo is not expected to be treated as a U.S. corporation for U.S. federal income tax purposes, dividends paid by ListCo may
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be qualified dividends (subject to the discussion below regarding the passive foreign investment company rules and other applicable requirements under Section 1 of the Code) and the U.S. subsidiaries of ListCo are not expected to be subject to the limitations and other rules described above under Section 7874 of the Code. However, whether the 80% ownership test (or 60% ownership test) has been satisfied must be finally determined after completion of the Merger, by which time there could be adverse changes to the relevant facts and circumstances or adverse rule changes. In addition, the rules for determining ownership under Section 7874 of the Code are complex and unclear.
If ListCo were to be treated as a U.S. corporation for U.S. federal income tax purposes, it could be subject to substantial liability for additional U.S. income taxes, and the gross amount of any dividend payments to its non-U.S. holders (as defined below) could be subject to 30% U.S. withholding tax, depending on the application of any income tax treaty that might apply to reduce the withholding tax. However, if ListCo were to be treated as a U.S. corporation for U.S. federal income tax purposes, dividend payments would generally constitute qualified dividends and be subject to tax at the rates accorded to long-term capital gains. Furthermore, if the IRS were to successfully assert that the 60% ownership test has been met, the ability of the U.S. subsidiaries of ListCo to utilize certain U.S. tax attributes against income or gain recognized pursuant to certain transactions may be limited.
The remainder of this discussion assumes that ListCo will not be treated as a U.S. corporation for U.S. federal income tax purposes, that dividends of ListCo could be eligible to be treated as qualified dividends (if all other requirements are satisfied), and that the U.S. subsidiaries of ListCo will not be subject to the limitations and other rules under Section 7874 of the Code.
American Depositary Shares
Each ADS or ADW represents the right to receive, and to exercise the beneficial ownership interests in, one Post-Combination Company Class A Share, one Post-Combination Company Class C-1 Share, or one Polestar Warrant (as applicable) on deposit with the depositary and/or custodian. An ADS also represents the right to receive, and to exercise the beneficial interests in, any other property received by the depositary or the custodian on behalf of the owner of the ADS but that has not been distributed to the owners of ADSs because of legal restrictions or practical considerations.
The remainder of this discussion assumes that, for U.S. federal income tax purposes, ownership of AD securities will be treated as ownership of the underlying Post-Combination Company Class A Shares, Post-Combination Company Class C Shares, or Polestar Warrants (as applicable).
Class C ADSs
In the event that the Warrant Amendment Proposal is approved, at the Effective Time each GGI Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C ADS (see Warrant Holder Proposal No. 1 The Warrant Amendment Proposal). The U.S. federal income tax treatment of the Class C ADSs is uncertain. It is possible that the Class C ADSs could be treated as stock of ListCo for U.S. federal income tax purposes, or could be treated as warrants exercisable for stock of ListCo. Holders of GGI Warrants should consult their tax advisors regarding the U.S. federal income tax considerations relating to the Class C ADSs.
U.S. Holders
The section applies to you if you are a U.S. holder. For purposes of this discussion, a U.S. holder means a beneficial owner of GGI Securities or AD securities that is, for U.S. federal income tax purposes:
| an individual who is a citizen or resident of the United States; |
| a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
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| an estate whose income is subject to U.S. federal income tax regardless of its source; or |
| a trust if (1) a U.S. court can exercise primary supervision over the trusts administration and one or more U.S. persons are authorized to control all substantial decisions of the trust; or (2) the trust has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. |
Redemption of GGI Common Stock
In the event that a U.S. holder of GGI Common Stock exercises its right to have its GGI Common Stock redeemed pursuant to the redemption provisions described in Special Meeting of GGI StockholdersRedemption Rights, the treatment of the transaction for U.S. federal income tax purposes will depend on whether the redemption qualifies as a sale of such stock pursuant to Section 302 of the Code or whether the U.S. holder will be treated as receiving a corporate distribution. Whether that redemption qualifies for sale treatment will depend largely on the total number of shares of GGI Common Stock treated as held by the U.S. holder (including any stock constructively owned by the U.S. holder as a result of, among other things, owning GGI Warrants or AD securities) relative to all of shares of GGI Common Stock both before and after the redemption and the Merger. The redemption of stock generally will be treated as a sale of the stock (rather than as a corporate distribution) if the redemption is substantially disproportionate with respect to the U.S. holder, results in a complete termination of the U.S. holders interest in GGI or is not essentially equivalent to a dividend with respect to the U.S. holder. These tests are explained more fully below.
In determining whether any of the foregoing tests are satisfied, a U.S. holder takes into account not only stock actually owned by the U.S. holder, but also shares of GGI Common Stock that are constructively owned by such U.S. holder. A U.S. holder may constructively own, in addition to stock owned directly, stock owned by certain related individuals and entities in which the U.S. holder has an interest or that have an interest in such U.S. holder, as well as any stock the U.S. holder has a right to acquire by exercise of an option. In order to meet the substantially disproportionate test, the percentage of GGIs outstanding voting stock actually and constructively owned by the U.S. holder immediately following the redemption of GGI Common Stock (taking into account the Merger) must, among other requirements, be less than 80% of the percentage of GGIs outstanding voting stock actually and constructively owned by the U.S. holder immediately before the redemption. Prior to the Merger, GGI Class A Common Stock might not be treated as voting stock for this purpose, and, consequently, the substantially disproportionate test may not be applicable. There will be a complete termination of a U.S. holders interest if either all the shares of GGI Common Stock actually and constructively owned by the U.S. holder are redeemed (taking into account the Merger) or all the shares of GGI Common Stock actually owned by the U.S. holder are redeemed (taking into account the Merger) and the U.S. holder is eligible to waive, and effectively waives in accordance with specific rules, the attribution of stock owned by certain family members and the U.S. holder does not constructively own any other stock. The redemption of the GGI Common Stock will not be essentially equivalent to a dividend if a U.S. holders redemption results in a meaningful reduction of the U.S. holders proportionate interest in GGI. Whether the redemption will result in a meaningful reduction in a U.S. holders proportionate interest in GGI will depend on the particular facts and circumstances. However, the IRS has indicated in a published ruling that even a small reduction in the proportionate interest of a small minority stockholder in a publicly-held corporation who exercises no control over corporate affairs may constitute such a meaningful reduction.
If the redemption qualifies as a sale of stock by the U.S. holder under Section 302 of the Code, the U.S. holder generally will be required to recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received and the tax basis of the shares of GGI Common Stock redeemed. Such gain or loss should be treated as capital gain or loss if such shares were held as a capital asset on the date of the redemption. Any such capital gain or loss will generally be long-term capital gain or loss if the U.S. holders holding period for such GGI Common Stock exceeds one year. Long-term capital gains recognized by non-corporate U.S. holders may be taxed at reduced rates. It is unclear, however, whether the redemption rights of a U.S. holder with respect to the GGI Common Stock may suspend the running of the applicable holding period for this purpose. If the running of the holding period is suspended, then non-corporate U.S. holders may not be able to satisfy the
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one year holding period requirement for long-term capital gain treatment, in which case any gain on a sale or taxable disposition of the GGI Common Stock would be subject to short-term capital gain treatment and would be taxed at regular ordinary income tax rates. The deductibility of capital losses is subject to limitations. A U.S. holders tax basis in such holders shares of GGI Common Stock generally will equal the cost of such shares. A U.S. holder that purchased GGI units would have been required to allocate the cost between the shares of GGI Common Stock and the warrants comprising the units based on their relative fair market values at the time of the purchase.
If the redemption does not qualify as a sale of stock under Section 302 of the Code, then the U.S. holder will be treated as receiving a corporate distribution. Such distribution generally will constitute a dividend for U.S. federal income tax purposes to the extent paid from current or accumulated earnings and profits of GGI, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. holders adjusted tax basis in such U.S. holders GGI Common Stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the GGI Common Stock. After the application of the foregoing rules, any remaining tax basis of the U.S. holder in the redeemed GGI Common Stock will be added to the U.S. holders adjusted tax basis in its remaining stock, or, to the basis of stock constructively owned by such holder if the stock actually owned by the holder is completely redeemed.
Dividends deemed paid by GGI to a U.S. holder that is a taxable corporation generally will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions, and provided certain holding period requirements are met, dividends deemed paid by GGI to a non-corporate U.S. holder generally will constitute qualified dividends that will be subject to tax at the rates accorded to long-term capital gains. It is unclear whether the redemption rights with respect to the GGI Common Stock described in this proxy statement/prospectus may prevent a U.S. holder from satisfying the applicable holding period requirements with respect to the dividends received deduction or the preferential tax rate on qualified dividend income, as the case may be.
A U.S. holder should consult its own tax advisors as to the tax consequences to it of a redemption.
Adoption of the Proposed Amendments
In the event that the Warrant Amendment Proposal is approved, U.S. holders of GGI Warrants should be treated as having received new warrants of GGI in exchange for their GGI Warrants in a tax-free recapitalization under Section 368 of the Code in which no gain or loss will be recognized. U.S. holders of GGI Warrants should have the same tax basis and holding period in the new warrants of GGI received as in their GGI Warrants exchanged therefor.
The Merger
The parties to the Merger intend that the Merger, taken together with certain related transactions, qualify as a transaction described under Section 351 of the Code, and, as discussed further below, not subject the GGI Public Stockholders to U.S. federal income tax under Section 367 of the Code (subject to entry into gain recognition agreements by any such stockholders required to enter into such agreements to preserve tax-free treatment under Section 367 of the Code) (the Intended Tax Treatment). Based upon customary assumptions and representations made by Parent and GGI, as well as certain covenants and undertakings of Parent and GGI, Weil, GGIs tax counsel, is currently of the opinion that the Merger should qualify for the Intended Tax Treatment. However, the closing of the Merger is not conditioned upon the receipt of an opinion of counsel regarding the U.S. federal income tax treatment of the Merger, and neither GGI nor Parent intends to request a ruling from the IRS regarding the U.S. federal income tax consequences of the Merger. If any of the assumptions, representations, covenants or undertakings by Parent or GGI is incorrect, incomplete or inaccurate or is violated, the accuracy of the opinion may be affected and the U.S. federal income tax consequences of the Merger could differ from those described herein. Further, the qualification of the Merger for the Intended Tax Treatment
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depends on numerous facts and circumstances, some of which may change between the date of this proxy statement/prospectus and the closing of the Merger, and cause the opinion to no longer be in effect. The opinion is given only as of the date hereof, and is not binding on the IRS or any court. No assurance can be given that the IRS will not challenge the conclusions in the opinion, or that a court would not sustain such a challenge.
Assuming that the Merger qualifies for the Intended Tax Treatment, a U.S. holder that exchanges its GGI Common Stock in the Merger for Class A ADSs generally should not recognize any gain or loss on such exchange. In such case, the aggregate adjusted tax basis of the Class A ADSs received by a U.S. holder in the Merger should be equal to the adjusted tax basis of the GGI Common Stock surrendered in the Merger in exchange therefor. The holding period of the Class A ADSs should include the holding period of the GGI Common Stock surrendered in the Merger in exchange therefor.
To the extent the Merger does not qualify under Section 351 (or any other tax-deferral provision) of the Code, and subject to the discussion below regarding the conversion of GGI Warrants, then a GGI Public Stockholder that is a U.S. holder generally would recognize gain or loss, if any, in an amount equal to the difference, if any, between (i) the fair market value of the Class A ADSs received (and, if such U.S. holder is also surrendering GGI Warrants, any Class C ADSs in the event that the Warrant Amendment Proposal is approved, or any ADWs in the event that the Warrant Amendment Proposal is not approved) and (ii) such U.S. holders adjusted tax basis in the GGI Common Stock (and, if such U.S. holder is also surrendering GGI Warrants, any such GGI Warrants) exchanged therefor. Any such gain or loss so recognized would be capital gain or loss, and would be long-term capital gain or loss only if such U.S. holders holding period for the GGI Common Stock exceeds one year at the time of the Merger. Long-term capital gains of non-corporate U.S. holders (including individuals) are currently eligible for preferential U.S. federal income tax rates. The deductibility of capital losses is subject to limitations. A U.S. holders holding period in the Class A ADSs (and the Class C ADSs or ADWs, if any, as applicable) received in the Merger would not include the holding period for the GGI Common Stock (and the GGI Warrants, if any) exchanged therefor. As discussed further below, to the extent that the Merger does not qualify for tax-deferral solely as a result of the application of Section 367 of the Code, a GGI Public Stockholder that is a U.S. holder generally would recognize gain, but not loss.
The appropriate U.S. federal income tax treatment of the disposition of GGI Warrants in connection with the Merger is uncertain. If the Warrant Amendment Proposal is not approved, it is possible that a U.S. holder of GGI Warrants could be treated as exchanging such GGI Warrants for new warrants. If so treated, a U.S. holder could be required to recognize gain or loss in such deemed exchange in an amount equal to the difference between the fair market value of the ADWs held by such U.S. holder immediately following the Merger and the adjusted tax basis of the GGI Warrants held by such U.S. holder immediately prior to the Merger. Alternatively, it is also possible that a U.S. holder of GGI Warrants could be treated as transferring its GGI Warrants and shares of GGI Common Stock to ListCo for ADWs and Class A ADSs in an exchange governed by Section 351 of the Code. If so treated, a U.S. holder should be required to recognize gain (but not loss) in an amount equal to the lesser of (i) the amount of gain realized by such holder (generally, the excess of (x) the sum of the fair market values of the ADWs treated as received by such holder and the Class A ADSs received by such holder over (y) such holders aggregate adjusted tax basis in the GGI Warrants and GGI Common Stock treated as having been exchanged therefor) and (ii) the fair market value of the ADWs treated as having been received by such holder in such exchange. However, if the deemed transfer of GGI Warrants also qualifies as part of a reorganization within the meaning of Section 368 of the Code, subject to Section 367(a) of the Code as discussed below, a U.S. holder of GGI Warrants generally should not recognize any gain or loss on such deemed transfer of GGI Warrants, and such U.S. holders basis in the ADWs deemed received should be equal to the U.S. holders basis in its GGI Warrants deemed transferred. The requirements for qualification of the Merger as a reorganization under Section 368 of the Code are more stringent in certain respects than the requirements for qualification as an exchange under Section 351 of the Code. While not free from doubt, the parties to the Merger do not intend to report the exchange of GGI Warrants for ADWs as qualifying as part of a reorganization within the meaning of Section 368 of the Code.
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If the Warrant Amendment Proposal is approved, and if the Class C ADSs are treated as stock for U.S. federal income tax purposes, a U.S. holder of GGI Warrants should be treated as having exchanged its GGI Warrants in the Merger for stock of ListCo, and should be treated similarly to a U.S. holder of GGI Common Stock, as discussed above. If the Class C ADSs are not treated as stock for U.S. federal income tax purposes, then the conversion of GGI Warrants to Class C ADSs should be treated in the same manner as the conversion of GGI Warrants to ADWs, as described in the immediately preceding paragraph.
Section 367(a) of the Code and the Treasury Regulations promulgated thereunder generally require a U.S. holder of stock or securities in a U.S. corporation to recognize gain (but not loss) when such stock or securities are exchanged for stock of a non-U.S. corporation in an exchange that would otherwise qualify for nonrecognition treatment, unless certain conditions are met. U.S. holders of GGI Common Stock will be deemed to transfer shares of such stock to ListCo in exchange for Class A ADSs (and, in the event that the Warrant Amendment Proposal is approved, U.S. holders of GGI Warrants will be deemed to transfer GGI Warrants to ListCo in exchange for Class C ADSs, if the Class C ADSs are treated as stock for U.S. federal income tax purposes), and Section 367(a) of the Code would require gain (but not loss) recognition by such stockholders unless each of the following conditions is met: (i) the U.S. corporation complies with certain reporting requirements; (ii) no more than 50% of both the total voting power and the total value of the stock of ListCo is received in the exchange, in the aggregate, by U.S. transferors (as defined in the Treasury Regulations), computed by taking into account direct, indirect and constructive ownership; (iii) no more than 50% of each of the total voting power and the total value of the stock of ListCo is owned, in the aggregate, immediately after the exchange by U.S. persons (as defined in the Treasury Regulations) that are officers, directors or five-percent target shareholders of GGI (as defined in the Treasury Regulations), computed by taking into account direct, indirect and constructive ownership; (iv) either (A) the U.S. holder is not a five-percent transferee shareholder of ListCo (as defined in the Treasury Regulations) or (B) the U.S. holder is a five-percent transferee shareholder of ListCo and enters into an agreement with the IRS to recognize gain on the transferred GGI Common Stock under certain circumstances; and (v) the active trade or business test as defined in Treasury Regulation Section 1.367(a)-3(c)(3) is satisfied. The active trade or business test generally requires (A) ListCo or any qualified subsidiary of ListCo to be engaged in an active trade or business outside of the United States for the 36-month period immediately before the transfer and neither the transferors nor ListCo to have an intention to substantially dispose of or discontinue such trade or business and (B) the fair market value of ListCo to be at least equal to the fair market value of GGI, as specifically determined for purposes of Section 367 of the Code, at the time of the transfer.
It is currently expected that conditions (i), (ii), (iii) and (v) above will be met. As a result, the parties to the Merger do not expect Section 367(a) of the Code to apply with respect to the exchange of GGI Common Stock for the Class A ADSs (or the exchange of GGI Warrants for Class C ADSs, in the event that the Warrant Amendment Proposal is approved and the Class C ADSs are treated as stock for U.S. federal income tax purposes) (subject to entry into gain recognition agreements by any five-percent transferee shareholder of ListCo required to enter into such an agreement to preserve tax-free treatment under Section 367 of the Code). However, U.S. holders are cautioned that the potential application of Section 367(a) of the Code to the Merger is complex and depends on factors that cannot be determined until the closing of the Merger and upon the interpretation of legal authorities and facts relating to the Business Combination. U.S. holders should consult with their own tax advisors regarding the potential application of Section 367(a) of the Code in their particular situation.
To the extent that a U.S. holder of GGI Common Stock (and a U.S. holder of GGI Warrants, in the event that the Warrant Amendment Proposal is approved) is required to recognize gain under Section 367(a) of the Code for any of the foregoing reasons, such U.S. holder would recognize gain, if any, in the Merger in an amount equal to the excess of (i) the sum of the fair market value of the Class A ADSs (and, in the case of a U.S. holder of GGI Warrants, the fair market value of the Class C ADSs) received by such holder, over (ii) such holders adjusted tax basis in the GGI Common Stock (and GGI Warrants, if any) exchanged therefor. Any such gain would be capital gain, and generally would be long-term capital gain if the U.S. holders holding period for the GGI Common Stock (and GGI Warrants, if any) exceeds one year at the time of the Merger.
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Distributions on Class A ADSs
Subject to the discussion below under Passive Foreign Investment Company Rules, the gross amount of any distribution on Class A ADSs generally will be taxable to a U.S. holder as ordinary dividend income on the date such distribution is actually or constructively received, but only to the extent that the distribution is paid out of ListCos current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because ListCo does not maintain, nor is it required to maintain, calculations of its earnings and profits under U.S. federal income tax principles, it is currently expected that any distributions generally will be reported to U.S. Holders as dividends. Any such dividends generally will not be eligible for the dividends received deduction allowed to corporations in respect of dividends received from other U.S. corporations.
With respect to non-corporate U.S. holders, dividends will be taxed at the lower applicable long-term capital gains rate (see Sale, Exchange, Redemption or Other Taxable Disposition of AD securities below) if Class A ADSs are readily tradable on an established securities market in the United States (which they will be if the Class A ADSs are traded on the Nasdaq) and certain other requirements are met, including that ListCo is not classified as a passive foreign investment company during the taxable year in which the dividend is paid or the preceding taxable year. There can be no assurance that Class A ADSs will be considered readily tradable on an established securities market in future years. U.S. holders should consult their own tax advisors regarding the potential availability of the lower rate for any dividends paid with respect to Class A ADSs.
Sale, Exchange, Redemption or Other Taxable Disposition of AD securities
Subject to the discussion below under Passive Foreign Investment Company Rules, a U.S. holder generally will recognize gain or loss on any sale, exchange, redemption (subject to the discussion below) or other taxable disposition of AD securities in an amount equal to the difference between (i) the amount realized on the disposition and (ii) such U.S. holders adjusted tax basis in such securities. Any gain or loss recognized by a U.S. holder on a taxable disposition of AD securities generally will be capital gain or loss and will be long-term capital gain or loss if the holders holding period in such shares and/or warrants exceeds one year at the time of the disposition. Preferential tax rates may apply to long-term capital gains of non-corporate U.S. holders (including individuals). The deductibility of capital losses is subject to limitations. Any gain or loss recognized by a U.S. holder on the sale or exchange of AD securities generally will be treated as U.S. source gain or loss. In the case of a redemption of Class A ADSs, or, if treated as stock for U.S. federal income tax purposes, Class C ADSs, such redemption will be subject to Section 302 of the Code as described above under Redemption of GGI Common Stock.
Exercise or Lapse of an ADW
In the event that the Warrant Amendment Proposal is not approved and GGI Warrants are exchanged for ADWs, and subject to the PFIC rules discussed below, and except as discussed below with respect to the cashless exercise of an ADW, a U.S. holder generally will not recognize gain or loss upon the exercise of an ADW for cash. A U.S. holders tax basis in a Class A ADS received upon exercise of an ADW generally should be an amount equal to the sum of (i) the U.S. holders tax basis in the ADW exchanged therefor and (ii) the exercise price. The U.S. holders holding period for a Class A ADS received upon exercise of an ADW will begin on the date following the date of exercise (or possibly the date of exercise) of the ADW and will not include the period during which the U.S. holder held the ADW. If an ADW is allowed to lapse unexercised, a U.S. holder generally will recognize a capital loss equal to such holders tax basis in the ADW.
The tax consequences of a cashless exercise of an ADW are not clear under current U.S. federal income tax law. A cashless exercise may be tax-deferred, either because the exercise is not a realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either tax-deferred situation, a U.S. holders basis in the Class A ADSs received would equal the holders basis in the ADWs exercised therefor. If the cashless exercise were treated as not being a realization event, it is unclear whether a U.S. holders holding period for the Class A ADSs would be treated as commencing on the date of exercise of the warrants or the day
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following the date of exercise of the warrants. If the cashless exercise were treated as a recapitalization, the holding period of the Class A ADSs would include the holding period of the ADWs exercised therefor.
It is also possible that a cashless exercise of an ADW could be treated in part as a taxable exchange in which gain or loss would be recognized. In such event, a U.S. holder would recognize gain or loss with respect to the portion of the exercised ADWs treated as surrendered to pay the exercise price of the ADWs (the surrendered warrants). The U.S. holder would recognize capital gain or loss with respect to the surrendered warrants in an amount generally equal to the difference between (i) the fair market value of the ADWs deemed surrendered and (ii) the U.S. holders tax basis in the surrendered warrants. In this case, a U.S. holders tax basis in the Class A ADSs received would equal the U.S. holders tax basis in the ADWs exercised (meaning, the ADWs disposed of by the U.S. holder in the cashless exercise, other than the surrendered warrants) and the exercise price of such ADWs. It is unclear whether a U.S. holders holding period for the Class A ADSs would commence on the date of exercise of the warrants or the day following the date of exercise of the warrants.
Due to the absence of authority on the U.S. federal income tax treatment of a cashless exercise of warrants, there can be no assurance which, if any, of the alternative tax consequences and holding periods described above would be approved by the IRS or a court of law. Accordingly, U.S. holders should consult their tax advisors regarding the tax consequences of a cashless exercise of ADWs.
Conversion of a Class C ADS
In the event that the Warrant Amendment Proposal is approved, and the Class C ADSs are not treated as stock for U.S. federal income tax purposes, the U.S. federal income tax treatment of the conversion of a Class C ADS to a Class A ADS will generally be the same as the exercise of an ADW, as described in the preceding section Exercise or Lapse of an ADW.
In the event that the Warrant Amendment Proposal is approved, and the Class C ADSs are treated as stock for U.S. federal income tax purposes, the U.S. federal income tax treatment of the conversion of the Class C ADSs to Class A ADSs is unclear. A U.S. holder may be treated as in part exchanging the converted Class C ADSs for Class A ADSs, and in part exercising such Class C ADSs. In this case, a U.S. holder generally will not recognize gain or loss upon the conversion of a Class C ADS to a Class A ADS and would generally bifurcate its holding period in the Class A ADSs received upon conversion of the Class C ADSs, with a portion of the holding period of the Class A ADSs including the holding period of the Class C ADSs converted thereto, and a portion of the holding period of the Class C ADSs beginning on the date following the conversion. The ratio of such portions should be equal to the ratio of the fair market value of the converted Class C ADSs to the amount of the conversion price. A U.S. holders tax basis in a Class A ADS received upon conversion of a Class C ADS generally should be an amount equal to the sum of (i) the U.S. holders tax basis in the Class C ADS exchanged therefor and (ii) the conversion price. In the event that a Class C ADS is not converted to a Class A ADS prior to the applicable expiration date (a conversion expiration), a U.S. holder may be able to recognize a capital loss equal to such holders tax basis in such Class C ADS.
Possible Constructive Distributions
The terms of each ADW and Class C ADS provide for an adjustment to the number of Class A ADSs for which an ADW or Class C ADS may be exercised or converted, or to the exercise or conversion price of an ADW or Class C ADS in certain events, as discussed in the section of this proxy statement/prospectus captioned Description of ListCos Securities. An adjustment which has the effect of preventing dilution generally is not taxable. A U.S. holder of an ADW or Class C ADS would, however, be treated as receiving a constructive distribution from ListCo if, for example, the adjustment increases the holders proportionate interest in ListCos assets or earnings and profits (e.g., through an increase in the number of the Class A ADSs that would be obtained upon exercise or conversion) as a result of a distribution of cash to the holders of ListCo Shares which is taxable to the U.S. holders of such shares as described under Distributions on Post-Combination Company Shares above. Such constructive distributions would be subject to tax as described under that section in the
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same manner as if the U.S. holder received a cash distribution from ListCo equal to the fair market value of such increased interest.
Passive Foreign Investment Company Rules
The treatment of U.S. holders of the AD securities could be materially different from that described above if ListCo is treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. A PFIC is any non-U.S. corporation with respect to which either: (i) 75% or more of the gross income for a taxable year constitutes passive income for purposes of the PFIC rules, or (ii) 50% or more of such non-U.S. corporations assets in any taxable year (generally based on the quarterly average of the value of its assets during such year) is attributable to assets, including cash, that produce passive income or are held for the production of passive income. Passive income generally includes dividends, interest, royalties and certain rents. The determination of whether a non-U.S. corporation is a PFIC is based upon the composition of such non-U.S. corporations income and assets (including, among others, its proportionate share of the income and assets of any other corporation in which it owns, directly or indirectly, 25% or more (by value) of the stock), and the nature of such non-U.S. corporations activities. A separate determination must be made after the close of each taxable year as to whether a non-U.S. corporation was a PFIC for that year. Once a non-U.S. corporation qualifies as a PFIC it is, with respect to a shareholder during the time it qualifies as a PFIC, and subject to certain exceptions, always treated as a PFIC with respect to such shareholder, regardless of whether it satisfied either of the qualification tests in subsequent years.
Based on the projected composition of ListCos income and assets (including the income and assets of each subsidiary for which ListCo owns, directly or indirectly, 25% or more (by value) of its stock following the Merger), ListCo does not expect to be classified as a PFIC for its taxable year that includes the date of the Merger or, to the best of its current estimates, for subsequent taxable years. However, the application of the PFIC rules is subject to uncertainty as the composition of ListCos income and assets (including the income and assets of its applicable subsidiaries following the Merger) may change in the future and, therefore, no assurances can be provided that ListCo will not be a PFIC for the taxable year that includes the date of the Merger or in a future year.
If ListCo is or becomes a PFIC during any year in which a U.S. holder holds AD securities and such holder does not make a mark-to-market election, as described below, the U.S. holder will be subject to special tax rules with respect to (i) any gain realized on a sale or other disposition (including a pledge) of its AD securities, and (ii) any excess distributions it receives on its Class A ADSs (generally, any distributions in excess of 125% of the average of the annual distributions on Class A ADSs during the preceding three years or the U.S. holders holding period, whichever is shorter). Generally, under this excess distribution regime:
| the gain or excess distribution will be allocated ratably over the period during which the U.S. holder held its AD securities; |
| the amount allocated to the current taxable year will be treated as ordinary income; and |
| the amount allocated to prior taxable years will be subject to the highest tax rate in effect for that taxable year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
In lieu of being subject to the special tax rules discussed above with regard to its Class A ADSs, a U.S. holder may make a mark-to-market election with respect to its Class A ADSs, and with respect to its Class C ADSs if treated as stock. A U.S. holder may make a mark-to-market election if such shares are treated as marketable stock. A mark-to-market election is not available with respect to the ADWs, or with respect to the Class C ADSs if treated as warrants. The Class A ADSs generally will be treated as marketable stock if they are regularly traded on a national securities exchange that is registered with the SEC, including Nasdaq, or on a qualified non-U.S. exchange or other market (within the meaning of the applicable Treasury regulations). Although the Class A ADSs are expected to be listed on Nasdaq, no assurance can be given that the Class A ADS will be regularly traded for purposes of the mark-to-market election. ListCo currently does not intend to provide
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information necessary for U.S. holders to make a qualified electing fund election which, if available, would result in tax treatment different from the general tax treatment for PFICs described above.
If ListCo is classified as a PFIC for any taxable year, a U.S. holder of ADSs will be required to file an annual report on IRS Form 8621. Failure to file IRS Form 8621 for each applicable taxable year may result in substantial penalties and result in the U.S. holders taxable years being open to audit by the IRS until such Forms are properly filed.
U.S. holders are urged to consult their tax advisors concerning the U.S. federal income tax consequences of holding AD securities in the event that ListCo is considered a PFIC in any taxable year.
Additional Reporting Requirements
U.S. holders who are individuals and certain entities will be required to report information with respect to such U.S. holders investment in specified foreign financial assets on IRS Form 8938 (Statement of Specified Foreign Financial Assets), subject to certain exceptions (including an exception for AD securities held in accounts maintained at certain financial institutions). An interest in AD securities constitutes a specified foreign financial asset for these purposes. Persons who are required to report specified foreign financial assets and fail to do so may be subject to substantial penalties and the period of limitations on assessment and collection of U.S. federal income taxes will be extended in the event of a failure to comply. U.S. holders are urged to consult their tax advisors regarding the foreign financial asset and other reporting obligations and their application to the ownership and disposition of AD securities.
Non-U.S. Holders
The section applies to you if you are a non-U.S. holder. For purposes of this discussion, a non-U.S. holder is a beneficial owner (other than a partnership or an entity or arrangement characterized as a partnership for U.S. federal income tax purposes) of GGI Securities or AD securities that is not a U.S. holder, including a nonresident alien individual (other than certain former citizens and residents of the United States), a non-U.S. corporation, or a non-U.S. estate or trust.
This section generally does not apply to an individual who is present in the United States for 183 days or more in a taxable year. A holder that is such an individual should consult its tax advisor regarding the U.S. federal income tax consequences of holding GGI Securities or AD securities.
Redemption of GGI Common Stock
The characterization for U.S. federal income tax purposes of the redemption of a non-U.S. holders GGI Common Stock pursuant to the redemption provisions described in Special Meeting of GGI StockholdersRedemption Rights, will generally correspond to the U.S. federal income tax characterization of such a redemption of a U.S. holders GGI Common Stock, as described under U.S. HoldersRedemption of GGI Common Stock, above.
The consequences for a non-U.S. holder of recognizing gain in such a redemption would be the same as the consequences of recognizing gain on a sale or other disposition of AD securities described below under the heading Non-U.S. Holders Generally.
If the redemption does not qualify as a sale of stock under Section 302 of the Code, the portion of the redemption proceeds characterized as a distribution, which, to the extent of GGIs current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute a dividend for U.S. federal income tax purposes will be subject to a U.S. federal withholding tax on the gross amount of the dividend at a rate of 30%, unless (i) such dividends are effectively connected with the non-U.S. holders conduct of a trade or business within the United States, or (ii) such non-U.S. holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate
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(usually on an IRS Form W-8BEN or W-8BEN-E, as applicable). To the extent that the amount of the distribution exceeds GGIs current and accumulated earnings and profits (as determined under U.S. federal income tax principles), such excess amount will be treated first as a non-taxable return of capital to the extent of the non-U.S. holders tax basis in its GGI Common Stock, and thereafter as gain realized, which will be treated the same as a sale or other disposition of AD securities described below under the heading Non-U.S. Holders Generally. Dividends paid by GGI to a non-U.S. holder that are effectively connected with such non-U.S. holders conduct of a trade or business within the United States (or if a tax treaty applies, are attributable to a U.S. permanent establishment or fixed base maintained by the non-U.S. holder in the United States) will generally not be subject to U.S. withholding tax, provided such non-U.S. holder complies with certain certification and disclosure requirements (usually by providing an IRS Form W-8ECI). Instead, the effectively connected income will be subject to regular U.S. income tax as if the non-U.S. holder were a U.S. resident, unless an applicable income tax treaty provides otherwise. A corporate non-U.S. holder receiving effectively connected dividends may also be subject to an additional branch profits tax imposed at a rate of 30% (or a lower treaty rate).
Adoption of the Proposed Amendments
The U.S. federal income tax consequences of the approval of the Warrant Amendment Proposal to non-U.S. holders generally will correspond to the U.S. federal income tax consequences described under U.S. HoldersAdoption of the Proposed Amendment above.
The Merger
The U.S. federal income tax consequences of the Merger to non-U.S. holders generally will correspond to the U.S. federal income tax consequences described under U.S. HoldersThe Merger, above, except that Section 367(a) of the Code will not apply to any non-U.S. holder and, to the extent the Merger results in a taxable exchange of GGI Common Stock or GGI Warrants, the consequences for a non-U.S. holder of recognizing gain in such a taxable exchange would be the same as the consequences of recognizing gain on a sale or other disposition of AD securities described below under the heading Non-U.S. Holders Generally.
Non-U.S. Holders Generally
Assuming that ListCo is not treated as a U.S. corporation under the rules discussed above under U.S. Federal Income Tax Treatment of ListCo, a non-U.S. holder of AD securities will not be subject to U.S. federal income tax or, subject to the discussion below under Information Reporting and Backup Withholding, U.S. federal withholding tax on any dividends (including constructive dividends) received on AD securities or any gain recognized on a sale or other disposition of AD securities (including, any distribution to the extent it exceeds the adjusted basis in the non-U.S. holders AD securities) unless such dividend or gain (i) is effectively connected with the non-U.S. holders conduct of a trade or business in the United States, and (ii) if required by an applicable tax treaty, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States.
Any such dividends and gains that are effectively connected with a non-U.S. holders conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base in the United States) generally will be subject to U.S. federal income tax at the same regular U.S. federal income tax rates applicable to a comparable U.S. holder and, in the case of a corporate non-U.S. holder, also may be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.
The U.S. federal income tax treatment of a non-U.S. holders exercise of an ADW, or the lapse of an ADW held by a non-U.S. holder, generally will correspond to the U.S. federal income tax treatment of the exercise or lapse of a warrant held by a U.S. holder, as described under U.S. HoldersExercise or Lapse of an ADW, above, although to the extent a cashless exercise results in a taxable exchange, the consequences for a non-U.S. holder of
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recognizing gain in such a taxable exchange would be the same as the consequences of recognizing gain on a sale or other disposition of AD securities described in the preceding paragraphs above regarding a non-U.S. holders sale or other disposition of AD securities.
The U.S. federal income tax treatment of a non-U.S. holders conversion of a Class C ADS to a Class A ADS or conversion expiration of the holders Class C ADS generally will correspond to the U.S. federal income tax treatment of the conversion or conversion expiration of a Class C ADS held by a U.S. holder, as described under U.S. HoldersConversion of a Class C ADS, above.
FATCA
Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or FATCA) impose a 30% withholding tax on payments of U.S.-source dividends (including a redemption of GGI Common Stock that is treated as a dividend), and subject to the discussion of certain proposed Treasury Regulations below, on the gross proceeds from a redemption treated as a sale, in each case if paid to foreign financial institutions (which is broadly defined for this purpose and in general includes investment vehicles) and certain other non-U.S. entities unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with those entities) have been satisfied, or an exemption applies (typically certified as to by the delivery of a properly completed IRS Form W-8BEN-E). If FATCA withholding is imposed, certain non-U.S. holders generally will be able to obtain a refund of any amounts withheld by filing a U.S. federal income tax return (which may entail significant administrative burden). Non-U.S. holders located in jurisdictions that have an intergovernmental agreement with the U.S. governing FATCA may be subject to different rules. Non-U.S. holders should consult their tax advisers regarding the possible implications of FATCA upon the redemption of their GGI Common Stock.
The IRS released proposed Treasury Regulations that, if finalized in their present form, would eliminate the U.S. federal withholding tax of 30% applicable to the gross proceeds of a redemption of GGI Securities that is treated as sale. In its preamble to such proposed Treasury Regulations, the IRS stated that taxpayers may generally rely on the proposed Treasury Regulations until final Treasury Regulations are issued.
Information Reporting and Backup Withholding
Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries are subject to information reporting, and may be subject to backup withholding. Backup withholding generally will not apply, however, to a U.S. holder if (i) the U.S. holder is a corporation or other exempt recipient or (ii) in the case of backup withholding, the U.S. holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding. A Non-U.S. holder generally will eliminate the requirement for information reporting and backup withholding by providing certification of its non-U.S. status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.
Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a holder will be allowed as a credit against such holders U.S. federal income tax liability and a holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for a refund with the IRS and furnishing any required information.
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MATERIAL UNITED KINGDOM TAX CONSIDERATIONS
The following is intended as a general guide to current United Kingdom tax law and HMRC published practice applying as at the date of this proxy statement/prospectus (both of which are subject to change at any time, possibly with retrospective effect) relating to (i) the United Kingdom withholding tax implications of dividends paid by the Post-Combination Company in respect of the Post-Combination Company Class A Shares and (ii) the United Kingdom stamp duty and SDRT implications of transfers of, and agreements to transfer, AD securities. It does not constitute legal or tax advice and does not purport to be an analysis of any other United Kingdom tax considerations relating to the acquisition, holding or disposing of AD securities or any other shares or securities that may be issued by the Post-Combination Company from time to time.
THESE PARAGRAPHS ARE A SUMMARY OF MATERIAL UNITED KINGDOM TAX CONSIDERATIONS AND ARE INTENDED AS A GENERAL GUIDE ONLY. IT IS RECOMMENDED THAT ALL HOLDERS OF AD SECURITIES OBTAIN ADVICE AS TO THE CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSAL OF THE AD SECURITIES IN THEIR OWN SPECIFIC CIRCUMSTANCES FROM THEIR OWN TAX ADVISORS.
Dividend Withholding Tax
Dividends paid by the Post-Combination Company in respect of the Post-Combination Company Class A Shares should not be subject to any withholding or deduction for or on account of United Kingdom income tax.
Stamp Duty and Stamp Duty Reserve Tax - Transfers of AD securities
The statement in this section assumes that the AD securities are held at all relevant times through the clearance service facilities of DTC and that all transfers of the AD securities take place in paperless form without the creation of any written instrument of transfer. This section does not consider the implications of transfers of, or agreements to transfer, any Post-Combination Company securities held in certificated form.
No SDRT should be required to be paid on a paperless transfer of AD securities through the clearance service facilities of DTC, provided that DTC has not made an election under section 97A of the United Kingdom Finance Act 1986, and such AD securities are held through DTC at the time of any agreement for their transfer.
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General
GGI is a blank check company incorporated on December 21, 2020 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (an initial business combination). Prior to entering into the Business Combination Agreement, GGIs acquisition and value creation strategy was to identify, acquire and, after an initial business combination, to build a company in an industry or sector that complements the experience of GGIs management team and can benefit from GGIs operational expertise. GGIs acquisition selection process capitalizes on the ability of GGIs management team to identify, acquire and manage a business that can benefit from GGIs expertise, as members of GGIs management team have done in diverse sectors, including industrials, technology, telecommunications, media and entertainment, business services, healthcare and consumer products. GGI also has neither engaged in any operations nor generated any revenue to date. Based on GGIs business activities, GGI is a shell company as defined under the Exchange Act because GGI has no operations and nominal assets consisting solely of cash and/ or cash equivalents.
GGIs executive offices are located at 6260 Lookout Road, Boulder, CO 80301 and GGIs telephone number is (303) 531-3100.
On February 10, 2021, the GGI Sponsor purchased 21,562,500 Founder Shares for $25,000, or approximately $0.001 per share. The GGI Class F Common Stock comprising the Founder Shares is identical to the GGI Class A Common Stock included in the GGI Public Units, except that the GGI Class F Common Stock is convertible under the circumstances described below. The Founder Shares included an aggregate of up to 2,812,500 shares subject to forfeiture by the GGI Sponsor depending on the extent to which the underwriters over-allotment is exercised. As a result of the underwriters election to partially exercise their over-allotment option, 1,562,500 Founder Shares were forfeited on May 9, 2021, and the remaining 1,250,000 Founder Shares are no longer subject to forfeiture. On March 22, 2021, the GGI Sponsor transferred 25,000 Founder Shares to each of GGIs three independent director nominees at their original purchase price.
On March 25, 2021, GGI consummated the GGI IPO of 80,000,000 GGI Public Units, including 5,000,000 GGI Public Units subsequently issued pursuant to the partial exercise of the underwriters over-allotment option. Each GGI Public Unit consists of one GGI Public Share, and one-fifth of one GGI Public Warrant, each whole GGI Public Warrant entitling the holder thereof to purchase one share of GGI Class A Common Stock at an exercise price of $11.50 per share. The GGI Public Units were sold at a price of $10.00 per share, generating gross proceeds to GGI of $800,000,000. Simultaneously with the GGI IPO Closing Date, GGI completed the private sale of an aggregate of 9,000,000 GGI Private Placement Warrants to the GGI Sponsor, including 500,000 GGI Private Placement Warrants subsequently issued substantially concurrently with the partial exercise of the underwriters over-allotment option, at a price of $2.00 per GGI Private Placement Warrant, each exercisable to purchase one share of GGI Class A Common Stock at $11.50 per share, generating gross proceeds to GGI of $18,000,000. The GGI Private Placement Warrants have terms and provisions that are identical to those of the GGI Public Warrants, except that the GGI Sponsor has agreed not to transfer, assign or sell any of the GGI Private Placement Warrants (except to certain permitted transferees) until 30 days after the completion of GGIs initial business combination. The GGI Private Placement Warrants may also be net cash settled and are not redeemable so long as they are held by the GGI Sponsor or its permitted transferees. The sale of the GGI Private Placement Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
On March 25, 2021, a total of $750,000,000, comprised of $735,000,000 of the proceeds from the GGI IPO, and $15,000,000 of the proceeds from the sale of the Private Placement Warrants, was deposited in the Trust Account with Computershare Trust Company, N.A., acting as trustee. On April 22, 2021, the issuance by GGI of 5,000,000 GGI Public Units at a price of $10.00 per unit pursuant to the partial exercise of the underwriters
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over-allotment option resulted in gross proceeds of $50,000,000 being placed in the Trust Account. Substantially concurrently with the sale of the GGI Public Units pursuant to the partial exercise of the underwriters over-allotment option, GGI completed a private placement with the GGI Sponsor for an additional 500,000 GGI Private Placement Warrants at a price of $2.00 per warrant, generating gross proceeds of $1,000,000 that were used to pay the additional deferred underwriting discount. Except with respect to up to $900,000 per year of interest earned on the funds in the Trust Account that may be released to GGI to fund its regulatory compliance requirements and other costs related thereto, plus additional amounts necessary to pay its franchise and income taxes, if any, the proceeds from the GGI IPO will not be released from the Trust Account until the earliest of (i) the consummation of the Business Combination; (ii) the redemption of any GGI Public Shares properly tendered in connection with a stockholder vote to amend the Current GGI Certificate (A) to modify the substance or timing of GGIs obligation to redeem 100% of such shares of the GGI Public Shares if GGI does not complete an initial business combination within 24 months from the closing of the GGI IPO or (B) with respect to any other provisions relating to stockholders rights or pre-initial business combination activity; and (iii) the redemption of 100% of the GGI Public Shares if GGI is unable to complete an initial business combination within 24 months from the closing of the GGI IPO, subject to applicable law.
On May 11, 2021, GGI announced that the holders of GGI Public Units may elect to separately trade the GGI Class A Common Stock and GGI Public Warrants included in the GGI Public Units commencing May 13, 2021, on Nasdaq under the symbols GGPI and GGPIW, respectively. Those GGI Public Units not separated will continue to trade on Nasdaq under the symbol GGPIU and each of the GGI Class A Common Stock and GGI Public Warrants that are separated will trade on Nasdaq under the symbols GGPI and GGPIW, respectively, until the Closing.
On September 27, 2021, GGI entered into a Business combination Agreement, which provides for, among other things, the Business Combination. The transactions set forth in the Business Combination Agreement, including the Business Combination, will constitute a Business Combination as contemplated by the Current GGI Certificate.
Initial Business Combination
Nasdaq rules require that an initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the initial business combination. GGI Board has determined that the Business Combination meets the 80% test.
Redemption Rights for Holders of Public Shares
GGI is providing GGI Public Stockholders with the opportunity to redeem all or a portion of their GGI Public Shares upon the completion of the Business Combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding GGI Public Shares, subject to the limitations described herein. The amount in the Trust Account as of December 31, 2021 is approximately $10.00 per GGI Public Share. The per-share amount GGI will distribute to investors who properly redeem their shares will not be reduced by the Deferred Discount totaling $28,000,000 that GGI will pay to the underwriters. Pursuant to the GGI IPO Letter Agreement, the GGI Initial Stockholders have agreed to waive their redemption rights with respect to their Founder Shares and any GGI Public Shares they may hold in connection with the consummation of the Business Combination. The Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price.
Submission of the Business Combination to a Stockholder Vote
The Stockholder Special Meeting to which this proxy statement/prospectus relates is to solicit GGI stockholder approval of the Business Combination. Unlike many other blank check companies, GGI Public Stockholders are
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not required to vote against the Business Combination in order to exercise their redemption rights. If the Business Combination is not completed, then GGI Public Stockholders electing to exercise their redemption rights will not be entitled to receive such payments. The GGI Initial Stockholders, including the GGI Sponsor, have agreed to vote their Founder Shares, as well as any GGI Public Shares purchased during or after the GGI IPO, in favor of the Business Combination. As a result, approximately 38% of the GGI Public Shares sold in the GGI IPO will need to vote in favor of the Business Combination Proposal for the Business Combination Proposal to be approved.
Limitations on Redemption Rights
A GGI Public Stockholder, together with any of its affiliates or any other person with whom it is acting in concert or as a group (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the groups shares, in excess of 15% of the GGI Public Shares. In addition, in no event will GGI redeem GGI Public Shares in an amount that would result in GGIs failure to have net tangible assets equaling or exceeding $5,000,001. Other than the foregoing, there are no additional specified maximum redemption thresholds under the Current GGI Certificate. Each redemption of GGI Public Shares will reduce the amount in the Trust Account.
Employees
GGI currently has three officers. Members of GGIs management team is not obligated to devote any specific number of hours to GGIs matters but they intend to devote as much of their time as they deem necessary to GGIs affairs until GGI has completed an initial business combination. The amount of time that any such person will devote in any time period will vary based on whether a target business has been selected for an initial business combination and the current stage of the initial business combination process.
Management
Officers and Directors
GGIs officers and directors are as follows:
Name |
Age |
Title | ||
Alec Gores |
68 | Chairman | ||
Mark Stone |
57 | Chief Executive Officer | ||
Andrew M. Rosenfield |
69 | President and Director | ||
Andrew McBride |
41 | Chief Financial Officer and Secretary | ||
Randall Bort |
56 | Director | ||
Elizabeth Marcellino |
63 | Director | ||
Nancy Tellem |
68 | Director |
Alec Gores has been GGIs Chairman since December 2020. Mr. Gores is the Founder, Chairman and Chief Executive Officer of The Gores Group, a global investment firm focused on acquiring businesses that can benefit from the firms operating expertise. Mr. Gores implemented an operational approach to private equity investing when he founded The Gores Group in 1987 by operating businesses alongside management, or in some cases in lieu of management, to build value in those entities. Since then, the firm has acquired more than 120 businesses including a current portfolio of 8 active companies worldwide. Mr. Gores began his career as a self-made entrepreneur and operating executive. In 1978, he self-funded and founded Executive Business Systems (EBS), a developer and distributor of vertical business software systems. Within seven years, EBS had become a leading value-added reseller in Michigan and employed over 200 people. In 1986, CONTEL purchased EBS, and Mr. Gores subsequently began acquiring and operating non-core businesses from major corporations and building value in those entities, a decision that ultimately led to the founding of what has evolved into The Gores
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Group today. Under his leadership, The Gores Group has continued to acquire businesses in need of operational and financial resources, while creating value and working with management teams to establish an entrepreneurial environment as a foundation for sustainable growth. This philosophy has served the firm well. Mr. Gores served as the Chairman of the board of directors of Gores Holdings, Inc. (Gores Holdings I) from its inception in June 2015 until completion of the Hostess acquisition in November 2016, as the Chairman of the board of directors of Gores Holdings II, Inc. (Gores Holdings II) from its inception in August 2016 until completion of the Verra acquisition in October 2018 and as the Chairman of the board of directors of Gores Holdings III, Inc. (Gores Holdings III) from its inception in October 2017 until the completion of the PAE acquisition in February 2020. Additionally, Mr. Gores served as the Chief Executive Officer and Director of Gores Metropoulos, Inc. (Gores Metropoulos I) from its inception in August 2018 until the completion of the Luminar acquisition in December 2020 and has served as a director of Luminar since December 2020. In addition, Mr. Gores has served as the Chairman of the board of directors of Gores Holdings IV, Inc. (Gores Holdings IV) from June 2019 until the completion of the UWM acquisition in January 2021. Mr. Gores has served as the Chairman of the board of directors of Gores Holdings V, Inc. (Gores Holdings V) from June 2020 until the completion of the Ardagh Metal Packaging transaction in August 2021, Gores Holdings VI, Inc. (Gores Holdings VI) from June 2020 until the completion of the Matterport transaction in July 2021, Gores Holdings VII, Inc. (Gores Holdings VII) since September 2020, Gores Holdings VIII, Inc. (Gores Holdings VIII) since September 2020, Gores Technology Partners, Inc. (Gores Technology I) since December 2020, Gores Technology Partners II, Inc. (Gores Technology II) since December 2020, Gores Metropoulos II, Inc. (Gores Metropoulos II) since July 2020 until the completion of the Sonder Holdings Inc. (Sonder) transaction in January 2022 and Gores Holdings IX, Inc. (Gores Holdings IX) since January 2022.. Mr. Gores holds a degree in Computer Science from Western Michigan University. Mr. Gores significant investment and financial expertise make him well qualified to serve as a member of the GGI Board.
Mark Stone has been GGIs Chief Executive Officer since December 2020. Mr. Stone is a Senior Managing Director of The Gores Group. Mr. Stone is a member of the Investment Committee and a member of the Office of the Chairman of The Gores Group. Mr. Stone has worked at The Gores Group for more than fifteen years. Mr. Stone served as the Chief Executive Officer of Gores Holdings I from its inception in June 2015 until completion of the Hostess acquisition in November 2016 and served as a Director of Hostess until April 2018. Additionally, Mr. Stone served as the Chief Executive Officer of Gores Holdings II from its inception in August 2016 until completion of the Verra Mobility acquisition in October 2018, Gores Holdings III from its inception in October 2017 until the completion of the PAE acquisition in February 2020, Gores Holdings IV since June 2019 until the completion of the UWM acquisition in January 2021, Gores Holdings V since June 2020 until the completion of the Ardagh Metal Packaging transaction in August 2021 and Gores Holdings VI since June 2020 until the completion of the Matterport transaction in July 2021. Mr. Stone has served as the Chief Executive Officer of Gores Holdings IX since January 2021, Gores Holdings VII since January 2021 and Gores Holdings VIII since September 2020. From 2005 until 2013, Mr. Stone primarily focused on worldwide operations of Gores portfolio companies and Gores operational due diligence efforts. He has been a senior team member with key responsibility in several turnaround, value-oriented investment opportunities, including Stock Building Supply, a supplier of building materials and construction services to professional home builders and contractors in the Unites States; United Road Services, a provider of finished vehicle logistics services; and Sage Automotive Interiors, the largest North American manufacturer of high-performance automotive seat fabrics. Mr. Stone has also been involved with the acquisitions, successful carve-outs and transformations of Lineage Power and VincoTech, manufacturers of telecom conversion products, electronic OEMs, power modules, GPS products and electronic manufacturing services, from TE Connectivity Ltd.; Therakos, a global leader in advanced technologies for extracorporeal photopheresis (ECP), from Johnson & Johnson; and Sagem Communications, a Paris-based manufacturer of set-top boxes, residential terminals, printers and other communications equipment, from the Safran Group. He has served as Executive Chairman and/or CEO of several portfolio companies including Siemens Enterprise Communications, a leading Munich-based global corporate telephony (PBX) and unified communications (UC) solutions provider, and Enterasys Networks, a global network solutions provider. Prior to joining The Gores Group, Mr. Stone spent nearly a decade as a chief executive transforming businesses across the services, industrial and technology sectors. Mr. Stone spent five years with The Boston Consulting Group as a member of their high technology and industrial goods practices and served in the firms Boston, London, Los Angeles and Seoul offices. Mr. Stone earned a B.S. in Finance with Computer Science and
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Mathematics concentrations from the University of Maine and an M.B.A. in Finance from The Wharton School of the University of Pennsylvania.
Andrew M. Rosenfield has been GGIs President since February 2021 and currently serves as a member of the board of directors. Mr. Rosenfield is the President of Guggenheim Partners, which he joined in 2004 as a Managing Partner, where he is responsible for many aspects of firm management and strategic planning and leads the firms principal transactions. Mr. Rosenfield is also a Professor of Law at the University of Chicago Law School, whose faculty he joined in 1986. From 2010 through 2018, while remaining a Managing Partner at Guggenheim Partners, Mr. Rosenfield was the founder and Chief Executive Officer of TGG Group, a behavioral economics consulting firm. From 1977 until 2001, Mr. Rosenfield was the co-founder and Chief Executive Officer of Lexecon Inc. (now known as Compass Lexecon), a leading law and economics consulting firm. From 1999 until its sale in 2004, Mr. Rosenfield was the founder and Chief Executive Officer of UNext Inc., an early online education business that partnered with Columbia University, Stanford University, the University of Chicago, Carnegie Mellon University and the London School of Economics. Mr. Rosenfield is active in the Chicago community and is a board member of various non-profit organizations such as the Board of Trustees of The University of Chicago and the Board of Trustees of the Art Institute of Chicago. Mr. Rosenfield received a J.D. from The University of Chicago Law School, an MCRP from Harvard University Graduate School of Design and a B.A. in economics and mathematic from Kenyon College. Mr. Rosenfields extensive academic, business and investment experience in, among others, the finance and consulting industries, make him well qualified to serve as a member of the GGI Board.
Andrew McBride has been GGIs Chief Financial Officer and Secretary since July 2020. Mr. McBride has served as Director, Finance and Tax at The Gores Group since February 2010, where he is responsible for tax due diligence and structuring of acquisitions, compliance, planning, financial management and portfolio company reporting. Mr. McBride also served as the Chief Financial Officer and Secretary of Gores Holdings I from January 2016 until completion of the Hostess acquisition in November 2016. Additionally, Mr. McBride served as the Chief Financial Officer and Secretary of Gores Holdings II from its inception in August 2016 until completion of the Verra acquisition in October 2018 and as the Chief Financial Officer and Secretary of Gores Holdings III from its inception in October 2017 until the completion of the PAE acquisition in February 2020. Additionally, Mr. McBride also served as the Chief Financial Officer and Secretary of Gores Metropoulos from its inception in August 2018 until the completion of the Luminar acquisition in December 2020. In addition, Mr. McBride has served as the Chief Financial Officer and Secretary of Gores Holdings IV from June 2019 until the completion of the UWM acquisition in January 2021. Mr. McBride has also served as the Chief Financial Officer of Gores Holdings V from June 2020 until the completion of the Ardagh Metal Packaging transaction in August 2021, Gores Holdings VI from July 2020 until the completion of the Matterport transaction in July 2021, Gores Holdings VII since September 2020, Gores Holdings VIII since September 2020, Gores Technology I since December 2020, Gores Technology II since December 2020, and Gores Metropoulos II since July 2020 until the completion of the Sonder transaction in January 2022. In addition, Mr. McBride has served as the Chief Financial Officer and Secretary of Gores Holdings IX since its inception in January 2021. Previously, from January 2008 to January 2010, Mr. McBride worked in the High Net Worth group at Ehrhardt, Keefe, Steiner, and Hottman, P.C. From January 2004 to January 2008, Mr. McBride was with KPMG LLP, assisting international corporations with tax planning, structuring and compliance issues. Mr. McBride holds a B.S. in Accounting and Finance from the University of Notre Dame and is licensed as a Certified Public Accountant in the State of Colorado.
Randall Bort has served as a member of the GGI Board since March 22, 2021. Mr. Bort is a Co-Founder of SandTree Holdings, LLC, a private commercial real estate investment firm, and has been a partner at SandTree since November 2012. Previously, Mr. Bort was an investment banker at Drexel Burnham Lambert, BT Securities, Donaldson, Lufkin & Jenrette, Credit Suisse First Boston, The Mercanti Group and Imperial Capital. Mr. Bort has significant financial, transactional and capital markets experience across multiple industries and has worked both domestically and in Asia. Mr. Bort earned a B.A. in Economics and Mathematics from Claremont McKenna College and an M.B.A. in Finance and Entrepreneurial Management from The Wharton School of the University of Pennsylvania. Mr. Bort served as a member of the board of directors of Gores Holdings I from August 2015 until
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completion of the Hostess acquisition in November 2016, as a member of the board of directors of Verra Mobility Corp. (formerly Gores Holdings II) from January 2017 until June 2019, as a member of the board of directors of Gores Holdings III from September 2018 until the completion of the PAE acquisition in February 2020, as a member of the board of directors of Gores Metropoulos, from February 2019 until the completion of the Luminar acquisition in December 2020, and as a member of the board of directors of Gores Holdings IV from June 2019 until the completion of the UWM acquisition in January 2021. Mr. Bort has also served as a member of the board of directors of Gores Holdings V from August 2020 until the completion of the Ardagh Metal Packaging transaction in August 2021, Gores Holdings VI from December 10, 2020 until the completion of the Matterport transaction in July 2021, Gores Holdings VII since February 2021, Gores Holdings VIII since March 2021, Gores Metropoulos II since January 2021 until the completion of the Sonder transaction in January 2022 and Gores Holdings IX since January 2021. Mr. Bort also is a member of the Board of Trustees of Childrens Bureau, a non-profit organization based in Los Angeles focused on foster care and the prevention of child abuse. Mr. Borts significant investment and financial expertise make him well qualified to serve as a member of the GGI Board.
Elizabeth Marcellino has served as a member of the GGI Board since March 22, 2021. Ms. Marcellino is a writer and journalist reporting on a wide range of policy issues for Los Angeles-based City News Service. She was previously a managing director at Goldman Sachs Group, Inc., where she worked from 1991 to 2004 in investment banking, portfolio management, and private equity. During her time with the firms Principal Investment Area, Ms. Marcellino managed operations and human resources in support of a global team investing $10 billion in corporate private equity funds. Prior to that, as a portfolio manager for Goldman Sachs Asset Management, Ms. Marcellino launched and managed the Goldman Sachs Real Estate Securities Fund, a total return fund invested primarily in REITs. As an investment banker, Ms. Marcellino advised primarily real estate clients in a wide range of public and private buy-side and sell-side transactions across all property types, including lodging and gaming. Ms. Marcellino also served as a member of the board of directors of Gores Holdings VI from June 2020 until the completion of its acquisition of Matterport, Inc. in July 2021. Ms. Marcellino has served as a member of the board of directors of Gores Holdings VII, since February 2021 and Gores Holdings IX since January 2022. She earned a B.A. in Economics from the University of California, Los Angeles and an M.B.A. in Finance and Real Estate from The Wharton School of the University of Pennsylvania. Ms. Marcellino sits on the national board of Jumpstart for Young Children (Jumpstart), a nonprofit organization working to close the early childhood education gap, and also serves on that boards finance committee. She is also a board member and treasurer for the Society of Professional Journalists, Greater Los Angeles Chapter. She is also a member of the board of Ardagh Metal Packaging S.A., as well as the audit and sustainability committees, of Ardagh Metal Packaging S.A. Ms. Marcellinos significant investment and management experience make her well qualified to serve as a member of the GGI Board.
Nancy Tellem has served as a member of the GGI Board since March 22, 2021. Ms. Tellem is the Executive Chairperson of Eko, a media network that reimagines storytelling by using proprietary technology to create interactive stories that respond and leverage the interactive nature of todays media devices. In addition, as a board member of Metro-Goldwyn-Mayer Holdings Inc. (Metro-Goldwyn-Mayer) since 2013, Nancy expanded her role from January through July 2019, becoming Executive Director to the Office of the CEO to help develop the overall long-term strategy for the company. Until October of 2014, Ms. Tellem was President of Xbox Entertainment Studios where she oversaw Microsofts TV strategy and created a studio focused on the development and production of interactive programming. From 1997 to 2012, Ms. Tellem was President of the CBS Network Television Entertainment Group. She oversaw both CBS Entertainment Network and CBS Studios. Before CBS, Ms. Tellem was the Executive Vice President of Business and Financial Affairs for Warner Bros. Entertainment Inc. where she shepherded in such hits as ER and Friends. In 2006, Ms. Tellem was inducted into the Broadcasting & Cable Hall of Fame for her contributions to the electronic arts. Ms. Tellem holds board and advisory positions at numerous digital and media-related companies, including Eko, Metro-Goldwyn-Mayer, Nielsen Holdings plc, LeagueApps, Inc., KODE Labs, Inc. and is a board member of Rocket Companies, Inc., Cranbrook Art Academy and Museum, and Seeds of Peace, Inc. Ms. Tellem has also served as a member of the board of directors of Gores Holdings VI from June 2020 until the completion of the Matterport transaction in July 2021. She earned her B.A. from the University of California Berkeley, and received her J.D.
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from University of California, Hastings College of Law. Ms. Tellems significant business and management expertise make her well qualified to serve as a member of the GGI Board.
Number and Terms of Office of Officers and Directors
The GGI Board consists of five directors. GGIs officers are appointed by the GGI Board and serve at the discretion of the GGI Board, rather than for specific terms of office. The GGI Board is authorized to appoint persons to the offices set forth in GGIs bylaws as it deems appropriate. The GGI bylaws provide that GGIs officers may consist of a Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, Vice Presidents, Secretary, Treasurer and such other offices as may be determined by the GGI Board.
Director Independence
Nasdaq listing standards require that a majority of the GGI Board be independent. An independent director is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the companys board, would interfere with the directors exercise of independent judgment in carrying out the responsibilities of a director. The GGI Board has determined that Mr. Randall Bort, Ms. Elizabeth Marcellino and Ms. Nancy Tellem are independent directors as defined in the Nasdaq listing standards and applicable SEC rules. GGIs independent directors have regularly scheduled meetings at which only independent directors are present.
Committees of the GGI Board
The GGI Board has two standing committees: an audit committee and a compensation committee. Subject to phase-in rules and a limited exception, the rules of Nasdaq and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and the rules of Nasdaq require that the compensation committee of a listed company be comprised solely of independent directors.
Audit Committee
The GGI Board established an audit committee of the GGI Board. Mr. Randall Bort, Ms. Elizabeth Marcellino and Ms. Nancy Tellem serve as members of GGIs audit committee. Mr. Bort serves as the chairman of the audit committee. Under the Nasdaq listing standards and applicable SEC rules, GGI is required to have at least three members of the audit committee, all of whom must be independent. Mr. Bort, Ms. Marcellino, and Ms. Tellem are each independent.
Each member of the audit committee is financially literate and the GGI Board has determined that Mr. Bort qualifies as an audit committee financial expert as defined in applicable SEC rules.
GGI has adopted an audit committee charter, which details the principal functions of the audit committee, including:
| the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by GGI; |
| pre-approving all audit and permitted non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by GGI, and establishing pre-approval policies and procedures; |
| reviewing and discussing with the independent auditors all relationships the auditors have with GGI in order to evaluate their continued independence; |
| setting clear hiring policies for employees or former employees of the independent auditors; |
| setting clear policies for audit partner rotation in compliance with applicable laws and regulations; |
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| obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditors internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting; |
| one or more independent audits carried out by the firm and any steps taken to deal with such issues; |
| reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to GGI entering into such transaction; and |
| reviewing with management, the independent auditors, and GGIs legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding GGIs financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
Compensation Committee
The GGI Board established a compensation committee of the GGI Board. Mr. Randall Bort, Ms. Elizabeth Marcellino and Ms. Nancy Tellem serve as members of GGIs compensation committee. Ms. Elizabeth Marcellino serves as the chairman of the compensation committee. Under the Nasdaq listing standards and applicable SEC rules, GGI is required to have at least two members of the compensation committee, all of whom must be independent. Mr. Bort, Ms. Marcellino, and Ms. Tellem are each independent.
GGI has adopted a compensation committee charter that details the principal functions of the compensation committee, including:
| reviewing and approving on an annual basis the corporate goals and objectives relevant to GGIs Chief Executive Officers compensation, evaluating GGIs Chief Executive Officers performance in light of such goals and objectives and determining and approving the remuneration (if any) of GGIs Chief Executive Officer based on such evaluation; |
| reviewing and approving on an annual basis the compensation of all of GGIs other officers; |
| reviewing on an annual basis GGIs executive compensation policies and plans; |
| implementing and administering GGIs incentive compensation equity-based remuneration plans; |
| assisting management in complying with GGIs proxy statement and annual report disclosure requirements; |
| approving all special perquisites, special cash payments and other special compensation and benefit arrangements for GGIs officers and employees; |
| if required, producing a report on executive compensation to be included in GGIs annual proxy statement; and |
| reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
It is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The Current GGI Certificate also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
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Director Nominations
GGI does not have a standing nominating committee, though GGI intends to form a corporate governance and nominating committee as and when required to do so by law or Nasdaq rules. In accordance with Rule 5605(e)(2) of the Nasdaq rules, a majority of the independent directors may recommend a director nominee for selection by the GGI Board. The GGI Board believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. In accordance with Rule 5605(e)(1)(A) of the Nasdaq rules, all such directors are independent. As there is no standing nominating committee, GGI does not have a nominating committee charter in place.
The GGI Board will also consider director candidates recommended for nomination by GGI stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). GGI stockholders that wish to nominate a director for election to the GGI Board should follow the procedures set forth in GGIs current bylaws.
GGI has not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the GGI Board considers educational background, diversity of professional experience, knowledge of GGIs business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of GGIs stockholders.
Compensation Committee Interlocks and Insider Participation
None of GGIs officers currently serves, and in the past year has not served, as a member of the GGI Board or compensation committee of any entity that has one or more officers serving on the GGI Board.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires GGIs officers, directors and persons who beneficially own more than ten percent of GGI Class A Common Stock to file reports of ownership and changes in ownership with the SEC. These reporting persons are also required to furnish GGI with copies of all Section 16(a) forms they file. Based solely upon a review of such forms, GGI believes that for the year ended December 31, 2021 there were no delinquent filers.
Code of Ethics
GGI has adopted a Code of Ethics applicable to GGIs directors, executive officers and employees that complies with the rules and regulations of the Nasdaq. The Code of Ethics codifies the business and ethical principles that govern all aspects of GGIs business. GGI has previously filed copies of its form Code of Ethics, its form of Audit Committee Charter and its form of Compensation Committee Charter as exhibits to its registration statement in connection with the GGI IPO. You may review these documents by accessing GGIs public filings at the SECs web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request to GGI in writing at 6260 Lookout Road, Boulder, CO 80301 or by telephone at (303) 531-3100. GGI intends to disclose any amendments to or waivers of certain provisions of its Code of Ethics in a Current Report on Form 8-K.
Conflicts of Interest
The Gores Group manages several investment vehicles, and Guggenheim Capital, LLC (Guggenheim) provides financial advisory, investment management and other services to clients. Each of Guggenheim, clients of Guggenheim and funds managed by Gores or their respective affiliates may compete with GGI for acquisition
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opportunities. If any of them decide to pursue any such opportunity, GGI may be precluded from procuring such opportunities. In addition, investment ideas generated by Guggenheim, or within The Gores Group, including by Mr. Gores, may be suitable for both GGI and for Guggenheim or a current or future Gores or Guggenheim fund or client and may be directed to such entity rather than to GGI. Neither Guggenheim, The Gores Group nor members of GGIs management team who are also employed by certain affiliates of Guggenheim or The Gores Group have any obligation to present GGI with any opportunity for a potential business combination of which they become aware, unless, in the case of members of GGIs management team, presented to such member solely in his or her capacity as an officer of GGI. Guggenheim, Gores and/or GGIs management, in their capacities as officers or managing directors of The Gores Group or Guggenheim, as applicable, or in their other endeavors, may be required to present potential business combinations to the related entities described above, current or future Gores investment vehicles, Guggenheim or third parties, before they present such opportunities to GGI.
Each of GGIs officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity. Specifically, all of GGIs officers and certain of GGIs directors have fiduciary and contractual duties to (i) The Gores Group and certain companies it has invested in or managed, including Gores Holdings VII, Gores Holdings VIII, Gores Technology, Gores Technology II and Gores Holdings IX and (ii) Guggenheim and certain companies in which it has invested or advising. Accordingly, if any of GGIs officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such entity. GGI does not believe, however, that the fiduciary duties or contractual obligations of GGIs officers or directors will materially affect GGIs ability to complete an initial business combination. More specifically, Guggenheim manages a significant number of private and public funds and other co-mingled vehicles and advises public and private companies, governments, and other institutions on numerous investment transactions merger and acquisition activities and other transactions. Guggenheim, as well as its managed vehicles and on behalf of clients may compete with GGI for acquisition opportunities. If these entities decide to pursue any such opportunity, GGI may be precluded from procuring such opportunities. In addition, investment ideas generated within Guggenheim may be suitable for both GGI and for current or future vehicles managed by Guggenheim and its clients and may be directed to such vehicles or clients or may be used by Guggenheim rather than by GGI and may never be presented to GGI. In this respect, neither GGI, the GGI Sponsor, The Gores Group or Guggenheim nor members of GGIs management team who are also employed by either The Gores Group or Guggenheim have any obligation to present GGI with any opportunity for a potential business combination of which they become aware. The Gores Group and Guggenheim and/or their management, in their capacities as employees of The Gores Group and Guggenheim will be, or in their other endeavors may be, required to present potential business combinations to other entities, before they present such opportunities to GGI. In addition, GGI expects that certain members of Guggenheim and The Gores Group will be offered acquisition opportunities on a preferred basis. If any member of Guggenheim or The Gores Group, as applicable, decides to pursue any such opportunity or to present to funds, clients or others, you should expect that GGI will be precluded from pursuing such opportunity.
Although GGI expects to benefit from Guggenheims network of relationships and processes for sourcing, executing and evaluating potential acquisition targets, neither Guggenheim nor any of its affiliates has any legal or contractual obligation to seek on GGIs behalf or to present to GGI investment opportunities that might be suitable for GGIs business, and may allocate any such opportunities at its discretion to GGI or other parties. GGI has no investment management, advisory, consulting or other agreement in place with Guggenheim or any of its affiliates that obligates them to undertake efforts on GGIs behalf or that govern the manner in which they will allocate investment opportunities. Further, Guggenheim manages a significant number of funds and other co-mingled vehicles and advises public and private companies, governments, and other institutions on numerous investment transactions, merger and acquisition activities and other transactions and may establish new vehicles, acquire additional clients or mandates or increase funds under management in the future, which will be during the period in which GGI is seeking an initial business combination. These entities, or Guggenheim on their behalf, may be seeking acquisition opportunities and related financing at any time. GGI may compete with any one or more of them
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on any given acquisition opportunity. To the extent any conflict of interest arises between, on the one hand, GGI and, on the other hand, investment funds or companies, accounts, co-investment vehicles and other entities advised or managed by Guggenheim or its affiliates, Guggenheim will resolve such conflicts of interest in their sole discretion in accordance with their then existing fiduciary, contractual and other duties and there can be no assurance that such conflict of interest will be resolved in GGIs favor. See the section titled Risk Factors.
Guggenheim Securities and Guggenheim Investments are and in the future will continue to, be engaged in a variety of business activities on their own behalf and on behalf of clients, including investing and underwriting, arranging, syndicating or providing investment management or other financial advisory services with respect to, various forms of debt, equity and other financial instruments. Guggenheim may seek (but are not obligated) to provide these services to GGI or a business GGI seeks to acquire, and may seek to provide these services to competitors of GGI. In connection with these activities, Guggenheim, its affiliates or on behalf of its clients may provide or participate in any debt financing arrangement in connection with any acquisition, financing or disposition of any target business that GGI may make or any such transaction that may be made in competition with GGI. As a result, Guggenheim or its clients may have interests that differ materially from or take actions that are directly adverse to GGI, GGI stockholders or a business GGI seeks to acquire, especially where GGI, any future target or underlying business is facing financial distress.
Additional conflicts could arise where one or more Guggenheim funds or other clients has invested or will in the future invest in part of a companys capital structure and GGI is investing in, or considering investing in, a different part of the same companys (or its affiliates) capital structure (including but not limited to investments in public versus private securities, investments in debt versus equity, or investments in senior versus subordinated debt), or where the same or similar instruments in a given issuer or borrower are held by GGI and Guggenheims funds or other clients but GGI has different rights or benefits. With respect to an existing or future economic interests of its clients in a company (i) Guggenheim will solely consider the interests of its clients (and not GGI), including any potential adverse effects to its clients, when deciding whether or not to enforce rights associated with such economic interests on behalf of its clients, and (ii) Guggenheim will take all necessary actions to preserve or protect the value or rights of its funds or other clients associated with such economic interests, without regard to GGIs interests, which may have an adverse effect on GGIs interests, including but not limited to when GGI is considering a target for an initial business combination, or during or after such initial business combination.
Furthermore, to the extent that GGI acquires in connection with its initial business combination a company in which Guggenheims clients, affiliates or related persons hold equity or debt instruments, GGI may be subject to additional significant conflicts. Guggenheim may take or have the ability to direct actions that are adverse to or suboptimal to GGI, particularly in situations in which the target experiences financial or operational challenges. For example, Guggenheim, on behalf of its clients, could sponsor or support reorganizations, recapitalizations or similar workout arrangements for a company in which GGI is invested that could result in a substantial or even total loss of GGIs investment. GGI does not and will not have the ability, or obligation to determine what investments Guggenheim makes on behalf of its clients. Such economic interests of Guggenheims funds or other clients, affiliates or related persons in companies may create significant potential conflicts among GGI and GGI may not be able to timely identify such conflicts. Such conflicts are also likely to be resolved not in GGIs favor. In addition, to the extent a prospective target for GGIs initial business combination (or one of its affiliates) is a Guggenheim client an additional potential conflict exists, which may preclude GGI from making an investment.
To the extent that any conflict of interest arises between GGI and Guggenheim or its clients you should expect that any such conflicts of interest will be resolved in favor of Guggenheim or its clients, as applicable.
The Current GGI Certificate contains a waiver of the corporate opportunity doctrine, which provides that GGI renounces its interest in any corporate opportunity offered to any director or officer unless (i) such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of GGI, (ii) such opportunity is one GGI is legally and contractually permitted to undertake and would otherwise be reasonable for GGI to
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pursue and (iii) the director or officer is permitted to refer the opportunity to GGI without violating another legal obligation. The purpose for the surrender of corporate opportunities is to allow officers or directors with multiple business affiliations to continue to serve as an officer of GGI or on the GGI Board. GGIs officers and directors may from time to time be presented with opportunities that could benefit both another business affiliation and GGI. In the absence of the corporate opportunity waiver in GGIs charter, certain candidates would not be able to serve as an officer or director. GGI believes GGI substantially benefits from having representatives who bring significant, relevant and valuable experience to GGIs management, and, as a result, the corporate opportunity waiver in the Current GGI Certificate provides GGI with greater flexibility to attract and retain the officers and directors that GGI feels are the best candidates. GGI does not believe that this provision impacted GGIs search for prospective business combination targets.
However, the personal and financial interests of GGIs directors and officers may influence their motivation in timely identifying and selecting a target business and completing an initial business combination. The different timelines of competing business combinations could cause GGIs directors and officers to prioritize a business combination due to timing over finding a more suitable acquisition target for GGIs business combination. Consequently, GGIs directors and officers discretion in identifying and selecting a suitable target business may result in a conflict of interest when determining whether the terms, conditions and timing of a particular business combination are appropriate and in GGIs stockholders best interest, which could negatively impact the timing for a business combination.
In addition, the GGI Sponsor, The Gores Group, Guggenheim and GGIs officers and directors may participate in the formation of, or become an officer or director of, any other blank check company prior to completion of GGIs initial business combination. As a result, the GGI Sponsor, officers or directors could have conflicts of interest in determining whether to present business combination opportunities to GGI or to any other blank check company with which they may become involved. Although GGI has no formal policy in place for vetting potential conflicts of interest, the GGI Board will review any potential conflicts of interest on a case-by-case basis. In particular, affiliates of the GGI Sponsor are currently sponsoring five other blank check companies, Gores Holdings VII, Gores Holdings VIII, Gores Technology, Gores Technology II and Gores Holdings IX. On December 14, 2021 Gores Holdings VIII entered into a definitive agreement to acquire Footprint International Holdco, Inc. (Footprint), Gores Holdings VII and Gores Holdings IX may seek to complete a business combination in any location and each is not focusing on any particular industry for business combinations. Gores Technology and Gores Technology II may seek to complete a business combination in any location and each is focusing on a business combination in the technology industry. Further, Mr. Gores, GGIs Chairman, serves as Chief Executive Officer of Gores Holdings IX, Mr. Stone, GGIs Chief Executive Officer, serves as the Chief Executive Officer of Gores Holdings VII, Gores Holdings VIII and Gores Holdings IX, and Mr. McBride, GGIs Chief Financial Officer, serves as the Chief Financial Officer for Gores Holdings VII, Gores Holdings VIII, Gores Technology, Gores Technology II and Gores Holdings IX.
Any such companies, including Gores Holdings VII, Gores Holdings VIIII, Gores Technology, Gores Technology II and Gores Holdings IX may present additional conflicts of interest in pursuing an acquisition target. However, GGI does not believe that any potential conflicts with Gores Holdings VII, Gores Holdings VIII, Gores Technology, Gores Technology II and Gores Holdings IX would materially affect GGIs ability to identify and pursue initial business combination opportunities or complete its initial business combination, because (i) Gores Holdings VIII has entered into a definitive agreement to acquire Footprint, (ii) Gores Technology and Gores Technology II each have a Chief Executive Officer that is different than GGIs Chief Executive Officer, (iii) GGI expects that Mr. Gores will lead the search for a business combination target for each of Gores Holdings VII and Ted Fike and Justin Wilson will lead the search for a business combination target for Gores Technology and Gores Technology II, (iv) three of the four directors that are on the GGI Board are not directors of either Gores Technology or Gores Technology II, two of the four directors that are on the GGI Board are not directors on Gores Holdings VIII and one of the four directors that are on the GGI Board is not a director of Gores Holdings VII and (vi) GGI believes the different composition of its leadership will mitigate any potential conflicts of interest with respect to Gores Metropoulos II, Gores Holdings VII, Gores
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Holdings VIII, Gores Technology and Gores Technology II and (vii) GGIs management team has significant experience in identifying and executing multiple acquisition opportunities simultaneously, and GGI is not limited by industry or geography in terms of the acquisition opportunities GGI can pursue.
In addition, Mr. Andrew Rosenfield, GGIs president and director, is also serving as Chief Executive Officer and director of Guggenheim Special Purpose Acquisition Corp. I, an affiliate of Guggenheim and another blank check company, incorporated as a Cayman Islands exempted company for the purpose of effecting a business combination. Guggenheim Special Purpose Acquisition Corp. I may have interests that differ materially from or take actions that are directly adverse to GGI, GGI stockholders or a business GGI seeks to acquire. To the extent any conflict of interest arises between GGI and Guggenheim Special Purpose Acquisition Corp. I, Mr. Rosenfield, as a member of the board of directors of Guggenheim Special Purpose Acquisition Corp. I, will resolve such conflicts of interest in his sole discretion in accordance with his then existing fiduciary, contractual and other duties and there can be no assurance that such conflict of interest will be resolved in GGIs favor.
GGI stockholders and GGI warrant holders should be aware that, aside from their interests as GGI stockholders and/or GGI warrant holders, as applicable, the GGI Sponsor and certain other members of the GGI Board and GGI officers have interests in the Business Combination that are different from, or in addition to, those of other stockholders or warrant holders generally. The GGI Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination, and in recommending to GGI stockholders and GGI warrant holders that they approve the proposals to be presented to GGI stockholders and GGI warrant holders, respectively. GGI stockholders and GGI warrant holders should take these interests into account in deciding whether to approve the proposals set forth in this proxy statement/prospectus.
These interests include, among other things:
| the fact that the GGI Initial Stockholders have agreed not to redeem any Founder Shares or GGI Class A Common Stock held by them in connection with a stockholder vote to approve a proposed initial business combination; |
| the fact that the GGI Initial Stockholders have agreed to waive their rights to conversion price adjustments with respect to any Founder Shares they may hold in connection with the consummation of the Business Combination and therefore, the Founder Shares will convert on a one-for-one basis into Class A ADSs at the Closing; |
| the fact that the GGI Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if GGI fails to complete an initial business combination by March 25, 2023; |
| the fact that the GGI Sponsor paid an aggregate of $25,000 for 21,562,500 Founder Shares at approximately $0.001 per share, and, after giving effect to the cancellation of 1,562,500 Founder Shares on May 9, 2021, the remaining 20,000,000 Founder Shares will become worthless if GGI fails to complete an initial business combination by March 25, 2023. In particular, in exchange for serving on the GGI Board, GGIs independent directors, Mr. Bort, Ms. Marcellino and Ms. Tellem, each received 25,000 Founder Shares at their original purchase price of $0.001 per share from the GGI Sponsor. Because these Founder Shares will become worthless if GGI fails to complete an initial business combination by March 25, 2023, GGIs independent directors may have a conflict of interest in determining whether a particular business is an appropriate business with which to effectuate GGIs initial business combination; |
| the fact that after giving effect to the cancellation of 1,562,500 Founder Shares on May 9, 2021 and the forfeiture of up to 1,540,835 shares of GGI Class F Common Stock pursuant to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, the remaining 18,459,165 Founder Shares that will be exchanged for Class A ADSs at the Closing will have a significantly higher value than their aggregate purchase price, which if unrestricted and freely tradable would be valued at approximately $185 million (however, given the restrictions on such shares, GGI believes such shares have a lesser value); |
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| the fact that, given the differential in the purchase price that the GGI Sponsor paid for the Founder Shares as compared to the price of the GGI Public Units and the substantial number of Class A ADSs that the GGI Sponsor will receive upon exchange of the Founder Shares at the Closing, the GGI Sponsor and its affiliates may earn a positive rate of return on their investment even if the Class A ADSs trade below the price initially paid for the GGI Public Units in the GGI IPO and GGI Public Stockholders experience a negative rate of return following the completion of the Business Combination; |
| the fact that the GGI Sponsor paid an aggregate of approximately $18,000,000 for its 9,000,000 GGI Private Placement Warrants, and that such GGI Private Placement Warrants will expire worthless if an initial business combination is not consummated by March 25, 2023. The GGI Private Placement Warrants are identical to the GGI Public Warrants sold as part of the GGI Public Units except that, so long as they are held by the GGI Sponsor or its permitted transferees: (i) they will not be redeemable by GGI, except as described in the Existing Warrant Agreement; (ii) they (including the GGI Class A Common Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the GGI Sponsor until 30 days after the completion of an initial business combination; (iii) they may be exercised by the holders on a cashless basis; and (iv) they are subject to registration rights. For additional information regarding the GGI Private Placement Warrants and the GGI Public Warrants, please see the Existing Warrant Agreement, attached hereto as Annex C; |
| the fact that, in connection with the Business Combination, each GGI Private Placement Warrant will, in the event the Warrant Amendment Proposal is approved prior to the Effective Time, be converted into the right to receive one Class C-2 ADS, issued against the deposit of an underlying Post-Combination Company Class C-2 Share, which will be exercisable to acquire a Post-Combination Company Class A Share in the form of a Class A ADS on substantially the same terms as the GGI Private Placement Warrants; |
| the fact that, in connection with the Business Combination, each GGI Private Placement Warrant will, in the event the Warrant Amendment Proposal is not approved prior to the Effective Time, be converted into the right to receive one PP ADW, issued against the deposit of an underlying Post-Combination Company Warrant, which will be exercisable to acquire a Post-Combination Company Class A Share in the form of a Class A ADS on substantially the same terms as the GGI Private Placement Warrants; |
| the continued right of the GGI Sponsor to hold the Class A ADSs to be issued to the GGI Sponsor upon exercise of Class C-2 ADSs or ADWs following the Business Combination, subject to certain lock-up periods; |
| the fact that if the Trust Account is liquidated, including in the event GGI is unable to complete an initial business combination within the required time period, the GGI Sponsor has agreed to indemnify GGI to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which GGI has entered into an acquisition agreement or claims of any third party (other than the independent public accountants) for services rendered or products sold to GGI, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account; |
| the continued indemnification of the existing directors and officers of GGI and the continuation of the directors and officers liability insurance after the Business Combination; |
| the fact that the GGI Sponsor and GGIs officers and directors will lose their entire investment in GGI and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by March 25, 2023, including the expected reimbursement at the closing of an initial business combination of approximately $615,000 of an aggregate of approximately $948,000 of expenses incurred by GGI Sponsor and its affiliates as of March 1, 2022; |
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| the fact that the GGI Sponsor made available to GGI a loan of up to $4,000,000 pursuant to a promissory note, of which a net amount of $2,500,000 was advanced by the GGI Sponsor to GGI as of March 1, 2022, and that the note will mature on the earlier of March 11, 2023 and the date on which GGI consummates an initial business combination; |
| the fact that GGI has entered into the Sponsor Subscription Agreement, pursuant to which the GGI Sponsor has agreed to purchase approximately 891,000 Post-Combination Company Class A Shares in the form of Class A ADSs at a purchase price of $9.09 per share on the date of Closing, and the GGI Sponsor has the right to syndicate its commitment to acquire such Class A ADSs in advance of the Closing; |
| the fact that Guggenheim Securities, LLC, an affiliate of the GGI Sponsor and Andrew Rosenfield, is acting as a joint placement agent in connection with the Subscription Investments and will receive a portion of a transaction fee equal to 3% of the gross proceeds raised by the placement agents in connection with the Subscription Investments, and as a financial advisor to GGI for no additional fee; |
| the fact that the GGI Sponsor and GGIs officers and directors would beneficially own the following number of Class A ADSs at the Closing: |
Name of Person/Entity |
Number of Class A ADSs(1) |
Value of Class A ADSs(2) |
||||||
Gores Guggenheim Sponsor LLC(3) |
19,350,375 | $ | 193,503,740 | |||||
GGP Sponsor Holdings LLC(3) |
19,350,375 | $ | 193,503,740 | |||||
Alec Gores(3) |
19,350,375 | $ | 193,503,740 | |||||
Andrew Rosenfield(3) |
19,350,375 | $ | 193,503,740 | |||||
Mark Stone(4) |
171,841 | $ | 1,718,410 | |||||
Andrew McBride |
20,892 | $ | 208,920 | |||||
Randall Bort |
25,000 | $ | 250,000 | |||||
Elizabeth Marcellino |
25,000 | $ | 250,000 | |||||
Nancy Tellem(5) |
40,670 | $ | 406,700 |
(1) | Does not reflect beneficial ownership of Class A ADSs subject to exercise of Post-Combination Company Class C Shares or Post-Combination Company Warrants, because such shares or warrants, as applicable, are not exercisable within 60 days of the date of this proxy statement/prospectus. |
(2) | Assumes a value of $10.00 per share, the deemed value of the GGI Common Stock in the Business Combination. |
(3) | Represents shares held by Gores Guggenheim Sponsor LLC which is jointly controlled indirectly by Mr. Gores and GGP Sponsor Holdings LLC. GGP Sponsor Holdings LLC is controlled by Mr. Rosenfield. Each of Mr. Gores and GGP Sponsor Holdings LLC may be deemed to beneficially own 19,350,375 Class A ADSs and ultimately exercises voting and dispositive power of the securities held by Gores Guggenheim Sponsor LLC. Voting and disposition decisions with respect to such securities are jointly made by Mr. Gores and GGP Sponsor Holdings LLC. Each of Mr. Gores, GGP Sponsor Holdings LLC and Mr. Rosenfield disclaim beneficial ownership of these securities except to the extent of any pecuniary interest therein. |
(4) | Reflects Class A ADSs to be purchased by Mark Stone and his immediate family as December PIPE Investors. |
(5) | Includes 15,670 Class A ADSs to be purchased by Nancy Tellem as a December PIPE Investor. |
| the fact that, pursuant to the Business Combination Agreement, the Post-Combination Company Board will include one independent director as reasonably determined by the GGI Sponsor and consented to by Parent. In addition, pursuant to the Post-Combination Articles, the Post-Combination Company Board will be subject to restrictions on its ability to convene a general meeting which proposes a resolution to remove an independent director, subject to certain conditions, and pursuant to the Shareholder Acknowledgement Agreement, Parent and the Parent Shareholders are subject to undertakings that restrict on their ability to vote in favor of the removal of independent directors on the Post-Combination Company Board, and the GGI Sponsor will have third party beneficiary rights to enforce such undertakings; |
| the fact that the GGI Initial Stockholders have entered into the Registration Rights Agreement as Registration Rights Holders, which provides such Registration Rights Holders and their permitted transferees with registration rights in respect of certain Post-Combination Company securities, ADSs and ADWs at the Closing; |
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| the fact that the GGI Initial Stockholders have agreed to vote any shares of GGI Common Stock owned by them in favor of the Business Combination Proposal; |
| the fact that GGI, Parent, ListCo and the GGI Initial Stockholders have entered into the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, pursuant to which the GGI Initial Stockholders have, among other things, agreed to (i) vote their GGI Class F Common Stock in favor of each of the proposals at the Special Meeting and referenced in this proxy statement/prospectus, and against any alternative business combination, (ii) waive all adjustments to the conversion ratio set forth in the Current GGI Certificate with respect to the GGI Class F Common Stock, (iii) be bound by certain transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants, and (iv) not to transfer any Class A ADSs issued pursuant to the Business Combination Agreement in respect of shares of GGI Class F Common Stock during the period beginning on the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein; and |
| the fact that GGI will reimburse the GGI Sponsor for the fees and expenses it incurs in connection with the Business Combination; provided, that such fees and expenses, together with all of GGIs other fees and expenses in connection with the Business Combination, are not in excess of $60 million in the aggregate. |
In the aggregate, the GGI Sponsor and its affiliates have approximately $218,000,000 at risk that depends upon the completion of a business combination. Specifically, $200,000,000 of such amount is the value of the GGI Sponsors and its affiliates GGI Class F Common Stock (assuming a value of $10.00 per share, the deemed value of the GGI Common Stock in the Business Combination), and $18,000,000 of such amount is the value of the GGI Private Placement Warrants held by the GGI Sponsor (based on the purchase price of $2.00 per GGI Private Placement Warrant). There are no fees contingent upon a business combination payable to the GGI Sponsors affiliates upon consummation of the Business Combination. The foregoing interests present a risk that the GGI Sponsor and its affiliates will benefit from the completion of a business combination, including in a manner that may not be aligned with GGI Public Stockholders. As such, the GGI Sponsor may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to GGI Public Stockholders rather than liquidate.
These interests may influence the GGI Board in making their recommendation that GGI stockholders vote in favor of the approval of the Business Combination Proposal and the other proposals to be voted on at the Stockholder Special Meeting, and their recommendation that the GGI warrant holders vote in favor of the proposals to be voted on at the Warrant Holder Meeting.
Under Delaware law, officers and directors owe the following fiduciary duties:
| duty to act in good faith, with the care of a prudent person, and in the best interest of the corporation as a whole. |
| duty to refrain from self-dealing, usurping corporate opportunities and receiving improper personal benefits. |
| duty to make decisions on an informed basis, in good faith and in the honest belief that the action was taken in the best interest of the corporation and that these decisions will be protected by the business judgment rule. |
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
| the corporation could financially undertake the opportunity; |
| the opportunity is within the corporations line of business; and |
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| it would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of the corporation. |
Accordingly, as a result of multiple business affiliations, GGIs officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. Furthermore, the Current GGI Certificate provides that the doctrine of corporate opportunity will not apply with respect to any of GGIs officers or directors in circumstances where the application of the doctrine would conflict with any fiduciary duties or contractual obligations they may have, and none of GGIs directors or officers will be required to offer any such corporate opportunity of which he may become aware to GGI. Below is a table summarizing the entities to which GGIs officers and directors currently have fiduciary duties or contractual obligations that may present a conflict of interest:
Individual |
Entity |
Entitys Business |
Affiliation | |||
Alec Gores | The Gores Group, LLC | Investments | Chief Executive Officer | |||
Gores Holdings VII, Inc.(1) | Investments | Chairman | ||||
Gores Holdings VIII, Inc.(1)(2) | Investments | Chairman | ||||
Gores Holdings IX, Inc.(1) | Investments | Chairman | ||||
Gores Technology Partners, Inc.(1) | Investments | Chairman | ||||
Gores Technology Partners II, Inc.(1) | Chairman | |||||
Luminar Technologies, Inc. | Automotive | Director | ||||
Mark Stone | The Gores Group, LLC | Investments | Director and Chief Executive Officer | |||
Gores Holdings VII, Inc.(1) | Investments | Chief Executive Officer | ||||
Gores Holdings VIII, Inc.(1)(2) | Investments | Chief Executive Officer | ||||
Gores Holdings IX, Inc.(1) | Investments | Chief Executive Officer | ||||
Andrew M. Rosenfield | Guggenheim Partners | Financial Services | President and Managing Partner | |||
Guggenheim Special Purpose Acquisition Corp. I | Financial Services | Chief Executive Officer and Director | ||||
The University of Chicago Law School | Education | Professor of Law | ||||
Dreamscape Immersive | Technology/ Entertainment/ Fashion |
Director | ||||
Birdwell California Category 41 | Technology/ Entertainment |
Director | ||||
Andy McBride | The Gores Group, LLC | Investments | Chief Financial Officer and Secretary | |||
Gores Holdings VII, Inc.(1) | Investments | Chief Financial Officer and Secretary | ||||
Gores Holdings VIII, Inc.(1)(2) | Investments | Chief Financial Officer and Secretary | ||||
Gores Holdings IX, Inc.(1) | Investments | Chief Financial Officer and Secretary | ||||
Gores Technology Partners, Inc.(1) | Investments | Chief Financial Officer and Secretary | ||||
Gores Technology Partners II, Inc.(1) | Investments | Chief Financial Officer and Secretary | ||||
Randall Bort | Gores Investments Metropoulos II, Inc.(1)(2) | Investments | Director | |||
Gores Holdings VII, Inc.(1) | Investments | Director | ||||
Gores Holdings VIII, Inc. (1)(2) | Investments | Director | ||||
Gores Holdings IX, Inc.(1) | Investments | Director | ||||
SandTree Holdings, LLC | Real Estate Investments | Partner | ||||
Childrens Bureau | Non-Profit | Trustee | ||||
Elizabeth Marcellino | Gores Holdings VII, Inc.(1) | Investments | Director |
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Individual |
Entity |
Entitys Business |
Affiliation | |||
Gores Holdings IX, Inc.(1) | Investments | Director | ||||
Jumpstart | Non-Profit | Director | ||||
Society of Professional Journalists, Greater Los Angeles Chapter | Society | Treasurer and Director | ||||
Ardagh Metal Packaging S.A. | Manufacturing | Director | ||||
Nancy Tellem | Metro-Goldwyn-Mayer | Media | Director | |||
LeagueApps, Inc. | Software | Advisor | ||||
KODE Labs, Inc. | Software | Advisor | ||||
Rocket Companies, Inc. | Financial Services | Director | ||||
TV Pass | Media | Advisor | ||||
Cranbrook Art Academy and Museum | Non-Profit | Director | ||||
Seeds of Peace, Inc. | Non-Profit | Director |
(1) | This entitys amended and restated charter contains a waiver of the corporate opportunity doctrine. Accordingly, there is no conflicting obligation to bring opportunities to this entity before GGI. |
(2) | Upon the consummation of the pending acquisition of Footprint by Gores Holdings VIII, the individual will resign from such position. |
GGI is not prohibited from pursuing an initial business combination with a company that is affiliated with the GGI Sponsor or GGIs officers or directors. In the event GGI seeks to complete an initial business combination with such a company, GGI, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA, or from an independent accounting firm, that the initial business combination is fair to GGI or its stockholders from a financial point of view.
The GGI Initial Stockholders have agreed to vote any Founder Shares held by them and any GGI Public Shares purchased during or after the GGI IPO in favor of the Business Combination and GGIs officers and directors have also agreed to vote any GGI Public Shares purchased during or after the GGI IPO in favor of the Business Combination.
Limitation on Liability and Indemnification of Officers and Directors
The Current GGI Certificate provides that GGIs officers and directors will be indemnified by GGI to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, the Current GGI Certificate provides that GGIs directors will not be personally liable for monetary damages to GGI or GGI stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to GGI or GGI stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.
GGI has entered into agreements with its officers and directors to provide contractual indemnification in addition to the indemnification provided for in the Current GGI Certificate. GGIs current bylaws also permit GGI to maintain insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. GGI has obtained a policy of directors and officers liability insurance that insures GGIs officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures GGI against its obligations to indemnify GGIs officers and directors.
These provisions may discourage stockholders from bringing a lawsuit against GGIs directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit GGI and GGI stockholders. Furthermore, a stockholders investment may be adversely affected to the extent GGI pays the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.
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GGI believes that these provisions, the directors and officers liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
Periodic Reporting and Financial Information
GGI has registered GGI Public Units, GGI Class A Common Stock and GGI Public Warrants under the Exchange Act and have reporting obligations, including the requirement that GGI file annual, quarterly and current reports with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at: http://www.sec.gov. The contents of this website are not incorporated into this filing. Further, references to the uniform resource locator (URL) for this website are intended to be inactive textual references only.
GGI will be required to evaluate its internal control procedures for fiscal years ending after December 31, 2022 as required by the Sarbanes-Oxley Act. Only in the event GGI is deemed to be a large accelerated filer or an accelerated filer will GGI be required to have its internal control procedures audited. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of the Post-Combination Company to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
GGI is an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, GGI is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in GGIs periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find GGIs securities less attractive as a result, there may be a less active trading market for GGIs securities and the prices of GGIs securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. GGI intends to take advantage of the benefits of this extended transition period.
GGI will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following March 25, 2026, the fifth anniversary of the GGI IPO Closing Date, (b) in which GGI has total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time), or (c) in which GGI is deemed to be a large accelerated filer, which means the market value of GGI Class A Common Stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (ii) the date on which GGI has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to emerging growth company shall have the meaning associated with it in the JOBS Act.
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GGIS MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of GGIs financial condition and results of operations should be read in conjunction with the financial statements and the notes related thereto which are included elsewhere in this proxy statement/prospectus. This discussion contains forward-looking statements reflecting GGIs current expectations, estimates and assumptions concerning events and financial trends that may affect GGIs future operating results or financial position. Actual results and timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections of this proxy statement/prospectus titled Risk Factors and Cautionary Note Regarding Forward-Looking Statements.
Overview
GGI is a blank check company incorporated on December 21, 2020 as a Delaware corporation and formed for the purpose of effecting a business combination with one or more target businesses. GGI completed the GGI IPO on March 25, 2021. GGI presently has no revenue, has had losses since its inception from incurring formation costs and has had no operations other than the active solicitation of a target business with which to complete a business combination.
Recent Developments
Proposed Polestar Business Combination
On September 27, 2021, GGI entered into a Business Combination Agreement, by and among GGI, Parent, Polestar Singapore, Polestar Sweden, ListCo, and Merger Sub, which provides for, among other things, the Business Combination. The transactions set forth in the Business Combination Agreement, including the Business Combination, will constitute a Business Combination as contemplated by the Current GGI Certificate.
The Business Combination Agreement was unanimously approved by the GGI Board on September 25, 2021.
On December 17, 2021, the parties to the Business Combination Agreement entered into Amendment No. 1 to the Business Combination Agreement to provide for certain administrative changes to reflect the December PIPE Subscription Agreements.
Amendment No. 1 to the Business Combination Agreement was unanimously approved by the Board on December 17, 2021.
On March 24, 2022, the parties to the Business Combination Agreement entered into Amendment No. 2 to the Business Combination Agreement to provide for certain administrative changes to reflect the March PIPE Subscription Agreements.
Amendment No. 2 to the Business Combination Agreement was unanimously approved by the Board on March 24, 2022.
The Business Combination Agreement
Pre-Closing Reorganization
In connection with the Business Combination, prior to the Closing, Parent will, and will cause ListCo, Polestar Singapore, Polestar Sweden and their respective subsidiaries to, complete the Pre-Closing Reorganization. As consideration for the Pre-Closing Reorganization, ListCo will issue to Parent Post-Combination Company Class A Shares and Post-Combination Company Class B Shares, such that, following the Pre-Closing Reorganization, Parent will hold an aggregate number of Post-Combination Company Shares equal to approximately (a) $20,003,000,000 divided by $10.00, less (b) (i) the aggregate principal amount due in respect the Parent Convertible Notes, divided by (ii) the applicable conversion price of such notes, less (c) 58,882,610, which represents the aggregate number of Post-Combination Company Preference Shares issued pursuant to the Volvo Cars Preference Subscription Agreement.
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As additional consideration for Parents contribution to ListCo of all the issued and outstanding equity securities of Polestar Sweden, Parent will be entitled to receive, subject to the terms provided in the Business Combination Agreement, earn out shares from ListCo, issuable in Post-Combination Company Class A Shares and Post-Combination Company Class B Shares up to an aggregate number equal to approximately (a) 0.075 multiplied by (b) the number of issued and outstanding Post-Combination Company Shares as of immediately after the Effective Time (including Post-Combination Company Shares issued pursuant to the Subscription Agreements), rounded down to the nearest whole number.
The Merger
Following the Pre-Closing Reorganization and pursuant to the Business Combination Agreement, at the Closing, Merger Sub will merge with and into GGI in the Merger, pursuant to which the separate corporate existence of Merger Sub will cease, with GGI being the surviving corporation and becoming a wholly owned subsidiary of ListCo, and each share of GGI Common Stock issued and outstanding immediately prior to the Effective Time will be exchanged for one Class A ADS duly and validly issued against the deposit of an underlying Post-Combination Company Class A Share with the depositary in which ListCo has established an ADR Facility. In connection with the Merger, (a) in the event the Warrant Amendment Proposal is approved prior to the Effective Time, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-1 ADS representing one Post-Combination company Class C-1 Share and each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-2 ADS representing one Post-Combination Company Class C-2 Share or (b) in the event that the Warrant Amendment Proposal is not approved prior to the Effective Time, each GGI Warrant will be automatically cancelled and extinguished and converted into the right to receive one ADW.
PIPE Subscription Agreements
Concurrently with the execution and delivery of the Business Combination Agreement, GGI and ListCo entered into the Initial PIPE Subscription Agreements with the Initial PIPE Investors, pursuant to which the Initial PIPE Investors have agreed to purchase, substantially concurrently with the Closing, the Initial PIPE Shares for a purchase price of $9.09 per share in a private placement, for the Initial PIPE Investment Amount.
On December 17, 2021, GGI and ListCo entered into the December PIPE Subscription Agreements with the December PIPE Investors, which include certain affiliates and employees of the GGI Sponsor. Pursuant to the December PIPE Subscription Agreements, the December PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of 14.3 million Post-Combination Company Class A Shares in the form of Class A ADSs for an average price of approximately $9.54 per Class A ADS, for an amount of approximately $136.0 million.
On March 24, 2022, GGI and ListCo entered into the March PIPE Subscription Agreements with the March PIPE Investors, which include certain affiliates and employees of the GGI Sponsor. Pursuant to the March PIPE Subscription Agreements, the March PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of 2.8 million Post-Combination Company Class A Shares in the form of Class A ADSs for an average price of approximately $9.57 per Class A ADS, for an amount of approximately $27.2 million. The December PIPE Subscription Agreements and the March PIPE Subscription Agreements are substantially similar to the Initial PIPE Subscription Agreements, except with regard to purchase price.
As a result of the December PIPE Assignment and the March PIPE Assignments, the aggregate investment amount and number of Class A ADSs to be purchased pursuant to the Subscription Agreements remains unchanged.
The issuance of the PIPE Shares pursuant to the PIPE Subscription Agreements is contingent upon, among other customary closing conditions, the substantially concurrent consummation of the Business Combination. Pursuant to the PIPE Subscription Agreements, ListCo agreed to file with the SEC (at ListCos sole cost and expense),
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within 30 calendar days after the date of Closing, the Resale Registration Statement registering the resale of the PIPE Shares, and to use its commercially reasonable efforts to have the Resale Registration Statement declared effective as soon as practicable after the filing thereof.
Sponsor Subscription Agreement
On September 27, 2021, GGI and ListCo entered into the Sponsor Subscription Agreement with GGI Sponsor, pursuant to which, the GGI Sponsor agreed to purchase an additional 2.15 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.09 per share on the date of Closing, for an aggregate investment of approximately $82.5 million. Pursuant to the Sponsor Subscription Agreement, the GGI Sponsor has the right to assign its commitment to purchase the Class A ADSs under the Sponsor Subscription Agreement in advance of the Closing. In connection with the December Sponsor Assignment on December 17, 2021, (i) the GGI Sponsor assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $63.0 million to the December PIPE Investors and (ii) GGI, ListCo and the GGI Sponsor amended and restated the Sponsor Subscription Agreement to reflect the December Sponsor Assignment. In connection with the March Sponsor Assignment on March 24, 2022, (i) the GGI Sponsor further assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $11.4 million to certain investors and (ii) GGI, ListCo and the GGI Sponsor amended the Sponsor Subscription Agreement to reflect the March Sponsor Assignment. As a result, pursuant to the Sponsor Subscription Agreement, Sponsor has agreed to purchase approximately 891,000 Class A ADSs for a purchase price of approximately $9.09 per Class A ADS on the date of Closing, for an aggregate investment of approximately $8.1 million. The Sponsor Subscription Agreement is substantially similar to the Initial PIPE Subscription Agreements, except that the GGI Sponsor has the right to syndicate its commitment to acquire the Class A ADSs to be purchased under the Sponsor Subscription Agreement in advance of the Closing.
Volvo Cars Subscription Agreement
On September 27, 2021, GGI and ListCo entered into the Volvo Cars PIPE Subscription Agreement with Snita, a corporation organized under the laws of Netherlands and a wholly owned indirect subsidiary of Volvo Cars, pursuant to which Snita has agreed to purchase an additional 10 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $10.00 per share on the date of Closing. Pursuant to the Volvo Cars Subscription Agreement, Snita has the right to assign its commitment to purchase the Class A ADSs under the Volvo Cars Subscription Agreement in advance of the Closing. In connection with the December Volvo Assignment on December 17, 2021, (i) Snita assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $73.0 million to purchase the Class A ADSs to the December PIPE Investors and (ii) GGI, ListCo and Snita amended and restated the Volvo Car Subscription Agreement to reflect the December Volvo Assignment. In connection with the March Volvo Assignment on March 24, 2022, (i) Snita further assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $15.8 million to certain investors and (ii) GGI, ListCo and Snita amended the Volvo Cars Subscription Agreement to reflect the March Volvo Assignment. As a result, pursuant to the Volvo Cars Subscription Agreement Snita has agreed to purchase approximately 1.1 million Class A ADSs for a purchase price of $10 per Class A ADS on the date of Closing, for an aggregate investment of approximately $11.2 million. The Volvo Cars Subscription Agreement is substantially similar to the Initial PIPE Subscription Agreements, except with regard to purchase price. Snita may, in accordance with the terms of the Volvo Cars Subscription Agreement, syndicate its commitment to acquire the Class A ADSs to be purchased under the Volvo Cars Subscription Agreement in advance of the Closing.
Volvo Cars Preference Subscription Agreement
In addition, and in connection with the foregoing and concurrently with the execution of the Business Combination Agreement, ListCo entered into the Volvo Cars Preference Subscription Agreement with Snita. On March 24, 2022, ListCo and Snita entered into an amendment to the Volvo Cars Preference Subscription
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Agreement. Pursuant to the Volvo Cars Preference Subscription Agreement, Snita agreed to purchase, upon and subject to the Closing, for the Post-Combination Company Preference Shares for an aggregate subscription price of $10.00 per share, for an aggregate investment amount equal to the Volvo Cars Preference Amount. The proceeds of such subscription will be used to satisfy certain accounts payable that are or will be due and payable by certain subsidiaries of Parent to Volvo Cars. As of the date hereof, it is currently anticipated that all of the Post-Combination Company Preference Shares will convert into Post-Combination Company Class A Shares at Closing, in accordance with, and subject to, the terms of the Post-Combination Company Preference Shares.
Results of Operations
For the period from January 1, 2021 to December 31, 2021, GGI had net loss of $(81,941,027) of which $72,750,000 is a non-cash expense related to the change in fair value of the warrant liability. GGIs business activities during the year mainly consisted of identifying and evaluating prospective acquisition candidates for an initial business combination. GGI believes that GGI has sufficient funds available to complete its efforts to effect an initial business combination with an operating business by March 25, 2023. However, if GGIs estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, GGI may have insufficient funds available to operate its business prior to an initial business combination.
As indicated in the accompanying GGI financial statements, at December 31, 2021, GGI had $302,504 in cash and deferred offering costs of $28,000,000. Further, GGI expects to continue to incur significant costs in the pursuit of its acquisition plans. GGI cannot assure investors that its plans to complete an initial business combination will be successful.
Liquidity and Capital Resources
On February 10, 2021, the GGI Sponsor purchased 21,562,500 Founder Shares for $25,000, or approximately $0.001 per share. On April 8, 2021, the GGI Sponsor forfeited 1,562,500 Founder Shares for no consideration, resulting in an aggregate of 20,000,000 outstanding Founder Shares. The number of Founder Shares issued was determined based on the expectation that such Founder Shares would represent 20% of the outstanding shares upon completion of the GGI IPO. On March 22, 2021, the GGI Sponsor transferred 25,000 Founder Shares to each of the independent directors at their original purchase price.
On March 25, 2021, GGI consummated the GGI public offering of 75,000,000 Units at a price of $10.00 per Unit, generating gross proceeds of $750,000,000. On the GGI IPO Closing Date, GGI completed the private sale of an aggregate of 8,500,000 GGI Private Placement Warrants, each exercisable to purchase one share of GGI Common Stock at $11.50 per share, to the GGI Sponsor, at a price of $2.00 per Private Placement Warrant, generating gross proceeds, before expenses, of $17,000,000. After deducting the underwriting discounts and commissions (excluding the Deferred Discount, which amount will be payable upon consummation of the Business Combination, if consummated), the total net proceeds from the GGI IPO and the sale of the GGI Private Placement Warrants were $752,000,000, of which $750,000,000 (or $10.00 per share sold in the GGI IPO) was placed in the Trust Account. The amount of proceeds not deposited in the Trust Account was $2,000,000 at the closing of the GGI IPO. On April 22, 2021, the underwriters partially exercised their over-allotment option to purchase 5,000,000 newly issued units, and the closing of the sale of the additional Units pursuant to such exercise occurred on April 22, 2021. The issuance by GGI of 5,000,000 over-allotment option units at a price of $10.00 per unit resulted in gross proceeds of $50,000,000 placed in the Trust Account. On April 22, 2021, substantially concurrently with the sale of the over-allotment option units, GGI completed a private placement with the GGI Sponsor for an additional 500,000 warrants at a price of $2.00 per warrant, generating gross proceeds of $1,000,000 used to pay the additional deferred underwriting discount. The remainder of the over-allotment option expired on May 9, 2021. Interest earned on the funds held in the Trust Account may be released to fund Regulatory Withdrawals, subject to an annual limit of $900,000, for a maximum of 24 months and/or additional amounts necessary to pay franchise and income taxes.
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Prior to the completion of the GGI IPO, GGI borrowed $300,000 by the issuance of an unsecured promissory note (the Note) from the GGI Sponsor for $300,000 to cover expenses related to the GGI IPO. This Note was non-interest bearing and payable on the earlier of February 28, 2022 or the completion of the GGI IPO. This Note was repaid in full upon the completion of the GGI IPO.
On April 20, 2021, the GGI Sponsor made available to GGI a loan of up to $4,000,000 pursuant to a promissory note issued by GGI to the GGI Sponsor. The proceeds from the note will be used for on-going operational expenses and certain other expenses in connection with an initial business combination. The note is unsecured, non-interest bearing and matures on the earlier of: (i) March 11, 2023 or (ii) the date on which GGI consummates an initial business combination. As of December 31, 2021, the amount advanced by the GGI Sponsor to GGI was $2,000,000, which was increased to $2,500,000 as of March 1, 2022.
As of December 31, 2021 and December 31, 2020, GGI had cash held outside of the Trust Account of $302,504 and $0, respectively, which is available to fund working capital requirements. Additionally, interest earned on the funds held in the Trust Account may be released to GGI to fund Regulatory Withdrawals for a maximum of 24 months and/or additional amounts necessary to pay franchise and income taxes.
In addition, at December 31, 2021 and December 31, 2020, GGI had current liabilities of $104,929,383 and $1,782 and working capital of ($103,149,599) and ($1,782), respectively, the balances of which are primarily related to warrants GGI has recorded as liabilities. Other amounts are related to accrued expenses owed to professionals, consultants, advisors and others who are working on seeking an initial business combination. Such work is continuing after December 31, 2021 and amounts are continuing to accrue. Additionally, the warrant liability will not impact GGIs liquidity until an initial business combination has been consummated, as they do not require cash settlement until such event has occurred.
GGI intends to use substantially all of the funds held in the Trust Account, including interest (which interest shall be net of Regulatory Withdrawals and taxes payable) to consummate an initial business combination. Moreover, GGI may need to obtain additional financing either to complete an initial business combination or because GGI becomes obligated to redeem a significant number of shares of GGI Class A Common Stock upon completion of an initial business combination. Subject to compliance with applicable securities laws, GGI would only complete such financing simultaneously with an initial business combination. If GGI is unable to complete an initial business combination because it does not have sufficient funds available, GGI will be forced to cease operations and liquidate the Trust Account. In addition, following an initial business combination, if cash on hand is insufficient, GGI may need to obtain additional financing in order to meet its obligations. To the extent that GGIs capital stock or debt is used, in whole or in part, as consideration to consummate an initial business combination, the remaining proceeds held in the Trust Account, if any, will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue GGIs growth strategy. Following the closing of a Business Combination, GGI does not expect there to be remaining proceeds in the Trust Account.
As of December 31, 2021, GGI did not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities. In connection with the GGI IPO, GGI entered into an administrative services agreement to pay monthly recurring expenses of $20,000 to an affiliate of the GGI Sponsor for office space, utilities and secretarial support. The administrative services agreement terminates upon the earlier of the completion of a business combination or the liquidation of GGI.
The underwriters are entitled to underwriting discounts and commissions of 5.5% ($44,000,000), of which 2.0% ($18,000,000) was paid upon close of the GGI IPO, and 3.5% ($28,000,000) was deferred. The Deferred Discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event that GGI completes a Business Combination, subject to the terms of the underwriting agreement. The underwriters are not entitled to any interest accrued on the Deferred Discount.
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Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with U.S. GAAP and pursuant to the accounting and disclosure rules and regulations of the SEC, and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of GGIs management, necessary for a fair presentation of the financial position as of December 31, 2021 and the results of operations and cash flows for the periods presented. Operating results for the year ended December 31, 2021 are not necessarily indicative of results that may be expected for any other period.
Offering Costs
GGI complies with the requirements of FASB ASC Topic 340-10-S99-1, Other Assets and Deferred Costs SEC Materials (ASC 340-10-S99) and SEC Staff Accounting Bulletin (SAB) Topic 5A Expenses of Offering. Offering costs were $44,757,840 (including $44,000,000 in underwriters fees) consisting principally of professional and registration fees incurred through the balance sheet date that are related to the GGI IPO and are charged to stockholders equity upon the completion of the GGI IPO. Since GGI is required to classify the warrants as derivative liabilities, offering costs totaling $832,496 are reflected as an expense in the statements of operations.
Income Taxes
GGI follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, Income Taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
For those liabilities or benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. GGI recognizes accrued interest and penalties related to unrecognized tax liabilities as income tax expense. No amounts were accrued for the payment of interest and penalties at December 31, 2021.
GGI may be subject to potential examination by U.S. federal, states or foreign jurisdiction authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income amounts in various tax jurisdictions and compliance with U.S. federal, states or foreign tax laws.
GGI is incorporated in the State of Delaware and is required to pay franchise taxes to the State of Delaware on an annual basis.
Recently Issued Accounting Pronouncements Not Yet Adopted
GGIs management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on GGIs financial statements based on current operations of GGI. The impact of any recently issued accounting standards will be re-evaluated on a regular basis or if a Business Combination is completed where the impact could be material.
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Going Concern Consideration
If GGI does not complete its business combination by March 25, 2023, and unless GGI amends the Current GGI Certificate and amends certain other agreements into which it has entered to extend the life of GGI, then GGI will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the common stock sold as part of the units in the GGI IPO, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of franchise and income taxes payable and less up to $100,000 of such net interest which may be distributed to GGI to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of GGIs remaining stockholders and the GGI Board, dissolve and liquidate, subject in each case to GGIs obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the GGI IPO. In addition, if GGI fails to complete its business combination by March 25, 2023, there will be no redemption rights or liquidating distributions with respect to the GGI Warrants, which will expire worthless.
In addition, at December 31, 2021 and December 31, 2020, GGI had current liabilities of $104,929,383 and $1,782 and working capital of ($103,149,599) and ($1,782), respectively, the balances of which are primarily related to GGI Warrants GGI has recorded as liabilities as described in Notes 2 and 3 of the Notes to GGIs financial statements, which are included elsewhere in this proxy statement/prospectus. Other amounts are related to accrued expenses owed to professionals, consultants, advisors and others who are working on seeking a Business Combination as described in Note 1 of the Notes to GGIs financial statements, which are included elsewhere in this proxy statement/prospectus. Such work is continuing after December 31, 2021 and amounts are continuing to accrue. Additionally, the warrant liability will not impact GGIs liquidity until a business combination has been consummated, as GGI does not require cash settlement until such event has occurred.
Critical Accounting Policies and Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires GGIs management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. GGI has identified the following as GGIs critical accounting policies:
Net loss per common share
GGI has two classes of shares, which are referred to as GGI Class A Common Stock and the Founders Shares. Net income/(loss) per common share is computed utilizing the two-class method. The two-class method is an earnings allocation formula that determines earnings per share separately for each class of common stock based on an allocation of undistributed earnings per the rights of each class. At December 31, 2021, GGI did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of GGI under the treasury stock method. As a result, diluted net income/(loss) per common share is the same as basic net income/(loss) per common share for the period.
Warrant Liability
GGI accounts for the GGI Warrants issued in connection with the GGI IPO in accordance with the guidance contained in ASC 815-40 under which the GGI Warrants do not meet the criteria for equity treatment and must
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be recorded as liabilities. Accordingly, GGI classifies the GGI Warrants as liabilities at their fair value and adjust the GGI Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in GGIs statement of operations. GGI utilizes a Monte Carlo simulation methodology to value the GGI Warrants at each reporting period, with changes in fair value recognized in the statement of operations. The key assumptions in the option pricing model utilized are assumptions related to expected share-price volatility, expected term, risk-free interest rate and dividend yield. The expected volatility as of the GGI IPO Closing Date was derived from observable public warrant pricing on comparable blank-check companies that recently went public in 2020 and 2021. The risk-free interest rate is based on the interpolated U.S. Constant Maturity Treasury yield. The expected term of the GGI Warrants is assumed to be six months until the Closing Date, and the contractual five year term subsequently. The dividend rate is based on the historical rate, which GGI anticipates to remain at zero.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices and/or equity prices. GGIs business activities for the period ended December 31, 2021 consisted solely of organizational activities and activities relating to the GGI IPO and the identification of a target company for an initial business combination. As of December 31, 2021, $800,056,447 (including accrued interest and dividends and subject to reduction by the Deferred Discount due at the consummation of an initial business combination) was held in the Trust Account for the purposes of consummating an initial business combination. As of December 31, 2021, investment securities in the Trust Account consisted of $800,056,447 in money market funds. As of December 31, 2021, the effective annualized rate of return generated by GGIs investments was approximately 0.0007%.
GGI has not engaged in any hedging activities during the year ended December 31, 2021. GGI does not expect to engage in any hedging activities with respect to the market risk to which GGI is exposed.
Changes in and Disagreements with Accounting on Accounting and Financial Disclosures
On November 1, 2021, the audit committee of the GGI Board approved the engagement of Withum as GGIs independent registered public accounting firm to audit GGIs financial statements for the year ended December 31, 2021. Accordingly, KPMG, GGIs prior independent registered public accounting firm, was informed on November 3, 2021 that it was dismissed as GGIs independent registered public accounting firm.
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in GGIs reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including GGIs Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, GGIs Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of GGIs disclosure controls and procedures as of December 31, 2021. Based upon their evaluation, GGIs Chief Executive Officer and Chief Financial Officer concluded that GGIs disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
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Changes in Internal Control Over Financial Reporting
As described below, during the year ended December 31, 2021, GGI remediated the material weakness in internal control over financial reporting that GGI identified as of March 31, 2021.
In connection with GGIs managements assessment of GGIs internal control over financial reporting as of March 31, 2021, GGI identified a material weakness in its internal control over financial reporting. The identified material weakness pertained to GGIs control activities over its accounting for warrants as derivative liabilities, recognition of changes in the estimated fair value of the derivative instruments, and correct equity classification of all GGI Class A Common Stock. GGIs control activities were not designed appropriately to ensure that GGIs related accounting conclusions were sufficiently documented and reviewed for compliance with GAAP. The material weakness resulted in a material misstatement of current liabilities and stockholders equity on GGIs balance sheet as well as a material misstatement of GGIs net income within its statement of operations. This was corrected prior to the issuance of GGIs financial statements for the period ended March 31, 2021.
During the second quarter of 2021, GGIs management enhanced and revised the design of GGIs controls and procedures over GGIs accounting for derivative liabilities and equity treatment of GGI Class A Common Stock. These enhancements include GGIs implementation of additional procedures related to documentation of GGIs managements evaluation of the facts and circumstances supporting its judgments and conclusions surrounding GGIs accounting for derivative liabilities and equity treatment of GGI Class A Common Stock as well as consultation with third-party accounting and valuation experts with relevant knowledge and experience to assist GGIs management with its evaluation of GGIs accounting for such items.
As a result of these enhancements, GGIs management concluded that the material weakness was remediated as of June 30, 2021.
There were no other material changes in GGIs internal control over financial reporting during the year ended December 31, 2021 that have materially affected or are reasonably likely to materially affect GGIs internal control over financial reporting.
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INFORMATION RELATED TO POLESTAR
Summary
Polestar is determined to improve society by accelerating the shift to sustainable mobility.
Polestar is a pure play, premium electric performance car brand headquartered in Sweden, designing products that are engineered to excite consumers and drive change. Polestar defines market-leading standards in design, technology and sustainability. Polestar was established as a premium electric car brand by Volvo Cars and Geely in 2017. Polestar benefits from the technological, engineering and manufacturing capabilities of these established global car manufacturers. Polestar has an asset-light, highly scalable business model with immediate operating leverage.
Polestar 1, an electric performance hybrid GT, was launched to establish Polestar in the premium luxury electric vehicle market in 2019. With a carbon fiber body, Polestar 1 has a combined 609 horse power (hp) and 1,000 Newton-metre (Nm) of torque. Production of the Polestar 1 ceased at the end of 2021. Polestar 2, an electric performance fastback and our first fully electric, high volume car was launched in 2020. Polestar 2 has three variants with a combination of long- and standard range batteries as large as 78 kWh, and dual- and single-motor powertrains with up to 300 kW / 408 hp and 660 Nm of torque. Polestar 1 and Polestar 2 have received major acclaim, winning multiple globally recognized awards across design, innovation and sustainability. Highlights for Polestar 1 include Insider car of the year and GQs Best Hybrid Sports Car. Polestar 2 alone has won over 50 awards, including various Car of the Year awards, the Golden Steering Wheel, Red Dots Best of the Best Product Design and a 2021 Innovation by Design award from Fast Company.
Today Polestars cars are on the road in nineteen markets across Europe, North America, China and Asia Pacific. Polestar intends to continue its rapid market expansion with the aim that its cars will be available in an aggregate of 30 markets by the end of 2023. Polestar also plans to introduce three new electric vehicles by 2024; Polestar 3, an aerodynamically optimized SUV; Polestar 4, a sporty SUV coupe and Polestar 5, a luxury 4 door GT. Polestars target is a production volume of approximately 290,000 vehicles per annum by the end of 2025. With these expanded markets and additional vehicles, Polestar expects to compete in segments constituting almost 80% of the global premium luxury vehicle market by volume of units sold. Polestar believes the premium luxury vehicle segment is one of the fastest growing vehicle segments, and expects the electric-only vehicle portion of this segment to grow at a faster rate than the overall segment.
Polestar has also established an important goal to create a truly climate neutral car by the end of 2030, which it refers to as the Polestar 0 project. The development of a truly climate neutral car by the end of 2030 is a significant milestone on the path to Polestars goal of becoming a climate neutral company by the end of 2040.
Polestars vehicles are currently manufactured at a plant in Luqiao, China that is owned and operated by Volvo Cars. The plant, referred to by Volvo Cars as the Taizhou plant, was acquired by Volvo Cars from Geely in December 2021. Prior to that time, the plant had been owned by Geely and operated by Volvo Cars. The Polestar 2 vehicles have been manufactured at this plant since production commenced in 2020. Commencing with the Polestar 3, Polestar intends to produce vehicles both in China and in Charleston, South Carolina in the United States (a facility operated by Volvo Cars). Polestars ability to leverage the manufacturing footprint of both Volvo Cars and Geely, provides it with access to a combined installed production capacity of about 750,000 units per annum across three continents, and gives Polestars highly scalable business model immediate operating leverage. Polestar also plans on expanding its production capacity in Europe by leveraging plants that are owned and operated by Volvo Cars.
Polestar uses a digital first, direct to consumer approach that enables its customers to browse Polestars products, configure their preferred vehicle and place their order on-line. Alternatively, Polestar Locations are where customers can see, feel and test drive our vehicles prior to making an on-line purchase. Polestar believes this
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combination of digital and physical retail presence delivers a seamless experience for its customers. Polestars customer experience is further enhanced by its comprehensive service network that leverages the existing Volvo Cars service center network. Polestar currently has over 40 permanent Polestar Locations (and over 60 temporary or pop up locations). Polestar plans to extend its retail locations to a total of over 150 in existing and new markets by the end of 2023. In addition, Polestar leverages the Volvo Cars service center network to provide access to over 800 customer service points worldwide in support of its international expansion.
Polestars research and development expertise is a core competence and Polestar believes it is a significant competitive advantage. Current proprietary technologies under development include bonded aluminum chassis architectures and their manufacture, a high-performance electric motor and bi-directional compatible battery packs and charging technology.
Polestar has drawn extensively on the industrial heritage, knowledge and market infrastructure of Volvo Cars. This combination of deep automotive expertise, paired with cutting-edge technologies and an agile, entrepreneurial culture, underpins Polestars differentiation, potential for growth and success.
Recent Developments
Operational Highlights
The table below summarizes key operational results of Polestar for the years ended December 31, 2020 and 2021. The following should be read in conjunction with the Risk Factors and Polestars Managements Discussion and Analysis of Financial Condition and Results of Operations sections and the Polestar Financial Statements and the related notes thereto included elsewhere in this proxy statement/prospectus.
Operational Results |
December 31, 2020 |
December 31, 2021 |
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Global Volumes (1) |
10,046 | 28,677 | ||||||
including 13 and 2,836 external vehicles with repurchase obligations for the years ended December 31, 2020 and December 31, 2021, respectively. |
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including 792 and 2,081 internal vehicles transferred for demonstration and commercial purposes for the years ended December 31, 2020 and December 31, 2021, respectively, as well as vehicles transferred to Polestar employees |
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Markets (2) |
10 | 19 | ||||||
Locations (3) |
40 | 103 | ||||||
Service Points (4) |
444 | 811 |
(1) | Represents total volumes of vehicles delivered, including external sales at time of invoicing and internal sales of vehicles transferred for demonstration and commercial purposes as well as vehicles transferred to Polestar employees at time of registration. Transferred vehicles for demonstration and commercial purposes are owned by Polestar and included in Inventory. | |
(2) | Represents the markets in which Polestar operates. | |
(3) | Represents Polestar Spaces and Polestar Destinations and Polestar Test Drive Centers. | |
(4) | Represents Volvo Cars service center networks to provide access to customer service points worldwide in support of Polestars international expansion. |
Global Strategic Partnership with Hertz
On March 11, 2022, Polestar entered into a letter of intent with Hertz pursuant to which Hertz intends to commit to purchase 65,000 or more Polestar vehicles during a 5-year period beginning in 2022. Polestar and Hertz intend to sign four regional purchase agreements covering the United States, Canada, Europe, and Australia. The new global strategic partnership was announced by Polestar and Hertz Global Holdings, Inc. (NASDAQ: HTZ) on April 4, 2022. Availability of vehicles is expected to begin in Spring 2022 in Europe and late 2022 in North America and Australia. Under the partnership, Hertz is expected to initially order Polestar 2s.
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Declarations of Intent by Snita and PSD Investment Limited
Polestars business is capital-intensive, and Polestar expects that the costs and expenses associated with its planned operations will continue to increase in the near term and, accordingly, ListCo anticipates that it will need to raise additional funds from time to time. Snita and PSD Investment Limited have each executed a Declaration of Intent (the Declarations of Intent). The Declarations of Intent are substantially identical and set forth the parties intention to subscribe for their pro rata share of equity or equity linked securities issued by ListCo in the event of any offering of such securities until March 31, 2024. The Declarations of Intent also provide that, (i) Polestar will actively seek appropriate debt financing and engage in raising capital from the market, and (ii) to the extent either Snita and/or PSD Investment Limited decide to make such investments, those investments will be made on market terms and conditions substantially identical to, or better than, those offered to third party investors and will be subject to all necessary corporate and/or regulatory approvals of Snita, Volvo Cars and/or PSD Investment Limited, as the case may be. The Declarations of Intent are not undertakings or guarantees, and any decision to invest in any offerings of securities by ListCo in the future are within the sole discretion of Snita and PSD Investment Limited, respectively. There can be no assurance that Snita and/or PSD Investment Limited will make any investment in the share capital of ListCo prior to March 31, 2024, or at all. There can also be no assurance that the amount of any further investment in ListCo by Snita and/or PSD Investment Limited will be sufficient to meet ListCos requirements or on terms acceptable to ListCo. See Risk FactorsRisks Related to Financing and Strategic TransactionsPolestar will require additional capital to support business growth, and this capital might not be available on commercially reasonable terms, or at all and Certain Relationships and Related TransactionsDeclarations of Intent by Snita and PSD Investment Limited.
Polestars Strategy
The global car industry is undergoing a fundamental transformation and Polestar believes it is optimally positioned at the forefront of this change. The premium luxury electric vehicle segment is one of the fastest growing in the global car market. This growth is driven by increasing consumer awareness of environmental impact, technological improvement and shifting consumer preference. Increasingly stringent environmental regulation and expanded charging infrastructure will also drive adoption of electric vehicles. Polestar expects growth in the premium luxury electric vehicle segment to significantly outpace overall premium vehicle growth and estimate the global electric vehicle segment will represent a $280 billion to $320 billion market segment by 2025 based on management estimates. In order to capitalize on these trends, Polestar intends to implement the following strategy.
| Expand international sales, support and manufacturing presence. With global sales from day one, Polestar intends to continue its rapid market expansion aiming to be present in an aggregate of 30 markets by the end of 2023. Polestars expansion plans include building presence in fast growing markets in the Asia Pacific region as well as the Middle East. Polestars digital first, direct to consumer approach enables its customers to browse Polestars products, configure their preferred vehicle and place their order on-line. Customers who wish to get to know the physical product or go for a test drive can visit one of the Polestar Locations. At December 31, 2020 Polestar had 26 permanent Polestar Locations (and a further 14 temporary or pop up locations). Currently Polestar has over 40 permanent Polestar Locations (and over 60 temporary or pop up locations). Polestar plans to extend its retail locations to a total of over 150 in existing and new markets by the end of 2023. |
Polestar currently leverages the Volvo Cars service center network to provide access to over 800 customer service points worldwide in support of its international expansion. Polestar plans to extend this service centre network to a total of over 1,100 by the end of 2023.
Polestars vehicles are currently manufactured at a plant in Luqiao, China that is owned and operated by Volvo Cars. The plant, referred to by Volvo Cars as the Taizhou plant, was acquired by Volvo Cars from Geely in December 2021. Prior to that time, the plant had been owned by Geely and operated by Volvo Cars. Polestar intends to expand its manufacturing presence to facilities in the US and in Europe, in each case operated by Volvo Cars. For example, Polestar intends to produce the Polestar 3 in Volvo Cars plant in Charleston, South Carolina as well as in China.
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| Continue to develop Polestars portfolio of vehicles. Polestar currently intends to launch three additional vehicles by 2024. Polestar expects to launch Polestar 3, an electric performance SUV, in 2022 and to launch Polestar 4, an electric SUV coupe in 2023. In addition, Polestar currently plans to launch Polestar 5, a premium electric 4 door GT, in 2024. Polestar believes that expanding its product line-up with these vehicles will enable us to compete in segments constituting almost 80% of the global premium luxury vehicle market by volume of units sold. Polestar believes the premium luxury vehicle segment is one of the fastest growing vehicle segments, and Polestar expects the electric-only vehicle portion of this segment to grow at a faster rate than the overall segment. |
| Continue to develop sustainable electric vehicle technologies as well as separately monetizing Polestars investment in research and development. Polestar intends to continue to develop technologies to mitigate its environmental impact from vehicle concept through to materials and production techniques. Polestars Polestar 0 project, which aims to develop a truly climate neutral car by the end of 2030 will be a significant focus of Polestars research and development activities, including through the development of new interior materials and structural components designed to further reduce Polestars environmental impact. See Sustainability. |
Polestar will continue to focus on developing cutting-edge technology, including bonded aluminum chassis architectures and their manufacture and the complimentary development of a high-performance electric motor. Polestar will also continue its efforts on battery management and its bi-directional battery pack (400V and 800V) systems and onboard bi-directional 22 kW Charger. Polestar also intends to take the opportunity to monetize these new technologies through sales and licensing arrangements with other market participants.
Polestars Strengths
Polestar believes it benefits from a number of competitive advantages:
| Polestar operates in one of the fastest-growing market segments of the industry. Polestar expects growth in the premium luxury electric vehicle segment to outpace overall premium vehicle growth and estimate the electric vehicle segment will represent a $280 billion to $320 billion market segment by 2025 based on management estimates. Polestar believes its ability to leverage a global manufacturing footprint and expanding market coverage coupled with a scalable and asset light business model means it is well positioned to capitalize on this growing market. Polestar started selling electric cars globally in August 2020 and its plan is to grow from selling approximately 10,000 cars in 2020 to sales of approximately 290,000 cars in 2025. |
| Polestar is one of only two global premium electric vehicle manufacturers already in mass production. Currently, Polestar and Tesla are the only global pure play premium electric vehicle manufacturers in mass production. New entrants would have to develop significant core competencies to match Polestars proprietary technology as well as the access to vehicle design and manufacturing capabilities and sales and service infrastructure that Polestar receives from Volvo Cars and Geely. Polestar believes these advantages constitute a significant barrier to entry. |
| Polestar has a distinct culture with a focus on innovation and an experienced management team. Polestar has a distinct corporate culture which is designer-led, visionary and fully committed to sustainability. As a relatively young company with progressive ideals Polestar believes talented people with the right analytical and creative skills are drawn to it. Polestars chief executive officer Thomas Ingenlath was previously senior vice president of design at Volvo Cars and is widely credited as one of the key players behind Volvo Carss recent award-winning design renaissance. Chief financial officer Johan Malmqvist has broad experience across multiple sectors including in the United States and publicly listed companies. Chief operating officer Dennis Nobelius is the previous chief executive officer of assisted and autonomous driving software provider Zenuity, a business whose technology Polestar intends to utilize in future vehicles, starting with the Polestar 3. |
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| Polestar has a scalable, asset-light business model with immediate operating leverage. Polestar has a scalable, asset-light business model that leverages the experience and manufacturing resources of Volvo Cars and Geely. Polestar has access to their technology, manufacturing footprint, logistical infrastructure and information technology systems. Access to these services gives Polestar the flexibility to scale production quickly with demand, using an already operational ecosystem, and has enabled Polestar to rapidly launch the brand globally. Polestar believes this asset-light model requires significantly less capital to produce vehicles and revenue compared to traditional manufacturers or other electric vehicle companies. |
| Polestar has a digital-first, direct to consumer approach with a differentiated distribution and service model. Polestars sales and distribution model is focused on a direct customer experience, reducing multiple traditional inefficiencies coupled with a differentiated distribution. Using the Polestar app or other digital connections, clients can discover Polestars products, configure and personalize them, choose a financing option and purchase on-line, creating a seamless experience. Complementing this digital experience, customers can see, feel and test drive our vehicles, at one of the Polestar Locations prior to making an on-line purchase. Polestar believes this combination of digital and physical retail presence serves to deliver a seamless experience for its customers. Polestars customers benefit from a comprehensive service network which leverages the existing Volvo Cars service center network. |
| Polestars design-led focus on sustainability. Polestar believes that its emphasis on environmentally sustainable products, using Scandinavian avant-garde design and high tech minimalism engages and attracts customers who share its ethos and design aesthetic. Polestars brand and product designs have received multiple global awards since the launch of the Polestar 1 in 2019 including Red Dots Brand of the Year as well as Best of the Best Product Design for Polestar 2. Polestar Precept has also captured imaginations most recently winning three of the four 2021 EyesOn Design awards. Sustainability remains a core principal for Polestar and it continues to work to reduce its impact on the environment in every aspect of its business, but with a particular focus on the manufacturing of its cars. Polestar is actively targeting climate neutral manufacturing processes and materials and uses tools such as Life Cycle Analysis to help it both ascertain the impact of its vehicles and to identify opportunity. Polestar transparently shares this information with its customers so they can make an informed buying decision and can track Polestars progress. |
| Polestars proprietary technology. Polestar believes its proprietary electric vehicle technology provides it with a substantial competitive advantage. Research and development, a core competence, is focused on areas such as lightweight chassis architectures and manufacturing, electric propulsion and motors and bi-directional battery packs that Polestar believes will significantly enhance the competitiveness of its vehicles. For example, Polestar is developing one of the most powerful electric motors in the market, the P10, which will be capable of delivering as much as 450kW of power, or 600hp alone and even more power when coupled with a front motor. Our state-of-the-art 800V battery pack technology is expected to be included in the Polestar 5 when launched in 2024. |
Polestars Vehicles
Polestar 1
Polestar 1 is Polestars halo car, a car intended to establish Polestars brand in the premium luxury electric vehicle market. Polestar 1 is manufactured at Polestars facility in Chengdu, China. First revealed in October 2017, commercial production commenced in 2019. Polestar 1 features a highly advanced and technically innovative powertrain, combined with composite materials and leading-edge technology mechanical components.
The hybrid powertrain features two electric motors on the rear axle one for each wheel mated to a front-mounted petrol engine which features turbo- and supercharging. A third electric motor is integrated between the crankshaft and gearbox for extra electric torque for the front wheels. Combined output is 609 hp and 1,000 Nm of torque. With three battery packs totaling 34 kWh, Polestar 1 features an all-electric range of 124 kmthe longest electric range of any plug-in hybrid in the world to date.
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The body of Polestar 1 is made from carbon fibre reinforced polymer (CFRP) which lowers the vehicles weight as well as its center of gravity. The CFRP body also allowed the cars designers to create truly emotive and sharp styling cues that cannot be stamped into traditional metal body panels. Under the surface, the CFRP body features a carbon fibre dragonfly between the front seats and the rear of the vehicle, further reinforcing the cars chassis.
Driving dynamics are key to the Polestar experience and Polestars engineers spent years developing the Polestar feeling with Polestar 1. Crucial to this was the co-development of leading-edge technology mechanical components like the manually adjustable Öhlins Dual Flow Valve dampers with double wishbone design and 6-piston Akebono brake calipers.
The fitment of the two rear electric motors, each with a planetary gear set, allowed engineers to develop real torque vectoring algorithms for Polestar 1. The effects of this are particularly evident during cornering rather than slowing down the inner wheel, the outer wheel is accelerated to help the car turn more sharply. The torque vectoring also allows the driver to apply power earlier than expected on the exit of a corner, resulting in a truly exhilarating experience.
Featuring Pure, Hybrid and Power drive modes, Polestar 1 can be driven in different ways depending on the driver needs and preference. In Pure mode, the combustion engine is shut off and Polestar 1 operates as a fully electric vehicle. The two rear electric motors generate total power of 170 kW and torque of 492 Nm. In Hybrid mode, Polestar 1 utilizes the electric motors and petrol engine according to demand from the driver, seamlessly switching between the two as needed. In Power mode, both the electric motors and combustion engine are utilized at all times, allowing the driver to take advantage of the full 609 hp and 1,000 Nm of torque, along with sharper responses from the throttle, steering and gearbox. Top speed is limited to 155 mph and the 0-62 mph sprint takes 4.2 seconds.
Polestar 1 went into production at Polestars Chengdu, China facility in 2019. The facility is the only Leadership in Energy and Environmental Design, or LEED, Gold accredited automotive manufacturing facility in China. With a planned three year production run and a limited build capacity of up to 500 units per year, production of the car ceased in 2021. The car retails in Polestars original launch markets in Europe, North America and China.
Polestar 2
Polestar 2 is an electric performance fastback and Polestars first fully electric, high volume model. Polestar 2 is manufactured at the Luqiao, China facility, which is owned and operated by Volvo Cars and which Volvo Cars renamed Taizhou after acquiring the plant from Geely in December 2021. First revealed in 2019, production commenced in 2020.
Polestar 2 model range includes three variants Long range dual motor (300 kW (408 hp)/ 660 Nm), Long range single motor (170 kW (231 hp)/ 330Nm) and Standard range single motor (165 kW (224 hp)/ 330 Nm) combined with three optional packages Pilot, Plus and Performance to provide consumers with the perfect Polestar 2 for their needs. Pilot and Plus packages encompass driver convenience and comfort features, while the Performance pack age adds further dynamic and visual appeal with Öhlins Dual Flow Valve dampers, 4-piston Brembo brakes, forged alloy wheels and, naturally, Polestars signature gold detailing inside and out. Polestar believes this modular approach simplifies both the purchase and manufacturing process while enhancing the customer experience.
Polestar 2 was the first car in the world to feature an infotainment system powered by Googles Android Automotive OS, with Google built-in. Developed in collaboration with Google, the Android system revolutionizes the way car infotainment system can be integrated, and with Google Assistant, Google Maps and the Google Play Store integrated, owners can benefit from one of the best voice and navigation systems in the world. The user interface is bespoke to Polestar 2 and developed in-house. With an open developer portal that
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features an Android Automotive OS emulator, Polestar also provides app developers the ability to develop apps for use in the car (for example a parking app from Easy Park, that can be downloaded directly to the car to simplify payment of parking fees) in shorter time than is generally required to develop apps for unique operating systems used by traditional car producers.
The Polestar 2 has been designed and produced in accordance with Polestars emphasis on design led sustainability. It was in connection with the launch of Polestar 2 in 2020 that Polestar released its first Life Cycle Assessment report, with full methodology and transparency, and with a call to the industry at large for a uniformly open and transparent way of disclosing the carbon footprint of electric vehicles from all manufacturers. In early 2021, Polestar took this transparency a step further by integrating a Product Sustainability Declaration into Polestar Locations and on its website and will continue to disclose such information going forward. See Sustainability.
Precept, Future Vehicles and Polestar 0 project
In March 2020 Polestar revealed Polestar Precept, a design study intended to showcase Polestars vision of the brands future, demonstrating innovation and ambition across three focus areas - design, technology and sustainability.
Polestar Precept was created as the manifesto for and design direction of Polestars future models. By the end of 2024, Polestar currently intends to have launched three new vehicles; Polestar 3, an electric performance SUV; Polestar 4, an SUV Coupe and Polestar 5 - a luxury electric 4 door GT.
Precept
In October 2020, Polestar announced at the Shanghai Motor Show that it would aim to produce a luxury 4 door GT based on the Precept concept; this will be the Polestar 5.
The design of the Precepts interior is defined by sustainability and offered an opportunity to work with new materials and processes. Similarly, the design seeks to capitalize on the evolution of the Human Machine Interface (HMI) based on Polestar 3 interactions and Google Android Automotive to deliver an enhanced customer experience.
Sustainable new interior materials balance modern high-tech luxury with reduced environmental impact. These sustainable materials include recycled PET bottles, reclaimed fishing nets and recycled cork vinyl. A flax-based composite developed by external partner Bcomp Ltd is featured in many interior- and some exterior parts. Polestars ambition is to bring much of this sustainability into production.
The next generation infotainment system HMI, powered by Android, builds on Polestars close collaboration with Google. An enlarged, portrait-oriented 15-inch center touch screen complements a 12.5-inch driver display, and the two are linked by an illuminated blade that encompasses the entire interior. In this execution, the unique Polestar emblem floats holographically inside a solid piece of Swedish crystal between the rear seat headrests.
Supporting the advancement of a personalized and dynamic digital interface, the instrument panel also hosts an array of smart sensors. Eye tracking will allow the car to monitor the drivers gaze and adjust the content of the various screens accordingly. Proximity sensors also enhance the usability of the center display when driving.
The sculpted form of the Polestar Precept sets the tone for future Polestar vehicles. The vehicles proportions define its presence with restrained surfacing and a focus on aerodynamic efficiency.
The front grille is replaced by the Polestar SmartZone, representing a shift from breathing to seeing. An area which once channeled air to radiators and the internal combustion engine now houses technology for safety
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sensors and driver assistance functions. Two radar sensors and a high- definition camera are located behind a transparent panel. In addition, a light detection and ranging (LiDAR) sensor, mounted atop the glass roof, is given optimal visibility as a next step towards increased driving assistance. The Thors Hammer LED headlight signature evolves with separated elements, taking on a dynamic and brand-defining interpretation.
Precept features an integrated front wing above the SmartZone which accelerates air flow over the long bonnet. This allows air to attach itself to the surface earlier, which improves laminar flow and aerodynamic efficiency and thus improves the vehicles performance and range. At the rear, the wide light-blade spans the entire width of the car, extending into vertical aero-wings another aerodynamic feature and a nod to light weight design.
Show cars, concept cars and vision statements
Periodically Polestar will use concept cars and other models and devices to further outline the future vision of Polestar. Concept cars are not associated with Polestars series production cycle plan (or business plan) but give the brand the opportunity to share new ideas and visuals to both gauge consumer opinion and provide insight. Such vehicles or devices are imperative in a sector such as automotive that has lengthy product development cycles. Concept cars are also a tool to engage wider stakeholders, from press to investors to generate interest, conversation and provide a halo across the brand.
On March 2, 2022, Polestar revealed Polestar O2, a new concept car to demonstrate Polestars vision of a sports roadster with open-top performance - with all the benefits of electric mobility. The Polestar O2 concept car is related to the Polestar Precept concept car but with its own distinct character. The look of Polestar O2 shows how Polestars evolving design language can be adapted to different body styles with a strong family resemblance. The concept leverages a modified version of the bonded aluminium unibody that is planned to underpin Polestar 5 and further reinforces the importance of in-house R&D capabilities. Sustainability is another core tenet of the design study with a mono-material interior further illustrating how the brand is looking to drive progress through innovative materials manufacturing processes.
Polestar 3
Polestar expects to launch the Polestar 3 in 2022. Polestar 3 will be a luxurious electric performance SUV with seating for five and design direction previewed by Precept. It is an aerodynamically-optimized using multiple design features to smooth airflow and reduce drag. The two seating rows in Polestar 3 stretch out between the long wheelbase offering luxurious and spacious legroom for the rear passengers even when the tallest driver is sitting in the front seat. Polestar 3 will define the SUV for the electric era by combining the high seating position favored by customers with a highly efficient aerodynamic silhouette.
Priced in the range of a Porsche Cayenne it will be Polestars first product with centralized computing, powered by Nvidia, and with redundant system possibilities. Polestar expects to include a variety of technological advances in Polestar 3 over time. These features will include unsupervised highway piloting by software from Zenseact (an autonomous driving software development subsidiary of Volvo Cars), and the best-in-class LiDAR sensor pod from Luminar, all of which is expected to be fully implemented in Polestar 3 vehicles by 2024.
Polestar 4
Polestar currently plans to launch Polestar 4 in 2023. Polestar 4 will be a sporty SUV coupe, more compact than, and priced below, Polestar 3 with a high-volume potential. With an avant-garde design inspired and previewed by Polestar Precept, the minimalist SUV coupe will offer excellent rear passenger comfort.
Priced in the range of the Porsche Macan, Polestar 4 will aim to offer driving dynamics and minimalist style to a larger market segment.
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Polestar 5
Polestar currently plans to launch the Polestar 5 in 2024. Polestar 5 will be an epic 4 door grand tourer that most closely follows inspiration from the Precept. Priced to compete with a Porsche Panamera, the vehicle will introduce new in-house aluminum body and chassis and powertrain architectures.
Polestar expects that Polestar 5 will be manufactured at a new state-of-the-art plant in China, built by Geely and to be operated by Polestar. The plant will meet a high standard of sustainability, aiming for LEED Gold accreditation.
Polestar 0 project
In April 2021, Polestar announced an important goal of creating a truly climate-neutral car by 2030 a significant and necessary step to reach its goal of becoming a climate neutral company by 2040.
Today, an electric car manufactured and charged on the current global electricity infrastructure mix has a smaller carbon footprint than an internal combustion engine car through its useful life. However, Polestar has set a target of producing a car by 2030 that is truly climate neutral when it rolls out of Polestars factories gates.
As a company, Polestar cannot directly control how its cars are charged or how they are disposed of after their use phase has ended. Polestar can control what happens before the car is handed over to the customer: the carbon footprint of the materials production, battery module and manufacturing process. For the Polestar 2, that carbon footprint was 26.2 tons in 2020 with most of the impact coming from three categories: aluminum, batteries, and steel. Together they account for 75% of the 24 tons attributable to materials production and battery modules. Add electronics and polymers and the total is 92%. While a lot of focus naturally will be on those categories, the goal is to reduce all to zero, including Polestars manufacturing footprint.
Design, Research and Development and Sustainability
Design
Design is at the core of Polestar. Polestar is a Scandinavian brand with pure, minimalist design. Polestars design is progressive and defines the avant-garde of the electric and sustainable age. Polestar celebrates technology in its creations and innovation is its driving force. Performance is not only a capability of Polestars products but the mindset of Polestars whole company. Polestars vehicles have been widely recognized for their outstanding design and performance credentials and Polestar 1 and Polestar 2 have each received numerous awards, including, among others, High-performance Luxury GT Coupe of the Year and Luxury High-Performance Electric Vehicle of the Year for Polestar Land Car of the Year titles in Norway, Switzerland, Germany (Luxury) China (Green Car), Germanys Golden Steering wheel as well as the Edie Sustainability Leader award for Polestar 2.
Progressive designs force Polestar to innovate and develop new technologies, technologies that in turn can improve customer experience and/or improve vehicle and sustainability performance. Polestars sustainability goals guide its design teams to continually innovate and drive even more progressive thinking. Polestar believes that its designs reflect the central tenants of Scandinavian design, with a focus on luxury minimalism and an emphasis on responsible material choices and such as the use of recycled and naturally grown materials. An example is that the Polestar UX (user experience) team is part of the design department bringing interaction with the car to the heart of the design process. New technologies, such as connectivity and autonomous drive, will create further opportunities.
Research and Development
Polestars research and development strategy is to focus its own resources on the development of key electric vehicle technologies while accessing the benefit of investments in other technology from within the larger Volvo
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Cars and Geely family. Polestar also accesses and utilizes battery labs, wind tunnels, VR simulations and testing, proving grounds both in UK and in Sweden.
Polestars research and development teams are located in Sweden and the United Kingdom. In Sweden, Polestars headquarters and research and development team is located in Gothenburg close to the facilities and competences at Volvo Cars and its surroundings. This research and development team is focused on collaboration with Volvo Cars in a wide variety of areas, including electrical propulsion, sustainability, lightweight material designs, software, and more. In the United Kingdom, Polestars research and development team is located in the Mira Technology Park in Coventry. This location benefits from good access to engineering talent, proving grounds, wind tunnels and workshops. Polestars engineering focus in the United Kingdom is chassis and dynamics, aluminum bonding and architecture and sports car design.
Sustainability
Polestar has a philosophy to design towards zero, actively using Scandinavian minimalist design to engage customers and minimize our environmental impact. Polestar seeks to achieve its clear sustainability goals by establishing concrete targets focusing on four pillars of its sustainability approach:
| Climate Neutrality; Combating the emission of greenhouse gases is one of the top priorities of Polestar. Most greenhouse gas emissions associated with its vehicles are related to the use of fossil fuels in energy conversion. Coal power is highly present in Polestars supply chains as it operates, and predominantly sources, in China. Aside from greenhouse gas emissions, the burning of fossil fuels also leads to emissions of sulfur dioxide, nitrogen oxides and particulates that affect the environment and the health of people living in the local areas surrounding the power plants. The use of renewable energy in the Polestar supply chain is absolutely key for it to reach climate neutrality and improve local air quality. Polestar has set two goals to achieve climate neutrality: Polestar is to be climate neutral by 2040 and create a climate neutral car (cradle-to-gate) by 2030. To drive towards the 2030 goal, Polestar has launched five strategic initiatives. These are: climate-neutral platform, climate-neutral materials, energy optimization, climate-neutral manufacturing and renewable energy in the supply chain. Each strategic initiative is headed by an accountable department but handled through cross-functional collaboration within Polestar. |
| Circularity; Circularity is a philosophy to ensure that we, as a society, produce and consume within planetary boundaries. The use of materials is at the root of Polestars biggest social and environmental impacts. The extraction, processing, use and waste treatment of materials is associated with risks and potential negative impacts such as resource depletion, pollution to air, soil and water, climate impact, loss of biodiversity and human rights violations. Pollution to air, soil and water from metallurgical processes and mining activities also affect the health of people working in the supply chain and their local environments. By using a circular approach and trying to close the loop for more materials, less virgin materials and minerals need to be extracted and produced, which minimizes the total environmental impact. Polestar aims to drive sustainable and circular use of materials through different key strategies and processes, including sustainability strategy, sourcing strategy, procurement process and product development process. Through its procurement practices Polestar aims to minimize the negative impact on land and water through reduced greenhouse gas emissions, pollution, waste and effluents throughout its supply chain. Polestar uses life-cycle assessments as its primary tool for assessing environmental impact from material use including material selection and waste management. |
| Transparency; Reporting and working on sustainability issues is meaningless unless it leads to real world positive impact. Being transparent about where Polestars risks and impacts lie and which methodologies Polestar uses to measure itself ensures that Polestar creates actual progress. Polestar was the first car company to share both a Life Cycle Analysis (LCA) and the methodology behind the calculation for Polestar 2, in order to provide transparency to its customers as to the true impact of their purchase. Polestar will continue to calculate and share a LCA along with an ever more detailed |
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Sustainability Declaration for each model it produces moving forward and urge the entire industry to adopt a transparent approach to help build consumer understanding and trust. |
Polestar is constantly looking to be honest with itself and its stakeholders and improve. For example, Polestar recognizes it uses materials with high risks of human rights violations and negative environmental impacts in the supply chain to create its vehicles. Cobalt, for example, is a key component of the batteries used in Polestar vehicles that is primarily mined in the Democratic Republic of Congo, where it has been linked to child labor in the artisanal and small-scale mining sector. Historically, it has been very difficult to trace the origin of minerals because of its complex supply chain and lack of reliable chain of custody methods. Polestar requires its suppliers to implement responsible sourcing practices to mitigate the risk of human rights violations. Polestar partners with a traceability-as-a-service provider, Circulor, that utilizes blockchain technology to trace the origins of materials used throughout Polestars supply chain. Additionally, Polestar maintains a parts and components sourcing partnership with Volvo Cars in which suppliers are analyzed using sustainability questionnaires and a risk assessment tool developed by Responsible Business Alliance.
| Inclusion: Inclusion is diversity, representation and equality working in harmony. By committing to this strategic focus area, Polestar stands up for the rights of people throughout its value chain from the workers producing the material of its cars, to its employees in factories or spaces, to customers and consumers around the world. Departments like Human Resources, Customer Experience and Procurement drive strategic initiatives on human rights and inclusion, addressing Polestars role as a responsible brand, employer, and procurer. |
Sales and Distribution
In 2019 Polestar commenced commercial sales of its vehicles with the Polestar 1, followed in 2020 with the Polestar 2. Polestar uses a digital first, direct to consumer approach that enables its customers to browse Polestars products, configure their preferred vehicle and, where permitted, place their order on-line. Currently, customers in North America place orders for Polestars vehicles through trusted retailers. In addition, Polestar has established physical retail locations comprised of Polestar Spaces, Polestar Destinations and Polestar Test Drive Centers referred to as Polestar Locations. Polestar Spaces are typically smaller Polestar showrooms located in urban areas, whereas Polestar Destinations and Polestar Test Drive Centers are typically larger Polestar showrooms located in peri-urban areas. Polestar Locations allow Polestars customers to see, feel and test drive Polestars vehicles. In addition, Polestar has also established handover centers that provide a convenient option for customers to take delivery of Polestar vehicles, although customers may also choose home delivery in certain markets. Currently, Polestar has over 40 permanent Polestar Locations (plus over 60 temporary or pop up locations) and expects to have an aggregate of 150 retail locations in existing and new markets by the end of 2023. In addition, as Polestar continues with its international expansion, it will use third party importers to give it access to lower volume markets, rapidly and with lower investment.
Polestar enters into agreements with independent investors to establish Polestar Locations. These investors do not carry any inventory of cars for sale, but rather hold demonstration vehicles and provide potential customers the opportunity to see, feel and test drive Polestar vehicles. These investors may, but do not necessarily, have a prior relationship with Volvo Cars. In North America, however, federal or state law may prohibit automobile manufacturers from acting as licensed dealers or to act in the capacity of a dealer, or otherwise restrict a manufacturers ability to deliver or service vehicles. Accordingly, all of Polestars sales in North America are conducted through trusted representatives. These representatives are not necessarily associated with Volvo Cars or the Volvo Cars dealer network in North America.
Polestar aims to deliver leading aftermarket services to its customers by leveraging Volvo Cars global service and repair network. Polestar is cooperating with Volvo Cars to develop their service center network, including the introduction of digital service boking, fault tracing, diagnostics and software download (Over The Air and in workshop). Polestar also utilizes the Volvo Cars service center network to supply its customers with a spare parts
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infrastructure. Polestar currently leverages the Volvo Cars service center network to provide access to over 800 customer service points worldwide in support of Polestars international expansion. Polestar does not have a direct contractual relationship with the operators of its service points. Rather, Polestar relies on the existing network of Volvo Cars who signs, enters into, or amend, existing service contracts with Volvo Cars to add the service of Polestar vehicles to the scope of their dealer agreement.
Polestars principal operating entity is Polestar Sweden. Polestar Sweden is responsible for and is engaged in the product strategy and development as well as marketing and distribution of Polestar vehicles. Polestar Sweden manages sales globally in conjunction with the local Polestar sales units. Sales on the Chinese domestic market are managed by the local Chinese Polestar sales unit. The vehicles sold globally by Polestar Sweden are manufactured in China but production is expected to also take place in the United States and potentially in Europe. Polestar may be subject to foreign exchange risk with respect to cash transfers within the group, including restrictions on cross border payments imposed by the Chinese government. See Risk Factors - Risks Relating to Polestars Business and Industry Polestar faces risks associated with international operations, including tariffs and unfavorable regulatory, political, tax and labor conditions, which could materially and adversely affects its business, financial condition, results of operations and prospects; and - Polestar relies heavily on manufacturing facilities based in China and its growth strategy will depend on growing its business in China. This subjects Polestar to economic, regulatory and legal risk specific to China.
Manufacturing
Polestars vehicles are currently manufactured at a plant in Luqiao, China that is owned and operated by Volvo Cars. The plant, referred to by Volvo Cars as the Taizhou plant, was acquired by Volvo Cars from Geely at the end of 2021. Prior to that time, the plant had been owned by Geely and operated by Volvo Cars.
Polestar has the benefit of being part of the larger global manufacturing footprint of Volvo Cars and Geely with access to a combined installed capacity of approximately 750,000 units per annum across three continents. Polestar intends to expand its contract manufacturing presence to facilities in the U.S. and potentially Europe. For example, the Polestar 3 will be produced in Volvo Cars factories in both Chengdu, China and Charleston, South Carolina USA. Polestar is also exploring the feasibility of producing the Polestar 2 in Europe for sales in the US market.
Chengdu facility
Polestar opened its Chengdu facility in 2019. Polestar produced the Polestar 1 at this facility until end of 2021. The facility is a low volume facility designed for small series production runs, for developing new manufacturing processes or procedures and for customizations that cannot be handled in a high-volume factory. Polestar intends to use the Chengdu facility in the near term to create Polestar limited editions of Polestar 2 and also to support the early pre-production builds of future Polestar vehicles.
Chengdu was the first LEED Gold-certified automotive production facility in China. It was designed by the Norwegian architecture firm Snøhetta and runs on 100% renewable electricity.
Luqiao facility
Polestar 2 is produced in the Luqiao facility. The facility opened in 2016 and has a total factory capacity of 180,000 cars per year. The plant is focused on the CMA platform, and also produces Volvo XC40. In October 2021, Geely and Volvo Cars agreed to transfer the Luqiao facility to Volvo Cars. The transfer was effectuated in December 2021 and did not affect production of the Polestar 2 at the facility. In connection with this transfer, the Luqiao facility has been renamed Taizhou.
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Battery suppliers
Polestar has a diversified strategy with respect to the supply of batteries, to reduce supply risk as well as to ensure better flexibility as battery technology continues to develop. Polestars primary sources of batteries are LG Chem Ltd and Contemporary Amperex Technology Co. Limited with whom Polestar has a long-term supply agreement and the ability to leverage group purchasing power. In addition, Volvo Cars has entered into a non-binding memorandum of understanding with battery developer and manufacturer Northvolt. This memorandum of understanding covers the supply of battery cells and joint ventures regarding research and development and production of battery cells that are tailored to power the next generation of fully electric Volvo Cars cars and Polestar cars. Polestar has also entered into a non-binding letter of intent to secure batteries from SK Innovation, expected to power the Polestar 5. Polestar continues to evaluate potential up and coming startups in this area.
Related Party Agreements with Volvo Cars and Geely
Polestar benefits from the technological, engineering and manufacturing capabilities of Volvo Cars and Geely. These relationships give it access to the developed technology, IT, logistic channels, manufacturing capacity and distribution networks established by Polestars founding partners, on a global basis. Accordingly, Polestar has entered into a number of contractual arrangements with Volvo Cars and Geely to obtain support and various services in connection with its business. Polestars agreements with its partners are made on an arms-length basis and it assesses any agreement with related parties on the same basis as an agreement with third parties with respect to the scope of the services offered, timing and fees. While Polestar derives substantial benefit from access to its partners resources and expertise, Polestar is free to seek technology, manufacturing and other services from third parties based solely on the needs of its business. Polestars material transactions with related parties are subject to approval by its Board of Directors or other relevant persons in conformity with its related party transactions directive. Polestar has also established a number of steering committees to monitor compliance and performance of its agreements related to development, manufacturing, or service contracts with related parties. Polestar believes the Steering Committees provides a means of ensuring the interests of Polestar are protected and if necessary, provides a means of escalating any concerns or disputes to senior management or the Polestar Board. For additional information in relation to materially significant related party transactions during the years ended December 31, 2021, 2020 and 2019, see note disclosure 23 to the Polestar Financial Statements as of December 31, 2021 and 2020 and for the fiscal years ended December 31, 2021, 2020 and 2019 included elsewhere in this proxy statement/prospectus. Any further related party transactions in the fiscal years ended December 31, 2021, 2020 and 2019 were both immaterial and no more than incidental in nature. For a further description of our contracts with related parties, see Related Parties.
Polestars agreements with Volvo Cars cover research and development services and intellectual property licenses, purchasing, manufacturing engineering and logistics engineering and manufacturing with respect to the Polestar 1, Polestar 2 and Polestar 3. Polestar has also entered into a design services agreement with Volvo Cars with respect to Polestar 4 and Polestar 5 and entered into development agreements and licensing agreements with Geely with respect to Polestar 4 during 2021. In addition, Polestar has entered into agreements with Volvo Cars for the supply of parts as well as customer service and support agreements, agreements for the supply of general corporate services, IT support agreements and maintenance and operations agreements. In connection with its logistics, it has entered into agreements with Volvo Cars for logistics support services for Europe, North America, China and APAC, including logistics management, customs clearance and claims management, although it contracts directly with transporters as well. For additional information in relation to materially significant related party transactions, see Certain Relationships and Related Person TransactionsPolestar Relationships and Related Party TransactionsAgreements with Volvo and Geely.
On December 10, 2021, Volvo Cars announced that it had become aware that one of its code and file repositories had been illegally accessed by a third party. Volvo Cars noted that the breach resulted in the theft of research and development information that may have an impact on its operations. Volvo Cars stated in the press release that
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they did not believe, based on information currently available to them, that the breach would have any impact on the safety or security of its customers cars or their personal data. In connection with their investigation into this breach, Volvo Cars has informed Polestar that information on a Volvo Cars server that shared information relevant to Polestar had been among those compromised. Polestar has concluded that certain items such as specifications, source code and test data related to its vehicles had been illegally accessed. Polestar has been collaborating closely with Volvo Cars and has established an internal task force to work with its counterparts at Volvo Cars to determine the full scope of the breach and to implement remedial processes and procedures. The investigation is ongoing and has so far not found any further indications of compromise. The Polestar task force agrees with the Volvo Cars assessment and does not believe, based on currently available information, that this breach has had any impact on the safety or security of its customers cars or their personal data. Polestar currently understands that no individual privacy data for Polestar has been compromised. In relation to the proprietary intellectual property for Polestar, investigations are ongoing. Polestar has entered into a number of agreements with Volvo Cars covering research and development services, intellectual property licenses, purchasing, manufacturing engineering and logistics engineering and manufacturing with respect to the Polestar 1, Polestar 2 and Polestar 3. See Information Related to Polestar Related Party Agreements with Volvo Cars and Geely and Certain Relationships and Related Party Transactions Polestar Relationships and Related Party Transactions Agreements with Volvo Cars and Geely. These agreements necessarily include shared access to Volvo Cars IT systems and, accordingly, Polestar remains vulnerable to cybersecurity breaches not only of its own IT systems, but of those of Volvo Cars as well. See Risk Factors Risks Related to Cybersecurity and Data Privacy Polestar relies on its and Volvo Cars IT systems and any material disruption to its or Volvo Cars IT systems could have a material adverse effect on Polestar.
Research and development services and intellectual property licenses
Polestar has or is about to enter into a number of agreements and licensing agreements with Volvo Cars with respect to research and development services and licensing of intellectual property in connection with the development and manufacture of the Polestar 1, Polestar 2, Polestar 3, Polestar 4 and Polestar 5. These agreements provide Polestar will pay development costs (either a fixed fee or as a volume share of development costs). The development cost is calculated based on actual cost and an arms length hourly rate. For Polestar 3 Polestar will pay a fixed price for the technology license and development services (either a fixed fee or as a volume share of development costs). For example, Polestar has also entered into agreements providing for services and a license relating to certain technology such as for technology updates and upgrades and new features to be introduced in Polestars model year programs for the Polestar 2. During the life-time of the Polestar 2, there are several model years planned. These programs include additional technology content and features for the Polestar 2 that will be developed, assigned or licensed by Volvo Cars to Polestar. Volvo Cars also provides certain development services to Polestar under these agreements. Polestar also entered into licensing agreements and development service agreement with Geely for the Polestar 4 during 2021.
Purchasing Agreements
Polestar has entered into several sourcing service agreements and maintenance agreements with Volvo Cars in connection with both the Polestar 1, Polestar 2 and Polestar 3. The sourcing service agreements provide for sourcing of direct procurement of materials from third party suppliers as well as indirect procurement of services and other supplies. Services provided by Volvo Cars for such procurement are charged at an hourly rate established annually and billed monthly. Furthermore, direct costs incurred by Volvo Cars are reimbursed by Polestar.
Manufacturing engineering and logistics engineering
Polestar has entered into manufacturing engineering service agreements with Volvo Cars in connection with the production of Polestar 1, Polestar 2 and Polestar 3. These agreements provide that Volvo Cars will support Polestar with the development and implementation of quality-assured manufacturing solutions for Polestars
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plant in Chengdu as well as providing industrial engineering services and manufacturing services with respect to the Polestar 1, Polestar 2 and Polestar 3 vehicle programs. Polestar has also entered into a logistical engineering service agreement with Volvo Cars, under which Volvo Cars will provide support in connection with the development and set-up of an inbound and outbound logistic process connected to the plants.
Manufacturing
For the manufacturing of Polestar 1 Polestar has entered into agreements with Volvo Cars to provide certain services such as electrocoating for Polestar 1 cars and certain pre-delivery manufacturing services in the Volvo Cars facility in Ghent. In addition, Polestar has entered into component supply agreements with Volvo Cars for Polestar 1. For the manufacturing of Polestar 2 cars Polestar has entered into contract manufacturing agreements with the Luqiao plant, which is owned and operated by Volvo Cars and which Volvo Cars renamed Taizhou after acquiring the plant from Geely in December 2021. Further, Polestar has entered into a financial undertaking agreements with Volvo Cars for investments for Polestar 3 production in a Volvo Cars plant in Chengdu China as well as at a plant in Charleston, South Carolina. Production in Chengdu is planned to start in late 2022 or beginning of 2023, and Polestar has signed an agreement relating to the production in Charleston, which is to (i) serve as a binding commitment for Polestar to the scope set out in the agreement and (ii) confirm both parties intentions to enter into a more detailed agreement for production of Polestar 3 at Volvo Carss Chengdu and Charleston plants not later than 1 year before start of production. Both parties have committed to certain investments necessary to manufacture and assemble Polestar 3 at Volvo Carss Chengdu and Charleston plant prior to the parties entering into the definitive agreement.
Other Agreements
In addition, Polestar has entered into several agreements regarding Outbound logistics according to which Volvo Cars support with supply chain related services for the supply of Polestar vehicles. Polestar has also entered into agreement regarding quality services. Polestar has also entered into commercial, administrative and product creation software license agreements that license IT applications and IT services connected to administration, commercial, R&D and purchasing for use by Polestar globally.
Charging Network
Polestar believes that proprietary charging networks do not encourage customer adoption. Accordingly, Polestar intends to seek to build partnerships with open charging infrastructure providers. Polestar will use aggregators to help simplify the charging and payment experience for its customers, leveraging technology such as in car apps.
We provide regional coverage and preferential pricing through regional strategic partnership with the largest charging network providers. Polestar provides its our customers with access to an extended regional charging network using Plugsurfing aggregated CPO network in the EU, Electrify America in the US and CaoCao in China.
Competition
Polestar faces competition from both traditional automotive manufacturers and an increasing number of newer companies focused on electric and other alternative fuel vehicles. Polestar expects this competition to increase, particularly as the transportation sector continues to shift towards low-emission, zero-emission or carbon neutral solutions. In addition, numerous manufacturers offer hybrid vehicles, including plug-in versions, with which Polestars vehicles also compete.
Polestar believes that the primary competitive factors on which it competes includes, but is not limited to, its focus on design and sustainability, its innovative proprietary technology and its digital first, direct to consumer approach. Polestar also has a start-up culture and a scalable asset-light business model that it believes generates significant competitive advantage. However, many of its current and potential competitors may have
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substantially greater financial, technical, manufacturing, marketing and other resources than Polestar or may have greater name recognition and longer operating histories than Polestar does (see also Risk FactorsRisks Related to the Polestars Business and IndustryPolestar operates in an intensely competitive market, which is generally cyclical and volatile. Should Polestar not be able to compete effectively against its competitors then it is likely to lose market share, which could have a material and adverse effect on the business, financial condition, results of operations and prospects of Polestar.). Polestar believes it is differentiated from its competitors due to its focus on design, technology and sustainability its global presence and ability to leverage an established production ecosystem due to its relationships with its founding partners.
On a global basis, Polestars principal competitor is Tesla. Tesla is the worlds leading manufacturer of premium electric vehicles, having brought desirable electric vehicles to mainstream consumers with the Model S in 2012. Since then, the brand has developed a model range of sedans and SUVs to become one of the leading producers of electric vehicles all over the world. The Tesla model 3 is a principal competitor to Polestar 2, with some cross-relevance in the recently launched Model Y, a crossover SUV based on the Model 3. Lucid, a US vertically-integrated technology and automotive company headquartered in California is a potential competitor. While Lucid is engaged in the design, engineering, and construction of electric vehicles, electric vehicle powertrains and battery systems its Lucid Air handovers only started at the end of October 2021. In addition, Lucid does not currently have an SUV model and has focused recent efforts on promoting the Lucid Air, its sedan offering that is being offered at higher price points than many Polestar offerings.
Porsche is one of Polestars core competitor brands from a driving experience and performance perspective. As one of the worlds most renowned makers of drivers cars, Porsche represents a strategic benchmark for Polestar. Although previously a manufacturer of solely internal combustion engine cars, Porsche has recently launched the Taycan electric vehicle which brings the brands renowned dynamic experience to an electric vehicle for the first time. Porsche is also a benchmark brand for future Polestar vehicles in terms of size and segments.
Other competition within the electric vehicle segment of the market, includes two pure play electric vehicle producers, Nio and Xpeng.
Intellectual Property
Research and development are one of Polestars core competencies and Polestars developments in areas such as lightweight chassis architectures, drivetrains, electric motors, bi-directional compatible battery packs and charging technology significantly enhance the flexibility and utility of its vehicles. In addition, Polestar has created considerable intellectual property related to its design of both the interior and exterior of its vehicles, including various components such as wheel rims and lights. Accordingly, Polestars commercial success depends in part on its ability to protect its proprietary technology and other intellectual property. Polestar relies on a combination of patents and trademarks to protect and preserve its proprietary technology and intellectual property. In addition, Polestar enters into employee, contractor, consultant and third-party nondisclosure and invention assignment agreements and other contractual arrangements.
As of December 31, 2021, Polestar owned 110 issued U.S. patents and 93, 56, and 180 issued patents in the EU, China and other jurisdictions, respectively. Those patents are related to Polestars core proprietary technology. In addition, Polestar has 76 pending U.S. patent applications and 38, 32 and 21 pending patent applications in the EU, China and other jurisdictions, respectively. In addition to patents covering Polestars core proprietary technology, Polestar has 125 pending U.S. design patent applications, plus 21, 67 and 28 issued design or industrial design patents in the U.S., EU and China, respectively. Another 14 and 2 design applications are pending in the EU and China, respectively. As of December 31, 2021, Polestar owned 6 registered U.S. trademarks, 11 pending U.S. trademark applications, as well as 12 and 20 registered trademarks in the EU and China, respectively. Further, 5 and 19 trademark applications are pending in the EU and China, respectively.
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Regardless of the coverage Polestar seeks under its existing patent applications, there is always a risk that alterations from Polestars products or processes may provide sufficient basis for a competitor to avoid infringement claims. In addition, the coverage claimed in a patent application can be significantly altered before a patent is issued and courts can reinterpret patent scope after issuance. Many jurisdictions, including the United States, permit third parties to challenge issued patents in administrative proceedings, which may result in further narrowing or even cancellation of patent claims. Polestar cannot provide any assurance that any patents will be issued from its pending or any future applications or that any current or future issued patents will adequately protect its intellectual property. For this and other risks related to Polestars proprietary technology, inventions and improvements, please see the section titled Risk FactorsRisks Related to Intellectual Property.
Progressive designs force Polestar to innovate and develop new technologies, technologies that in turn can improve customer experience or improve vehicle and sustainability performance. New technologies, not least connectivity and autonomous drive, will create additional intellectual property. Polestar also engages in competitive landscape analysis and forecasting measures, in an effort to identify future areas of interest that may allow it to more competitively engage in the future markets. As Polestar develops its technology, it will continue to build its intellectual property portfolio, including by pursuing patent and other intellectual property protection when Polestar believes it is possible, cost-effective, beneficial and consistent with its overall intellectual property protection strategy.
Polestars commercial success will also depend in part on not infringing, misappropriating or otherwise violating the intellectual or proprietary rights of third parties. The issuance of third-party patents could require Polestar to alter its development or commercial strategies, change its products or processes, obtain licenses to additional third-party patents or other intellectual property or cease certain activities. Polestars breach of any license agreements or failure to obtain a license to proprietary rights that it may require to develop or commercialize its future products or technologies may have an adverse impact on Polestar. See Risk FactorsRisks Related to Intellectual Property for additional information regarding these and other risks related to Polestars intellectual property portfolio and their potential effect on Polestar.
In addition to Polestars proprietary technology and intellectual property, it has also acquired, licensed or sub-licensed intellectual property from Volvo Cars. For example, it has acquired intellectual property with respect to motor vehicle drive units with electric vehicle motors, motor assemblies for operating electric powertrains, and structures specifically designed to protect electric vehicle components. Polestar has also entered into agreements providing for a license relating to certain technology and features to be introduced in its model year programs for the Polestar 2.
Regulation
Polestars products are designed to comply with all applicable regulations in the markets where it operates. Currently, Polestar is present in nineteen markets in Europe, North America, China and Asia Pacific. Polestars expansion plans include further building its presence in fast growing markets in the Asia Pacific region as well as the Middle East. As Polestar expands its international presence, it will continue to take action to support that its vehicle design and sales comply with all regulations for each market it enters. Currently, the regulatory regimes material to Polestars business are those established by the United Nations Economic Commission for Europe, the European Union, the United States and China. These regulations are monitored by Polestars product certification team, supported by Volvo Cars and other external suppliers, to ensure that the internal design requirements reflect the applicable requirements for each product, market, and time frame.
Polestar believes that the following regulations are material to its business:
UNECE
The World Forum for Harmonization of Vehicle Regulations of the United Nations Economic Commission for Europe (the UNECE) has been working towards international harmonization of the technical prescriptions
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for the construction and approval of wheeled vehicles since 1947. The UNECE has developed certain international rules and regulations in the area of safety, environment, range and energy consumption under the 1958 Agreement concerning the adoption of uniform technical prescriptions for wheeled vehicles, equipment and parts and the conditions for reciprocal recognition of those regulations. Regulations promulgated in accordance with the 1958 Agreement have been adopted in approximately 60 jurisdictions including the EU. The UNECE also adopted similar global technical regulations under the 1998 Agreement of which the United States, the EU, China, and Japan are parties and 21 global technical regulations have been promulgated to date. Polestars vehicles meet the relevant requirements under the UNECE regulations.
EU
Manufacturers of passenger vehicles in the EU that wish to benefit from the Single Market are required to comply with EU Regulation 2018/858 (the Whole Vehicle Type Approval - WVTA), which requires that vehicles that are put on the market within the EU must first be type-approved to ensure that they meet all relevant environmental, safety and security standards. A vehicle that has been type-approved in one EU member state can thereafter be sold and registered in all member states without further tests. Polestars vehicles are type approved and fulfill applicable underlying regulations and directives.
USA
Polestar is required to obtain permits and licenses under the United States laws, regulations, and standards. Violations of these laws, regulations or permits and licenses may result in substantial civil and criminal fines, penalties and possibly orders to cease the violating operations or to conduct or pay for corrective works. In some instances, violations may also result in the suspension or revocation of permits and licenses.
Polestars vehicles fulfill the applicable product requirements stipulated by the National Highway Traffic Safety Agency (NHTSA) and the Environmental Protection Agency (EPA) on a federal level, and similarly the California Air Resource Board (CARB) who is a major regulator on state level.
China
The regulatory system in China applies type approval for Polestars vehicles under three regulatory bodies:
| Ministry of Industry and Information Technology (MIIT) - regulates the approval to manufacture vehicles; |
| State Administration for Market Regulation (SAMR) - regulates vehicle safety; and |
| Ministry of Ecology and Environment (MEP) - regulates range and energy efficiency. |
The Chinese government has also enacted a number of macro policies that govern the automobile industry in China. In particular, the Provisions on the Administration of Investments into the Automobile Industry adopted by the National Development and Reform Commission on January 10, 2019, stated that, while the production of traditional gas fuel vehicles should be strictly controlled, the development of new energy vehicles should be promoted but the establishment of fully electric car manufacturing companies should also be subject to strict scrutiny and the establishment of low-level manufacturing companies should be avoided.
Further, in order to be able to operate in China, Polestar and its subsidiaries are subject to permission requirements from the following regulatory bodies:
| SAMR; |
| MEP; and |
| General Administration of Customs. |
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Polestar and its subsidiaries have received all requisite permissions to operate in China and have not been denied any permissions in the past. These permissions include the following:
| Business License; |
| Pollutants Discharge Permit; and |
| Customs Declaration Registration Certificate or Customs Declaration Enterprise Record Receipt. |
See Risk FactorsPolestar and its subsidiaries (i) may not receive or maintain permissions or approvals to operate in China, (ii) may inadvertently conclude that such permissions or approvals are not required, or (iii) may be required to obtain new permissions or approvals in the future due to changes in applicable laws, regulations, or interpretations related thereto. for more information regarding risks associated with Polestars and its subsidiaries operations in China.
Safety, Security and Privacy
UNECE
In March 2021 the United Nations announced UN R155 - a regulation on cybersecurity and cybersecurity management systems. The regulation requires that, from July 2022, all new vehicles types and, from July 2024, all registered vehicles must prove that their product development is based on a systematic approach to risks associate with cyber threats to their cars. The regulations have been adopted by the EU as well as jurisdictions such as Japan and South Korea. The UN regulations are not expected to be adopted in the United States or China where similar regulations are expected to be adopted.
Additionally, under the UNECE umbrella, UN R138 regulates the minimum sound emission of quiet vehicles, intended to protect persons with impaired vision around the vehicle.
EU
The EU overhauled its safety regulations in 2009 by adopting Regulation 661/2009, replacing more than fifty previously existing safety directives with one overarching safety regulation which included requirements on seat belts and child restraint systems for example. This regulation was in turn revised in 2019 by the adoption of Regulation 2019/2144 (the General Safety Regulation). The General Safety Regulation includes, for example rules on cybersecurity and new guidelines regarding driver drowsiness and distraction, such as distractions caused by the use of a smartphone while driving, intelligent speed assistance, reversing safely with the aid of cameras or sensors, data recording in case of an accident (black box), lane-keeping assistance, advanced emergency braking, and crash-test improved safety. The new safety features will become mandatory from 2022, except for certain requirements that will follow later.
Since the entry into force on May 25, 2018, of the General Data Protection Regulation 2016/679 (the GDPR), processing of personal data of individuals located in the European Economic Area (the EEA), or done by any entity in the EEA, is subject to strict requirements centered around core principles and rights of such individuals to receive access to, to rectify or to delete their personal data. The GDPR obliges us, where applicable, to ensure adherence to the principles of lawfulness, fairness and transparency, and purpose limitation, data minimization, data accuracy, storage limitation and integrity and confidentiality. The GDPR also requires Polestar to mitigate potential data breaches and to, unless the data breach leads to a low risk for the rights and freedoms of data subjects, report data breaches to the data protection supervisory authority within 72 hours. In order to meet the requirements of the GDPR and similar data privacy frameworks, Polestar has established a data privacy compliance program, including but not limited to policies, guidelines, impact and risk assessments, as well as training measures to ensure compliance with regard to personal data Polestar processes. On March 9, 2021, the European Data Protection Board adopted Guidelines 01/2020 on processing personal data in the context of connected vehicles and mobility related applications, which stated that much of
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the data that is generated by a connected vehicle relate to a natural person that is identified or identifiable and thus constitute personal data under the GDPR.
USA
The United States is a self-certification market when it comes to safety compliance. Accordingly, Polestar is required to fully comply with relevant regulations for every vehicle that is put on the market, but no formal approval is granted by the NHTSA. The National Traffic and Motor Vehicle Safety Act of 1966 (the Safety Act) requires cars and equipment sold in the United States to fulfill safety standards that are continuously updated to meet new technologies and needs.
The Safety Act prohibits the sale in the United States of any new vehicle or equipment that does not conform to applicable vehicle safety standards established by NHTSA. Manufacturers are required to notify owners of any defects in vehicle safety and remedy such defects through vehicle recalls. The Safety Act also authorizes NHTSA to investigate complaints relating to vehicle safety.
NHTSAs safety standards cover a variety of matters and are updated frequently. The 2000 Transportation Recall Enhancement, Accountability and Documentation Act (TREAD Act) required NHTSA to regulate vehicle rollover, impose more stringent tire safety standards and gather additional information relating to potential car defects. The TREAD Act also substantially increased NHTSAs authority to impose both civil and criminal penalties for non-compliance with regulatory requirements. In addition, manufacturers are required to report to regulators certain information relating to customer complaints, warranty claims, field reports, and notices and claims involving property damage, injuries and fatalities in the United States and claims involving fatalities outside the United States. Manufacturers are also required to report certain information concerning safety recalls and other safety campaigns outside the United States.
NHTSA issued in 2016 and updated in 2020, non-binding guidelines for addressing cybersecurity issues in the design and manufacture of new motor vehicles, as well as guidance for the investigation and validation of cybersecurity measures.
In addition, a new Federal Motor Vehicle Safety Standard requiring artificial sound in electric, and hybrid electric vehicles has taken effect for new motor vehicles built on or after March 1, 2021. The artificial sound is intended to provide audible notice of the presence of the electric or hybrid electric vehicle to persons with impaired vision.
China
On July 24, 2020, MIIT revised the 2017 Administrative Provisions on the Admission of New Energy Vehicle Manufacturing Enterprises and Products (the 2020 Admission Provisions), and the 2020 Admission Provisions set out the safety requirements for new energy vehicles, such as the standards for vehicle-mounted rechargeable electrical energy storage system, operation safety and fault protection and protection against electric shock.
Cybersecurity policies in China
In July 2021, Chinas State Council issued Opinions on Strictly Cracking Down on Illegal Securities Activities, a policy that calls for strengthening enforcement and improving laws and regulations on cross-border data transfer and data security. On July 30, 2021, the Ministry of Industry and Information Technology of China issued the Opinion on Strengthening the Management of Connected Vehicle Manufacturers and Product Access. The opinion requires companies to strengthen their data security management capacity, such as establishing data classification management, enhancing data security protection measures, conducting self-assessment to identify risks related to data and reporting data security incident to local authorities. It also specifically provides that companies should store personal information and important data collected and generated during its operation in
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China within the territory of China; and if there is any need to export data, these companies are required to conduct security assessment.
The Chinese Data Security Law, which was promulgated by the Standing Committee of the National Peoples Congress of China in June 2021 and entered into force in September 2021, imposes data security and privacy obligations on entities and individuals carrying out data activities, requires a national security review of data activities that may affect national security and imposes export restrictions on certain data and information. The Chinese Data Security Law has extraterritorial effect that data processing activities carried out outside of China that damage the national security and public interests of China, or the legitimate rights and interests of Chinese citizens and organizations will give rise to legal liabilities.
On May 12, 2021, the Cyberspace Administration of China released a draft of Several Administrative Provisions on Automobile Data Security. Following the draft, the Several Measures on the Automobile Data Security Management was promulgated in August 2021 and entered into force on October 1, 2021. The regulation applies to the operators engaged in automobile design, manufacturing and providing relevant services, including automobile manufacturers, providers of component and software, dealers, repairers, ride-hailing companies and insurance companies. The regulation requires the operators to comply with certain requirements in relation to processing of personal information and important data during the process of designing, manufacturing, selling, maintaining, managing automobiles within the territory of China. It specifically requires the operators to store certain personal information and important data within the territory of China in accordance with such laws; and if there is actual need to provide such data overseas, the operator is required to go through the data export security assessment organized by Cyberspace Administration of China in accordance with such laws.
In August 2021, the Chinese Personal Information Protection Law was passed and has been entered into force on November 1, 2021. The law provides further detailed rules for processing personal information and emphasizes its extraterritorial effect. It shall apply to the processing of personal information carried out outside of China of natural persons who are within the territory of China where (1) such processing is for the purpose of providing products or services for natural persons within China, (2) such processing is to analyse or evaluate the behavior of natural persons within China, or (3) there are any other circumstances stipulated by laws and administrative regulations.
In addition to the foregoing, on July 10, 2021, the CRO under the Cyberspace Administration of China promulgated a draft administrative measure relating to cybersecurity, which further restates and expands the rules of cybersecurity review in China. Pursuant to the administrative measure, critical information infrastructure operators that intend to purchase network products and services and data processors engaging in data processing activities that affect or may affect Chinese national security must be subject to cybersecurity review. The administrative measure specifically requires data processors in China who hold more than one million users personal information and plan to list on a stock exchange in a foreign country to apply for a cybersecurity review. Moreover, under the administrative measure, the CRO can initiate cybersecurity review under certain situations, for example, if a regulatory agency within the cyber-security review coordination mechanism believes a network product or service, data processing activity, or stock exchange listing activity outside of China impacts or might impact Chinese national security. As of the date of this proxy statement/prospectus, it is uncertain if and when this draft regulation will enter into force, and it remains unclear whether the formal version adopted in the future will have any further material changes (see also Risk FactorsRisks Related to Cybersecurity and Data Privacy).
AD/ADAS Regulations
Polestar equips its vehicles with certain advanced driver assistance features. Generally, laws pertaining to driver assistance features and self-driving vehicles are evolving globally and, in some cases, may create restrictions on advanced driver assistance or self-driving features that Polestar may develop. Polestars ambition is to meet relevant requirements for each product, market, and time frame.
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Sustainability and Environmental Regulations
Polestar operates in an industry that is subject to extensive sustainability and environmental related regulations, which have become more stringent over time. The laws and regulations to which Polestar is or may become subject govern, among other things, water use; air emissions; use of recycled materials; energy sources; the storage, handling, treatment, transportation and disposal of hazardous materials; the protection of the environment, natural resources and endangered species; responsible mineral sourcing; due diligence transparency and the remediation of environmental contamination. Compliance with such laws and regulations at an international, regional, national, state, provincial and local level is and will be an important aspect of Polestars ability to continue its operations.
Many countries have announced a requirement for the sale of zero-emission vehicles only within proscribed timeframes, some as early as 2035, and Polestar as an electric vehicle manufacturer is already in a position to comply with these requirements across its entire coming product portfolio as it expands. Polestars competitors, by contrast, will need to reconcile an expensive infrastructure with factories and equipment tailored for production of internal combustion engine (ICE) vehicles, along with workforces trained to produce ICE vehicles and intellectual property portfolios geared for ICE vehicles.
UNECE
The UNECE has developed certain international rules and regulations in the area of environment, range and energy consumption under the 1958 Agreement.
EU
Manufacturers of passenger vehicles in the EU are required to comply with EU Regulation 715/2007 the Worldwide harmonized Light vehicles Test Procedure (WLTP) on Energy Consumption and Range, and Directive 2005/64/EC - Recyclability, Recoverability, Reusability.
USA
The EPA is the federal regulator within this field, but the CARB is recognized in the federal Clean Air Act and has autonomous local regulations impacting air quality control. Polestar fulfills the applicable federal regulations under 40 CFR and the California state regulations under CCR 13.
China
Ministry of Ecology and Environment (MEP), (formerly the Ministry of Environmental Protection) - regulates range and energy efficiency for automotive products. It establishes and improves all fundamental systems in China with respect to the environment.
Emissions Credits
All manufacturers are required to comply with the applicable emission regulations in each jurisdiction in which they operate. Furthermore, since Polestars electric vehicles have zero or limited emissions compared to internal combustion engine vehicles, it earns emission grams or credits that may be sold to and used by other manufacturers to cover or offset their emissions footprint.
Polestar aims to follow the development and opportunities connected to emission regulations in all geographic regions in which it operates. The ability to earn excess emission grams or credits are dependent on each jurisdictions regulations and the opportunity to get compensated by others depends on the demand from other manufacturers.
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Recall activities
If Polestar vehicles need to be recalled or updated due to quality issues or not fulfilling applicable legal requirements in a market, decisions will be taken according to delegation of authority within Polestar. Reporting to authorities according to local requirements applies.
Legal Proceedings
From time to time, Polestar is subject to various legal proceedings that arise from the normal course of business activities. In addition, from time to time, third parties may assert claims of intellectual property infringement, misappropriation or other violation against Polestar in the form of letters and other forms of communication. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on its results of operations, prospects, cash flows, financial position and brand.
In March 2021, a Swedish investment firm specializing in class action lawsuits, initiated class action activities in Norway against Polestar Norway. The class action suit alleges the Polestar Norway issued misleading statements regarding the range of the Polestar 2 vehicle, which Polestar Norway rejects. As of the date these financial statements were issued, these class action activities consisted of the initial steps of soliciting individuals who purchased a Polestar 2 vehicle in Norway to join the class action suit against Polestar Norway; no claim has been filed in court. The Swedish investment firm refers to a potential total claim of approximately $2.53 million. Simultaneously, a Norwegian automobile association for car owners (NAF) has sent separate claim letters to Polestar Norway on behalf of a few members, on the same grounds as the class action lawsuit. These claims have also been rejected by Polestar Norway.
On August 16, 2019, ten Volvo Cars retailers in Illinois filed a protest with the Motor Vehicle Review Board against Volvo Car USA, LLC and Polestar Automotive USA, Inc (the Protest). The protest seeks a declaration from the Motor Vehicle Review Board that all Volvo Cars retailers in Illinois can sell Polestar-branded vehicles under the terms of their Volvo Cars retailer agreements. On November 6, 2019, Volvo Cars and Polestar each filed motions to dismiss the protest. The parties to the dispute have recently agreed in principle to the terms of a proposed settlement of all claims. Under the settlement, the retailers who filed the claim will be given an opportunity to become Polestar retailers, but will not be permitted to sell Polestar vehicles from their Volvo Cars dealerships or under the terms of their Volvo Cars retailer agreements. The parties are currently working to document the proposed settlement.
Employees
As of December 31, 2021, Polestar had more than 1,300 employees. Polestars employees are mainly located in Sweden, China, UK and USA.
Polestar follows local national requirements for collective bargaining agreements where such requirements exist. Currently, Polestar has instituted collective bargaining agreements with employees in Sweden, Finland, the Netherlands and Austria. Sweden is the only country where Polestar is actively engaged with employee union representatives. Polestar believes relations with these union representatives are good and its engagement with these union representatives is constructive.
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SELECTED HISTORICAL FINANCIAL INFORMATION OF POLESTAR AUTOMOTIVE HOLDING LIMITED
The following table shows select historical financial information of Polestar Automotive Holding Limited as of and for the periods presented in the Polestar Financial Statements. The following financial information should be read together with the Polestar Financial Statements included elsewhere in this proxy statement/prospectus and Polestars Managements Discussion and Analysis of Financial Condition and Results of Operations. The financial information in this section is not intended to replace the Polestar Financial Statements and historical results presented in this proxy/prospectus are not indicative of future results.
The financial information in this section is not reflective of the pro forma impact of the Business Combination. Please see Unaudited Pro Forma Condensed Combined Financial Information for detailed discussion on the pro forma impact of the Business Combination.
For the year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Statement of operations data | US$Thousand | US$Thousand | US$Thousand | |||||||||
Revenue |
1,337,181 | 610,245 | 92,415 | |||||||||
Cost of sales |
(1,336,321 | ) | (553,724 | ) | (39,790 | ) | ||||||
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Gross profit |
860 | 56,521 | 52,625 | |||||||||
Total operating expenses |
(995,699) | (497,009 | ) | (243,619 | ) | |||||||
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Operating loss |
(994,839 | ) | (440,488 | ) | (190,994 | ) | ||||||
Finance income (expense), net |
(12,279 | ) | (30,835 | ) | (4,966 | ) | ||||||
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Loss before income tax |
(1,007,118 | ) | (471,323 | ) | (195,960 | ) | ||||||
Income tax expense |
(336 | ) | (13,535 | ) | (2,015 | ) | ||||||
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Net loss |
(1,007,454 | ) | (484,858 | ) | (197,975 | ) | ||||||
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Statement of financial position data | ||||||||||||
Total assets |
3,309,693 | 2,548,564 | 1,548,350 | |||||||||
Total equity |
(122,496 | ) | (580,711 | ) | (591,162 | ) | ||||||
Total liabilities |
(3,187,197 | ) | (1,967,853 | ) | (957,188 | ) | ||||||
Statement of cash flows data | ||||||||||||
Cash used for operating activities |
(312,156 | ) | (57,050 | ) | (190,059 | ) | ||||||
Cash used for investing activities |
(129,672 | ) | (243,707 | ) | (285,448 | ) | ||||||
Cash provided by financing activities |
909,572 | 359,643 | 475,407 |
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POLESTARS MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Parent and its subsidiaries are collectively referred to herein as Polestar, we, our, or us.
Polestar is determined to improve society by accelerating the shift to sustainable mobility.
Polestar is a pure play, premium electric performance vehicle brand headquartered in Sweden, designing products that are engineered to excite consumers and drive change. Polestar defines market-leading standards in design, technology and sustainability. Polestar was established as a premium electric vehicle brand by Volvo Cars and Geely in 2017. Polestar benefits from the technological, engineering and manufacturing capabilities of these established global vehicle manufacturers. Polestar has an asset-light, highly scalable business model with immediate operating leverage. While Polestar has historically offered two performance vehicle models; Polestar 1 and Polestar 2, production of the Polestar 1 ceased during the year ended December 31, 2021.
Polestars vehicles are currently manufactured at a plant in Luqiao, China that is owned and operated by Volvo Cars. The plant, referred to by Volvo Cars as the Taizhou plant, was acquired by Volvo Cars from Geely in December 2021. Prior to that time, the plant had been owned by Geely and operated by Volvo Cars. Under contract manufacturing agreements, Polestar intends to expand its manufacturing presence to facilities in the U.S. and in Europe, in each case operated by Volvo Cars. For example, Polestar intends to produce the Polestar 3 in Volvo Cars plant in Charleston, South Carolina as well as in Chengdu, China. Polestars ability to leverage the manufacturing footprint of both Volvo Cars and Geely gives Polestars highly scalable business model immediate operating leverage.
Polestars business model focuses on a digital-first, direct-to-consumer approach that enables its customers to browse Polestars products, configure their preferred vehicle and place their orders online. This direct-to-consumer approach differs in some locations based on local legal jurisdictions (i.e., Polestar uses the dealer model only in the U.S. and Canada). This approach also differs in sales to fleet customers where ordering configured vehicles via the online platform is impracticable. Instead, sales are facilitated through Polestar fleet account managers.
Alternatively, Polestar Locations are where customers can see, feel and test drive Polestars vehicles prior to making an online purchase. Polestar believes this combination of digital and physical retail presence delivers a seamless experience for its customers.
Polestars customer experience is further enhanced by its comprehensive service network that leverages the existing Volvo Cars service center network. Polestar currently has over 40 permanent Polestar Locations (and over 60 temporary or pop-up locations). Polestar plans to extend its retail locations in existing and new markets to total over 150 by the end of 2023. In addition, Polestar leverages the Volvo Cars service center network to provide access to over 800 customer service points worldwide in support of its international expansion. Polestar plans to extend this service center network to a total of over 1,100 by the end of 2023.
Polestars research and development expertise is a core competence and Polestar believes it is a significant competitive advantage. Current proprietary technologies under development include bonded aluminum chassis architectures and their manufacture, a high-performance electric motor and bi-directional compatible battery packs and charging technology.
Polestar has drawn extensively on the industrial heritage, knowledge and market infrastructure of Volvo Cars. This combination of deep automotive expertise, paired with cutting-edge technologies and agile, entrepreneurial culture, underpins our differentiation potential for growth and success.
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Sustainability
During 2020, Polestar developed a sustainability strategy to support the vision of sustainable mobility. The strategy builds on the material issues Polestar faces and comprises four focus areas: climate neutrality, circularity, transparency and inclusion.
Climate neutrality
Combating the emission of greenhouse gases is one of Polestars top priorities. Most greenhouse gas emissions associated with Polestars vehicles are related to the use of fossil fuels in energy conversion. Coal power is highly present in Polestars supply chains as it operates, and predominantly sources, in China. Aside from greenhouse gas emissions, the burning of fossil fuels also leads to emissions of sulfur dioxide, nitrogen oxides and particulates that affect the environment and the health of people living in the local areas surrounding the power plants. The use of renewable energy in Polestars supply chain is absolutely key for it to reach climate neutrality and improve local air quality. Polestar has set two goals to achieve climate neutrality: Polestar is to be climate neutral by 2040 and create a climate neutral car (cradle-to-gate) by 2030. To drive towards the 2030 goal, Polestar has launched five strategic initiatives. These are: climate-neutral platform, climate-neutral materials, energy optimization, climate-neutral manufacturing and renewable energy in the supply chain. Each strategic initiative is headed by an accountable department but handled through cross-functional collaboration within Polestar.
Circularity
Circularity is a philosophy to ensure that we, as a society, produce and consume within planetary boundaries. The use of materials is at the root of Polestars biggest social and environmental impacts. The extraction, processing, use and waste treatment of materials is associated with risks and potential negative impacts such as resource depletion, pollution to air, soil and water, climate impact, loss of biodiversity and human rights violations. Pollution to air, soil and water from metallurgical processes and mining activities also affects the health of people working in the supply chain and their local environments. By using a circular approach and trying to close the loop for more materials, less virgin materials and minerals need to be extracted and produced, which minimizes the total environmental impact. Polestar aims to drive sustainable and circular use of materials through different key strategies and processes, including sustainability strategy, sourcing strategy, procurement process and product development process. Through its procurement practices Polestar aims to minimize the negative impact on land and water through reduced greenhouse gas emissions, pollution, waste and effluents throughout its supply chain. Polestar uses life-cycle assessments as its primary tool for assessing environmental impact from material use including material selection and waste management.
Transparency
Reporting and working on sustainability issues is meaningless unless it leads to real world positive impact. Being transparent about where Polestars risks and impacts lie and which methodologies Polestar uses to measure itself ensures that Polestar creates actual progress. Polestar uses materials with high risks of human rights violations and negative environmental impacts in the supply chain to create its vehicles. Cobalt, for example, is a key component of the batteries used in Polestar vehicles that is primarily mined in the Democratic Republic of Congo, where it has been linked to child labor in the artisanal and small-scale mining sector. Historically, it has been very difficult to trace the origin of minerals because of their complex supply chain and lack of reliable chain of custody methods. Polestar requires its suppliers to implement responsible sourcing practices to mitigate the risk of human rights violations. Polestar partners with Circulor, a traceability-as-a-service provider, which utilizes blockchain technology to trace the origins of many of the materials used throughout Polestars supply chain. Additionally, Polestar maintains a parts and components sourcing partnership with Volvo Cars in which suppliers are analyzed using sustainability questionnaires and a risk assessment tool developed by Responsible Business Alliance.
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Inclusion
Inclusion is diversity, representation, and equality working in harmony. By committing to this strategic focus area, Polestar stands up for the rights of people throughout its value chain from the workers producing the material of its vehicles, to its employees in factories or spaces, to customers and consumers around the world. Departments like Human Resources, Customer Experience and Procurement drive strategic initiatives on human rights and inclusion, addressing Polestars role as a responsible brand, employer, and procurer.
Key factors affecting performance
Polestars growth and success over the past five years has depended on numerous factors and trends. While these factors and trends provide opportunities for Polestar, they also pose risks and challenges such as those discussed in the section Risk Factors. The following paragraphs explain the key factors that continue to have a notable impact on Polestar.
Partnerships with Volvo Cars and Geely
Polestars relationship with Volvo Cars and Geely has provided it with a unique competitive advantage in its ability to rapidly scale commercialization activities while maintaining an asset-light balance sheet. This is achieved primarily through contract manufacturing and supply agreements with Volvo Cars and Geely. Polestar has utilized Volvo Cars established research and development capabilities to accelerate technological advancements in automotive technology. Additionally, selling and administrative expenses have been positively impacted due to service agreements with Volvo Cars that allow it to attain operational efficiencies in the areas of aftermarket services and maintenance and back-office functions such as information technology, legal, accounting, finance, and human resources.
Innovative automotive technologies and design
Polestar develops electric vehicles and technologies through cutting edge design and sustainable choices. Polestar has a high-performance, innovation-driven research and development team with safety heritage rooted from Volvo Cars and in-house competencies at its dedicated research and development facility in Coventry, UK. Internal development programs such as the Polestar Precept and P10 electric powertrain have advanced Polestars organic intellectual property. Further, Polestar continues to display ambition to create industry-leading technologies through partnerships with Volvo Cars, Geely, Nvidia, Luminar, Waymo, and Zenseact, among others. This combination of research and development resources allows Polestar flexibility in determining which technologies to develop in-house versus which to outsource to partners. Polestar believes that continued investments such as these are critical to establishing market share, attracting new customers, and becoming a profitable global electric vehicle company. In the years ended December 31, 2021, 2020 and 2019, $462,731, $338,093 and $349,653, respectively, were invested in new intellectual property. These investments have primarily impacted Polestars results of operations through higher amortization expense.
Direct-to-consumer business model
Polestar operates a direct-to-consumer business model for sales of vehicles, which allows it to create a tailored experience for customers based on their individual preferences. Polestar cultivates this experience through locations where potential customers can experience Polestar vehicles, engage with Polestar specialists, and in certain cases, test drive Polestar vehicles (Polestar Location). This serves as important brand awareness and as a sales driver for commercial expansion in key markets. Through these locations, Polestar is able to introduce customers to vehicles and enhance the Polestar experience, from brand introduction and education to vehicle delivery. Additionally, Polestar is able to run a lean sales model via the Polestar mobile application (the Polestar App) and website, offer a wide service network for aftermarket services and maintenance, and offer competitive pricing and financing for customers. This business model approach has allowed Polestar to achieve
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rapid expansion in, and capitalization of, the luxury electric vehicle market in Europe with lower overall selling, general, and administrative expenses as compared to a traditional original equipment manufacturer (OEM) dealer model.
Direct-to-business model
In the U.S. and Canada, Polestar operates a direct-to-business model through which vehicles are sold directly to a network of independent authorized dealers. In these markets, vehicles are displayed and subsequently sold to end retail consumers at Polestar Spaces, which are designed, built, and equipped by dealers in accordance with Polestars standards. Dealers also diagnose and repair Polestar vehicles at associated service facilities. Vehicles are sold to dealers at wholesale prices and Polestar provides a suggested retail price, although dealers are entitled to negotiate final sale prices with their end customers.
Fleet sales
In addition to Polestar and its subsidiaries direct-to-consumer and direct-to-business models, vehicles are also sold to various fleet customers (e.g., rental car companies and corporate fleet managers). As an incentive for high-volume purchases, sales to fleet customers often include certain discounts in the form of annual rebates based on the number of vehicles ordered during the year.
Impact of COVID-19
As a result of the COVID-19 pandemic, Polestar has modified its business practices, including the implementation of work-from-home arrangements for employees able to perform their duties remotely and limiting the number of employees allowed to be in the office at once to uphold safe social distancing protocols. While the pandemic has not resulted in an apparent slowdown in Polestars operating activities, it may have impacted the ability of customers to access Polestar Locations and test drive vehicles. The Polestar sales model via the Polestar App and website helps mitigate the risk of COVID-19, as customers configure and order their vehicles online. Because Polestars commercialization phase commenced in the midst of COVID-19, distinguishing consequences of COVID-19 versus consequences of other, external factors is difficult as there is no pre-COVID-19, comparative historical performance. Therefore, Polestar cannot determine the independent impact of COVID-19 on its overall financial performance.
Beginning in the first quarter of 2021, there has been a trend in many parts of the world of increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel and government activities and functions. Despite the increasing availability of vaccination programs and easing of restrictions, Polestar cannot currently predict if the recent emergence of new strains or continued infections and fatalities will cause governments to impose prior or new restrictive measures. The negative economic effects of the continuing pandemic could have an adverse impact on Polestars operating activities in the future, and an adverse impact on company growth from potential delays on the Groups ability to recruit and train staff. COVID-19 could also affect the operations of suppliers and business partners, which may result in delays or disruptions in the supply chain of Polestars components and delay the development and rollout of future vehicles. Polestar will continue to closely monitor the effects of the pandemic. Refer to the section Risk Factors for information on risks posed by COVID-19.
Impact of Russia and Ukraine conflict
In February 2022, Russia invaded Ukraine. As the Russian and Ukrainian markets are not current or planned Polestar markets, there has been no immediate impact to the Group. However, uncertain geopolitical conditions, sanctions, and other potential impacts on the global economic environment resulting from Russias invasion of Ukraine could weaken demand for Polestars vehicles, which could make it difficult for Polestar to forecast its financial results and manage inventory levels. The uncertainty surrounding these conditions and the current, and
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potentially expanded, scope of international sanctions against Russia could cause unanticipated changes in customers buying patterns, adversely impact operations of Polestars suppliers, or interrupt Polestars ability to source products from these regions.
Polestar vehicles are manufactured at facilities owned and operated by Volvo Cars. While Polestar understands that Volvo Cars does not directly conduct any business (i.e., Tier 1 supplier) with suppliers from Russia, there can be no assurance that all parts of the supply chain are devoid of any exposure to disruptions caused by the Russia and Ukraine conflict. Due to the complexities surrounding vehicle production and its related supply chain, it is possible there will be some components sourced from suppliers subject to sanctions against Russia and/or that the resulting disruption to the supply chain will have an adverse impact on Polestars business and operations. Polestar will continue to closely monitor the effect of the conflict between Russia and Ukraine. Refer to the section Risk Factors for information on risks posed by the Russia and Ukraine conflict.
Results of operations
Polestar conducts business under one operating segment with primary commercial operations in Europe and the U.S. While Europe and the U.S. represent Polestars primary geographic markets, Polestars presence is quickly expanding in Asia. Refer to Note 1Significant accounting policies and judgements in Polestars Consolidated Financial Statements for more information on the basis of presentation and segment reporting. The following paragraphs describe the key components of revenue and expenses as presented in our Consolidated Statement of Loss.
Revenue
Revenue is comprised of revenue from the sale of vehicles, revenue from the sale of software and performance engineered kits, revenue from sales of carbon credits, vehicle leasing revenue, and other revenue. Revenue from the sale of vehicles constitutes the primary source of revenue and has historically been derived primarily from sales of the Polestar 2. Polestars main customers for electric vehicles consists of private individuals, fleet management companies, dealers, and our related parties, Volvo Cars and Geely. Revenue from the sale of software and performance engineered kits is derived from intellectual property licensed to Volvo Cars related to software upgrades and enhancements for Volvo Cars vehicles. Revenue from sales of carbon credits is derived from sales of regulatory credits to external companies in partnership with Volvo Cars. Vehicle leasing revenue is derived from the Groups operating lease arrangements. Other revenue is derived from sales of automotive research and development services and intellectual property licensed to Volvo Cars enabling Volvo Cars to source and sell Polestar parts and accessories.
Cost of sales
Cost of sales primarily consists of contract manufacturing costs associated with the production of the Polestar 2, which is outsourced to Volvo Cars (previously outsourced to Geely), depreciation of tooling equipment, amortization of intangible assets related to manufacturing engineering, warehousing and transportation costs for inventory, customs duties, and charges to write down the carrying value of inventory when it exceeds the estimated net realizable value. Costs of sales also include costs related to direct parts and materials, direct labor, and manufacturing overhead for the Polestar 1, which was manufactured at Polestars facility in Chengdu, China.
Selling, general, and administrative expenses
Selling, general, and administrative expenses are comprised of personnel expenses for business development and marketing functions, advertising and marketing expenses, personnel-related expenses for corporate, executive, finance, and other administrative functions, expenses for outside professional services, including legal, audit, information technology, and accounting services, as well as expenses for facilities, general software costs and licenses, depreciation, amortization, and travel. Personnel-related expenses consist of salaries, benefits, social security contributions, and incentive programs.
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Research and development expenses
Research and development expenses consist of personnel expenses for Polestars internal engineering, research, and development functions, amortization of intangible assets related to intellectual property used in Polestars electric vehicles and internal development programs, and expenses for direct materials and facilities used by research and development personnel. Polestar outsources certain development of intellectual property used in its electric vehicles to Volvo Cars and makes payments in accordance with development plans. Such costs are capitalized as intangible assets instead of charged to research and development expense because they are paid in connection with the receipt of intellectual property from Volvo Cars that is expected to provide future economic benefit to Polestar.
Polestar conducts various internal research and development programs focused on advancing new technologies and concepts relevant to the business, such as electric vehicle propulsion systems, infotainment and software systems, and the use of eco-friendly recycled materials in production. Costs associated with Polestars internal research and development programs are expensed as incurred while they are in the research phase and not yet expected to contribute to future cash flows. Once Polestars internal research and development programs reach the development phase and are determined to contribute to future cash flows, such costs are capitalized as intangible assets instead of being charged to research and development expenses.
Finance income and expenses
Finance income consist of interest income on bank deposits associated with Polestars short-term financing facilities and net foreign exchange rate gains on financial activities. Finance expenses are comprised of interest expenses associated with Polestars short and long-term financing facilities, including amounts owed to related parties, net foreign exchange rate losses on financial activities, and interest expenses associated with lease liabilities.
Income tax expenses
Income tax expenses consist of current and deferred income tax expenses. Current income tax expenses primarily represent income taxes generated on income sourced in multiple foreign jurisdictions. Deferred income tax expenses represent differences generated between book accounting figures and tax figures.
Factors Affecting Future Results of Operations
Revenue from Carbon Credits
Due to recent changes in market demand for carbon credits, Polestars revenue from the sale of carbon credits was approximately $20.8 million lower for the year ended December 31, 2021 as compared to the $27.1 million in revenue generated from sales of carbon credits during the year ended December 31, 2020. Based on prevailing market conditions for carbon credits and the demand for carbon credits during the year ended December 31, 2021, Polestar also expects revenue from the sale of carbon credits for the year ending December 31, 2022 to be negligible and that demand for carbon credits from Volvo Cars and third party OEMs will remain low in the future.
Gross Profit on Sales of Vehicles and Carbon Credits
Polestar delivered 28,677 vehicles during the year ended December 31, 2021 of which 2,836 vehicles included buy-back agreements and 2,081 internal vehicle deliveries. In light of recent trends, Polestar reevaluated its assumptions on sales mix by geography, sales with buyback agreements, product configuration (e.g., single-motor vs. dual-motor) and channel (e.g., private consumer vs. fleet sales). As a result, Polestar expects the combined impact of such changes in sales mix and the reduction of revenue from the sale of carbon credits described above will reduce gross profit for the year ending December 31, 2022, and that the reduction of revenue from sale of carbon credits will reduce gross profit in future years as described above.
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Costs associated with the Business Combination and Listing on Nasdaq
Costs associated with the Business Combination and on-going costs associated with being a Nasdaq listed foreign private issuer after the completion of the Business Combination, including Sarbanes Oxley compliance, digital capabilities and D&O insurance premiums, will be reflected in Polestars results of operations for the year ending December 31, 2022 and future years.
Other Operating Expenditures
Polestar intends to continue to rapidly increase the pace of its market expansion plans during 2022 and further invest in the development of its technology, sales locations and digital capabilities to provide customers with enhanced purchasing and ownership experiences. As a result, Polestar expects operating expenditures to increase for the year ended December 31, 2022 and future years.
Comparison of the years ended December 31, 2021, 2020 and 2019
Prior to reading this comparative analysis, readers should note that Polestar commenced commercial deliveries of the Polestar 2 in August 2020, which impacts the comparability of financial performance between the periods presented. The following table summarizes Polestars historical Consolidated Statement of Loss for the years ended December 31, 2021, 2020 and 2019:
For the year ended December 31, | 2021 vs 2020 Variance | 2020 vs 2019 Variance | ||||||||||||||||||||||||||
2021 | 2020 | 2019 | $ | % | $ | % | ||||||||||||||||||||||
US$Thousand | US$Thousand | US$Thousand | US$Thousand | US$Thousand | ||||||||||||||||||||||||
Revenue |
1,337,181 | 610,245 | 92,415 | 726,936 | 119 | 517,830 | 560 | |||||||||||||||||||||
Cost of sales |
(1,336,321 | ) | (553,724 | ) | (39,790 | ) | (782,597 | ) | 141 | (513,934 | ) | 1,292 | ||||||||||||||||
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Gross profit |
860 | 56,521 | 52,625 | (55,661 | ) | (98 | ) | 3,896 | 7 | |||||||||||||||||||
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Selling, general and administrative expenses |
(714,724 | ) | (314,926 | ) | (210,572 | ) | (399,798 | ) | 127 | (104,354 | ) | 50 | ||||||||||||||||
Research and development expenses |
(232,922 | ) | (183,849 | ) | (34,386 | ) | (49,073 | ) | 27 | (149,463 | ) | 435 | ||||||||||||||||
Other operating income and expenses, net |
(48,053 | ) | 1,766 | 1,339 | (49,819 | ) | (2,821 | ) | 427 | 32 | ||||||||||||||||||
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Operating loss |
(994,839 | ) | (440,488 | ) | (190,994 | ) | (554,351 | ) | 126 | (249,494 | ) | 131 | ||||||||||||||||
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Finance income |
32,970 | 3,199 | 16,226 | 29,771 | 931 | (13,027 | ) | (80 | ) | |||||||||||||||||||
Finance expenses |
(45,249 | ) | (34,034 | ) | (21,192 | ) | (11,215 | ) | 33 | (12,842 | ) | 61 | ||||||||||||||||
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Loss before income taxes |
(1,007,118 | ) | (471,323 | ) | (195,960 | ) | (535,795 | ) | 114 | (275,363 | ) | 141 | ||||||||||||||||
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Income tax expense |
(336 | ) | (13,535 | ) | (2,015 | ) | 13,199 | (98 | ) | (11,520 | ) | 572 | ||||||||||||||||
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Net loss |
(1,007,454 | ) | (484,858 | ) | (197,975 | ) | (522,596 | ) | 108 | (286,883 | ) | 145 | ||||||||||||||||
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Revenues
Polestars revenue increased by $726,936, or 119%, from $610,245 for the year ended December 31, 2020 to $1,337,181 for the year ended December 31, 2021. Revenue from related parties decreased by $18,475, or 13%, from $147,455 for the year ended December 31, 2020 to $128,980 for the year ended December 31, 2021. Polestars revenue increased by $517,830, or 560%, from $92,415 for the year ended December 31, 2019 to $610,245 for the year ended December 31, 2020. Revenue from related parties increased by $55,068, or 60%, from $92,387 for the year ended December 31, 2019 to $147,455 for the year ended December 31, 2020. The following table summarizes the changes in components of revenue and related changes between annual periods:
For the year ended December 31, | 2021 vs 2020 Variance | 2020 vs 2019 Variance | ||||||||||||||||||||||||||
2021 | 2020 | 2019 | $ | % | $ | % | ||||||||||||||||||||||
Revenues | US$Thousand | US$Thousand | US$Thousand | US$Thousand | US$Thousand | |||||||||||||||||||||||
Sales of vehicles |
1,290,031 | 542,783 | | 747,248 | 138 | 542,783 | 100 | |||||||||||||||||||||
Sales of software and performance engineered kits |
25,881 | 35,434 | 73,107 | (9,553 | ) | (27 | ) | (37,673 | ) | (52 | ) | |||||||||||||||||
Sales of carbon credits |
6,299 | 27,141 | | (20,842 | ) | (77 | ) | 27,141 | 100 | |||||||||||||||||||
Vehicle leasing revenue |
6,217 | | | 6,217 | 100 | | | |||||||||||||||||||||
Other revenue |
8,753 | 4,887 | 19,308 | 3,866 | 79 | (14,421 | ) | (75 | ) | |||||||||||||||||||
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Total |
1,337,181 | 610,245 | 92,415 | 726,936 | 119 | 517,830 | 560 | |||||||||||||||||||||
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Sales of vehicles increased by $747,248 or 138%, from $542,783 for the year ended December 31, 2020 to $1,290,031 for the year ended December 31, 2021. As referenced earlier, this increase is primarily due to a full year of commercial sales in 2021, compared to three months in 2020 (as commercialization of the Polestar 2 didnt commence until Q4 2020), as well as Polestars further expansion into new markets in 2021. Sales of vehicles increased by $542,783, or 100%, from nil for the year ended December 31, 2019 to $542,783 for the year ended December 31, 2020. The increase was due to the first commercial deliveries of the Polestar 1 and Polestar 2 to customers during the year ended December 31, 2020.
Sales of software and performance engineered kits decreased by $9,553, or 27%, from $35,434 for the year ended December 31, 2020 to $25,881 for the year ended December 31, 2021. This decrease is a result of Polestar moving towards a focus on vehicle sales and Volvo Cars offering Polestars performance engineered kits at a reduced price. Sales of software and performance engineered kits decreased by $37,673, or 52%, from $73,107 for the year ended December 31, 2019 to $35,434 for the year ended December 31, 2020. The decrease is mainly an effect of the termination of the performance engineered kits agreement in March 2019. A new performance engineered kits agreement was not signed until December 2020, at which point in time Volvo Cars resumed offering Polestars performance engineered kits to its customers, but at a reduced price.
Sales of carbon credits decreased by $20,842, or 77%, from $27,141 for the year ended December 31, 2020 to $6,299 for the year ended December 31, 2021. This decrease is due to prevailing market conditions and lower demand for carbon credits from Volvo Cars and third party OEMs. Sales of carbon credits increased by $27,141, or 100%, from nil for the year ended for the year ended December 31, 2019 to $27,141 for the year ended December 31, 2020 as this was the first year Polestar sold carbon credits. The carbon credit arrangement with Volvo Cars was executed in November 2020 as the year ended December 31, 2020 was Polestars first year selling vehicles and generating carbon credits.
Vehicle leasing revenue increased by $6,217, or 100%, from nil for the year ended December 31, 2020 to $6,217 for the year ended December 31, 2021. The increase was the result of Polestar entering into operating leases for the first time in 2021.
Other revenue increased by $3,866, or 79%, from $4,887 for the year ended December 31, 2020 to $8,753 for the year ended December 31, 2021. This increase was primarily the result of sales-based royalties received from
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Volvo Cars on sales of parts and accessories for Polestar vehicles which Volvo Cars began selling to Polestar customers during 2021. Other revenue decreased by $14,421, or 75%, from $19,308 for the year ended December 31, 2019 to $4,887 for the year ended December 31, 2020. The decrease was primarily the result of a reduction in research and development services provided to Volvo Cars during the year ended December 31, 2020.
Cost of sales and gross profit
Cost of sales increased by $782,597, or 141%, from $553,724 for the year ended December 31, 2020 to $1,336,321 for the year ended December 31, 2021. This increase was primarily driven by expanded production and commercialization of Polestar 2 vehicles and a deterioration of the SEK/CNY exchange rate throughout 2021. Specifically, sales volume growth in the United States resulted in higher customs import duties and Polestars SEK/CNY transaction exchange losses on contract manufacturing invoices paid to Geely contributed to higher overall costs of sales. Cost of sales increased by $513,934, from $39,790 for the year ended December 31, 2019 to $553,724 for the year ended December 31, 2020. The increase in cost of sales was driven by deliveries of the Polestar 1 and Polestar 2. Prior to the year ended December 31, 2020, the Polestar 1 and Polestar 2 were only available for pre-order.
Gross profit decreased by $55,661, or 98%, from $56,521 for the year ended December 31, 2020 to $860 for the year ended December 31, 2021. This decrease was primarily due to a negative gross profit impact of $20,842 related to reduced sales of carbon credits, a negative gross profit impact of $9,553 related to reduced sales of software and performance engineered kits and a negative gross profit impact of $4,887 related to reduced sales of research and development services to related parties. Gross profit increased by $3,896, or 7%, from $52,625 for the year ended December 31, 2019 to $56,521 for the year ended December 31, 2020. The increase in gross profit was reflective of cost efficiencies from contract manufacturing afforded by Polestar 2 manufacturing on a large scale.
Selling, general and administrative expenses
Selling, general and administrative expenses increased by $399,798, or 127%, from $314,926 for the year ended December 31, 2020 to $714,724 for the year ended December 31, 2021. This increase was primarily driven by continued investments in advertising, marketing, and promotional activities as part of Polestars commercial expansion across geographic markets such as the U.S., UK, Germany and China, increased professional service fees related to accounting, finance, and information technology, and higher wages and salaries associated with scaling headcount of Polestars sales and administrative personnel to meet the demands of the growing business. Selling, general and administrative expenses increased by $104,354, or 50%, from $210,572 for the year ended December 31, 2019 to $314,926 for the year ended December 31, 2020. The increase was primarily due to increased investments in advertising, marketing, and promotional activities as part of Polestars commercial expansion across geographic markets such as the United States and China, increased professional service fees related to accounting, finance, and information technology, and higher wages and salaries associated with scaling headcount of Polestars sales and administrative personnel to meet the demands of the growing business.
Research and development expenses
Research and development expenses increased by $49,073, or 27%, from $183,849 for the year ended December 31, 2020 to $232,922 for the year ended December 31, 2021. This increase was primarily due to increased product development costs related to future vehicles and electronic vehicles technologies and a full year of amortization of capitalized R&D expenses in 2021 related to Polestar 2, as compared to ten months of amortization in 2020. Research and development expenses increased by $149,463, or 435%, from $34,386 for the year ended December 31, 2019 to $183,849 for the year ended December 31, 2020. The increase was the result of amortization of intangible assets related to the Polestar 1 and Polestar 2, which commenced in December 2019 and March 2020, respectively, and higher wages and salaries associated with scaling Polestars research and development personnel to pursue new electric vehicle technologies, software, and processes.
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Other operating income and expenses, net
Other operating income and expenses, net decreased by $49,819 from $1,766 for the year ended December 31, 2020 to $(48,053) for the year ended December 31, 2021. This decrease was primarily due to an increase in unrealized foreign exchange losses on conversions from the Swedish Krona (SEK) and the Chinese Yuan (CNY) related to Polestars contract manufacturing agreements in China. Other operating income and expenses, net increased by $427, or 32%, from $1,339 for the year ended December 31, 2019 to $1,766 for the year ended December 31, 2020. The increase primarily reflected higher unrealized foreign exchange gains on operating activities associated with Polestars commercial expansion in Europe, Asia, and other geographic markets.
Finance income
Finance income increased by $29,771, or 931%, from $3,199 for the year ended December 31, 2020 to $32,970 for the year ended December 31, 2021. This increase was primarily driven by net foreign exchange gains on financial activities. Finance income decreased by $13,027, or 80%, from $16,226 for the year ended December 31, 2019 to $3,199 for the year ended December 31, 2020. The decrease was primarily related to lower interest income on bank deposits required by Polestars short-term credit facilities.
Finance expenses
Finance expenses increased by $11,215, or 33%, from $34,034 for the year ended December 31, 2020 to $45,249 for the year ended December 31, 2021. This increase was primarily driven by interest expense on past due payables to Geely and Volvo Cars and interest expense on related party loans with Volvo Cars. Finance expenses increased by $12,842, or 61%, from $21,192 for the year ended December 31, 2019 to $34,034 for the year ended December 31, 2020. The increase was primarily related to higher interest charges related to Polestars related party loans with Volvo Cars and foreign exchange losses associated with Polestars short-term credit facilities.
Income tax expense
Income tax expense decreased by $13,199, or 98%, from $13,535 for the year ended December 31, 2020 to $336 for the year ended December 31, 2021. This decrease was primarily driven by a decrease in deferred taxes related to foreign currency translation adjustments, coupled with lower withholding taxes in China due to reduced distributions for the period. This was offset by higher income tax expenses generated from the significant increase in Polestars sales volumes for the year ended December 31, 2021. Income tax expense increased by $11,520, or 572%, from $2,015 for the year ended December 31, 2019 to $13,535 for the year ended December 31, 2020. The increase was primarily due to higher deferred tax expenses related to internally developed intellectual property that were capitalized for book purposes and expensed for tax purposes, higher withholding taxes in China, and income tax expenses generated in Polestars sales units. Additionally, higher pre-tax book losses in the year ended December 31, 2020 as compared to the year ended December 31, 2019 generated in Sweden and China provided no corresponding tax benefit as deferred tax assets do not meet the accounting recognition criteria in these jurisdictions.
Liquidity and capital resources
Polestar finances its operations primarily through the issuance of equity instruments, various short-term credit facilities, including working capital facilities, term loans with related parties, sale leaseback arrangements, and extended trade credit with related parties. The principal uses for liquidity and capital are funding operations, research and development expenditures, and sustaining access to additional capital via the repayment of existing credit facilities. Polestar is currently in the process of expanding operations in Europe, North America, and Asia, which has resulted in increased advertising, marketing, and promotional costs.
The development and commercialization of Polestar vehicles will continue to require substantial expenditures and Polestar is reliant upon continued investments from existing and new shareholders to fund operations. These
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conditions raised substantial doubt about Polestars ability to continue as a going concern. Refer to Note 1Significant accounting policies and judgements in the accompanying Consolidated Financial Statements.
As of December 31, 2021 and 2020, Polestar had cash and cash equivalents of $756,677 and $316,424, respectively. Cash and cash equivalents consist of cash in banks with an original term of three months or less. As of December 31, 2021 and 2020, Polestar had restricted cash of nil and $50,206, respectively. Restricted cash consists of cash collateral held by financial institutions that provide Polestars short-term working capital loans.
On a pro forma basis, assuming the consummation of the Business Combination, Polestar estimates that it would have cash and cash equivalents of approximately $1,712,463, assuming no redemptions by GGI Public Stockholders, and $1,612,407, assuming the contractual maximum redemption scenario, of pro forma cash and cash equivalents on hand at December 31, 2021. Polestar believes its existing cash and cash equivalents, current, refinanced and new short-term credit facilities, current working capital arrangements with related parties, existing share holders declarations of intent to subscribe to future equity offerings from related party owners, and the net proceeds from the Business Combination would be sufficient to meet its anticipated cash needs for at least 12 months from the date the accompanying Polestar Financial Statements were issued.
If Polestars pro forma cash resources, including the proceeds of the Business Combination, are insufficient to finance its future cash requirements, Polestar will need to finance future cash needs through a combination of public or private equity offerings, debt financings, or other means. To the extent Polestar raises additional capital through the sale of equity or convertible debt securities, the ownership interest of its shareholders may be diluted, and the terms of such securities may include liquidation or other preferences that adversely affect the rights of its existing stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting Polestars ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If Polestar is unable to raise additional funds through equity, debt financings, or other means when needed, it may be required to delay, limit, reduce, or, in the worst case, to terminate research and development and commercialization efforts and may not be able to fund continuing operations.
Debt and equity financing
In November 2020, Polestar issued 14,371,808 ordinary shares to Polestars principal owners at $6.15 per share for total proceeds of $438,340. Polestar also issued 18,032,787 Class B ordinary shares to third party investors in March 2021 at $30.50 per share for total proceeds of $550,000. In July 2021, 17,345,079 Class A ordinary shares were converted to Class B ordinary shares. Following these events, total Class A and Class B ordinary shares issued and outstanding were 232,404,595, with each share valued at $8.04. During the periods presented in the accompanying Consolidated Financial Statements, Polestar utilized several short-term working capital loans, none of which require it to meet any material debt covenants. All short-term working capital loans that have come due during the periods presented have been repaid on-time. These loans are further detailed as follows:
| In June 2019, Polestar entered into a 12-month unsecured working capital loan with a bank in China. The outstanding principal balance as of December 31, 2019 was $146,520. The loan carried interest at the latest interbank loan prime rate minus 0.1775%. This loan was fully repaid as of December 31, 2020. |
| In September 2019, Polestar entered into a 12-month unsecured working capital loan with a bank in China. The outstanding principal balance as of December 31, 2019 was $131,730. The loan carried interest at the LIBOR 3-month term rate plus 0.68657%. This loan was fully repaid as of December 31, 2020. |
| In December 2019, Polestar entered into a 12-month unsecured working capital loan with a bank in China. The outstanding principal balance as of December 31, 2019 was $112,195. The loan carried interest at the LIBOR 3-month term rate plus 2.1%. This loan was fully repaid as of December 31, 2020. |
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| In June 2020, Polestar entered into a 12-month unsecured working capital loan with a bank in China. The outstanding principal balance as of December 31, 2020 was $150,735. The loan carried interest at the interbank loan prime rate plus 0.065%. This loan was fully repaid as of December 31, 2021. |
| In July 2020, Polestar entered into a 3-month related party loan with Volvo Cars. The loans principal balance of $214,950 was fully repaid as of December 31, 2020. The loan carried interest at 3.48%. |
| In December 2020, Polestar entered into a 6-month unsecured working capital loan with a bank in China. The outstanding principal balance as of December 31, 2020 was $45,930. The loan carried interest at the latest 12-month national interbank loan prime rate minus 0.37%. This loan was fully repaid as of December 31, 2021. |
| In December 2020, Polestar entered into a 6-month uncommitted facility with a bank in the United Kingdom. The outstanding principal balance as of December 31, 2020 was $148,082. The loan carried interest at 2.1% per annum over the relevant interbank offered rate, plus a flat arrangement fee of 0.25% to be paid on the value of the facility payable. This loan was fully repaid as of December 31, 2021. |
| In June 2021, Polestar entered into a 12-month unsecured working capital loan agreement with a bank in China. The outstanding principal balance as of December 31, 2021 was $78,650. The loan carries interest at the latest 12-month national interbank loan prime offer rate plus 1.1%. |
| In July 2021, Polestar entered into a 12-month unsecured working capital loan agreement with a bank in China. The outstanding principal balance as of December 31, 2021 was $130,559. The loan carries interest at a rate of 3.915% per annum. |
| In December 2021, Polestar entered into a 9-month working capital loan agreement with a bank in China. The loan is secured on certain assets equal to approximately 70% of its value and benefits from a subsidiary guarantee from Polestar Shanghai as well as letters of keep well from both Volvo Cars and Geely. Polestar does not anticipate needing to rely on these letters. The outstanding principal balance as of December 31, 2021 was $400,000. The loan carries interest at a fixed rate of 1.883%. |
In July 2021, Geely and two other third-parties invested in non-interest-bearing convertible notes of $35,231 from Polestar Group. As discussed in Note 18Equity of the accompanying Consolidated Financial Statements, these convertible notes may not be cash settled and may only be settled via the automatic conversion to Class B common stock upon the occurrence of a qualifying conversion event, or at-will by Polestar, prior to a qualifying conversion event. As of December 31, 2021, no qualifying conversion event had occurred, and Polestar has not converted any of the convertible notes at-will. Therefore, all $35,231 of the convertible note remained outstanding.
During the years ended December 31, 2021 and December 31, 2020, Polestar entered into contracts to sell vehicles and then lease-back such vehicles for a period of up to 12 months, with an obligation to repurchase the vehicle at the end of the lease-back period. As of December 31, 2021 and 2020, $14,465 and $17,398 of the financing obligation related to these sale lease-backs was outstanding, respectively.
In the ordinary course of business, Polestar enters into multiple low-value working capital credit facilities with various financial service providers across the Groups multiple markets. These facilities are used to ensure the Group can meet vehicle demand and fund operations related to vehicle sales. As of December 31, 2021, and 2020, $32,453 and $1,345 of these working capital credit facilities were outstanding, respectively.
Under both arrangements, Polestar has the ability to repay lenders or repurchase vehicles at its convenience. Due to these circumstances, these arrangements are accounted for as short-term financing instead of revenue generating sales arrangements.
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Cash flows
For the year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
US$Thousand | US$Thousand | US$Thousand | ||||||||||
Cash used for operating activities |
(312,156 | ) | (57,050 | ) | (190,059 | ) | ||||||
Cash used for investing activities |
(129,672 | ) | (243,707 | ) | (285,448 | ) | ||||||
Cash provided by financing activities |
909,572 | 359,643 | 475,407 |
Cash used for operating activities
Cash used for operating activities increased from $57,050 for the year ended December 31, 2020 to $312,156 for the year ended December 31, 2021. The change was primarily the result of Polestar fulfilling its provisions related to warranties, employee benefits, and other provisions, increased prepaid expenses, and higher levels of inventory due to market expansion, partially offset by higher collections of trade receivables from related parties.
Cash used for operating activities decreased from $190,059 for the year ended December 31, 2019 to $57,050 for the year ended December 31, 2020. The change was primarily the result of increased trade payables to Polestars related parties, Volvo Cars and Geely, and accrued expenses, partially offset by higher trade receivables and inventories associated with the commencement of commercialization of the Polestar 2 in August 2020.
Cash used for investing activities
Cash used for investing activities decreased from $243,707 for the year ended December 31, 2020 to $129,672 for the year ended December 31, 2021. The change was primarily the result of a decrease in cash payments for investments in property, plant and equipment and lower cash payments for intangible assets in accordance with the terms of agreements with Volvo Cars.
Cash used for investing activities decreased from $285,448 for the year ended December 31, 2019 to $243,707 for the year ended December 31, 2020. The change was primarily the result of fewer additions of property, plant and equipment and investments in intellectual property related to the Polestar 1, Polestar 2, and Polestar 3 that had not yet been cash settled with Volvo Cars, partially offset by initial capitalization of investments in intellectual property under various internal development programs.
Cash provided by financing activities
Cash provided by financing activities increased from $359,643 for the year ended December 31, 2020 to $909,572 for the year ended December 31, 2021. The change was primarily the result of the issuance of Class B common shares to third-party investors, the issuance of convertible notes, and increased short-term borrowings, partially offset by principal repayments related to existing short-term credit facilities.
Cash provided by financing activities decreased from $475,407 for the year ended December 31, 2019 to $359,643 for the year ended December 31, 2020. The change was primarily the result of a decrease in restricted cash deposits and principal repayments related to existing short-term credit facilities, partially offset by the issuance of Class A common shares of Polestar to Polestars principal owners.
Contractual obligations and commitments
Polestar is party to contractual obligations to make payments to third parties in the form of short-term credit facilities, sale leaseback arrangements, and various other leasing arrangements. Polestar has also entered into capital commitments to purchase property, plant and equipment and intellectual property. Refer to Note 9Leases, Note 21Liabilities to credit institutions, and Note 24Commitments and contingencies in the accompanying Consolidated financial statements for more detail on contractual obligations and commitments.
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The following table summarizes Polestars estimated future cash expenditures related to contractual obligations and commitments as of December 31, 2021:
Payments due by period | ||||||||||||||||
Contractual obligations and commitments | Total | Less than 1 year |
Between 1-5 years |
After 5 years | ||||||||||||
US$ Thousand | US$ Thousand | US$ Thousand | US$ Thousand | |||||||||||||
Capital commitments |
763,780 | 437,947 | 298,833 | | ||||||||||||
Credit facilities, including sale leasebacks |
642,338 | 642,338 | | | ||||||||||||
Lease obligations |
89,329 | 10,250 | 72,718 | 6,361 | ||||||||||||
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Total |
1,468,447 | 1,090,535 | 371,551 | 6,361 | ||||||||||||
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Off-balance sheet arrangements
Polestar does not maintain any off-balance sheet activities, arrangements, or relationships with unconsolidated entities (e.g., special purpose vehicles and structured finance entities) or persons that have a material current effect, or are reasonably likely to have a material future effect, on Polestars Consolidated Financial Statements.
Critical accounting estimates
Polestar prepares its Consolidated Financial Statements in accordance with the IFRS issued by the IASB. The preparation of our Consolidated Financial Statements requires Polestar to make estimates, assumptions, and judgments that affect the reported amounts and related disclosures. All estimates, assumptions, and judgments are based on market information, knowledge, historical experience, and various other factors that Polestar determines reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Other companies in similar businesses may use different estimates, assumptions, and judgments which may impact the comparability of Polestars Consolidated Financial Statements to those of other companies.
Refer to Note 1Significant accounting policies and judgements in the accompanying Consolidated Financial Statements for detailed discussion of all accounting policies and judgements applied by Polestar. The following paragraphs discuss the accounting estimates that are most critical to the portrayal of our financial condition and results of operations and that require significant, difficult, subjective, or complex judgements.
Revenue recognition determining the transaction price of performance obligations included with sales of vehicles and variable consideration for volume related discounts to fleet customers
Included with the sale of each Polestar vehicle are stand-ready obligations for the provision of certain services and maintenance (e.g., connected services and certified vehicle maintenance). Polestar utilizes an expected cost-plus margin approach for estimating the transaction price associated with these services as this is determined to be the most suitable method for estimating stand-alone selling price due to the materiality and the nature of the services. The residual amount of the transaction price is allocated to the performance obligation associated with the delivery of the vehicle because (1) the vehicle represents the most valuable component of the contract, (2) Polestars vehicles are not sold on a stand-alone basis such that an established price exists separate from the Services and Maintenance, and (3) there is wide variation in market price among the limited competitors in this new space. The estimated transaction price allocated to each stand-ready obligation is recognized over time in accordance with the term of each service while the transaction price allocated to the delivery of the vehicle is recognized at a point in time on the delivery date. The majority of Polestars revenue recognized from the sale of vehicles during the year ended December 31, 2021 was related to transaction price allocated using the residual approach. Polestar has continued to evaluate and monitor the number of observable inputs available for use in estimating the standalone selling price of its vehicles. As part of its ongoing analysis, Polestar has determined that use of the residual method continues to be the most appropriate method for estimating the standalone selling price of its vehicles.
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Polestar also offers volume related discounts to fleet customers which impacts its estimation of the consideration it will be entitled to in exchange for the delivery of vehicles. Due to its lack of experience engaging with fleet customers and competitive pressures from more established original equipment vehicle manufacturers, Polestar utilizes the most-likely amount method for estimating volume related discounts instead of the expected value method. Polestars estimations under the most-likely amount method will improve as Polestar builds more relationships with fleet customers and gathers more reliable data over time.
Intangible assets capitalizing internally developed intellectual property and determining the useful lives
Polestar conducts various internal development programs for projects such as the Polestar Precept and the P10 electric propulsion system. Programs are divided into the concept phase and the product development phase. In the concept phase, Polestar conducts exploratory research activities and designs an official development program. Management deems a project program start and it enters the product development phase if it is aligned with the business plan, financially sustainable, and estimated to contribute to future cash flow benefits. Upon the achievement of program start, internally developed intellectual property is capitalized in intangible assets. Determining program start for a project involves a significant amount of estimation with regards to its future cash benefit expected to stem from such project.
Polestar conducts an analysis to estimate the useful life for internally developed intellectual property, acquired intellectual property, and software at the point in time when they are capitalized in intangible assets. The estimation of useful life is heavily impacted by Polestars contractual rights and obligations, technological complexities, and competitive pressures that influence technological advancements and obsolescence in the electric vehicle industry. The estimation of useful life ultimately impacts the amortization expense associated with intangible assets.
Impairment testing
Polestar conducts routine evaluations of intangible assets and goodwill for evidence of impairment indicators. At least annually and when impairment indicators exist, Polestar conducts an impairment test at the cash generating unit level. The recoverable amount for cash generating units is established through a calculation of value in use under a discounted future cash flow model that uses significant estimations regarding future cash flows as seen in the 2022-2025 business plan, a terminal growth rate of 2.0% for cash flows through the next ten years, and an after-tax discount rate of 10.1%.
Valuation of loss carry-forwards
The recognition of deferred tax assets requires estimates to be made about the level of future taxable income and the timing of recovery of deferred tax assets. These estimates take into consideration forecasted taxable income by relevant tax jurisdiction. Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that management has sufficient objectively verifiable evidence available which would demonstrate that is has become probable that future taxable profits will be available against which they can be used.
Recent accounting pronouncements
Certain new accounting standards and interpretations have been issued by the IASB but are not yet effective for the December 31, 2021 reporting period and have not been early adopted by the Polestar Group. These standards are not expected to have a material impact on Polestars Consolidated Financial Statements in current or future reporting periods. Refer to Note 1Significant accounting policies and judgements in the accompanying Consolidated Financial Statements for information on the new standards.
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Quantitative and qualitative disclosures about market risk
Polestar is exposed to certain market risks in the ordinary course of business. These risks primarily consist of foreign exchange risk, interest rate risk, credit risk, and liquidity risk. Refer to Note 2Financial risk management in the accompanying Consolidated Financial Statements for detailed discussion of these risks and sensitivity analyses.
Foreign currency exchange risk
The global nature of Polestars business exposes cash flows to risks arising from fluctuations in exchange rates. Relative changes in the currency rates have a direct impact on Polestars operating income, finance income, finance expense, Consolidated Statement of Financial Position and Consolidated Statement of Cash Flows. To mitigate the impact of currency exchange rate fluctuations for the business operations, Polestar continually assesses its exposure to exchange rate risks.
Translation exposure risk
Currency translation risk arises from the consolidation of foreign subsidiaries that maintain net assets denominated in functional currencies other than USD (i.e., the functional currency of the Parent). At each reporting date, assets and liabilities denominated in a foreign currency are translated to the functional currency using the closing exchange rate and items of income and expense are translated at the monthly average exchange rate. Such currency effect is recorded in the Consolidated Statement of Comprehensive Loss. Polestar is primarily exposed to currency translation risk from subsidiaries with functional currencies in SEK, the Euro (EUR), and the CNY.
Transaction exposure risk
Currency transaction risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the functional currency of the relevant Polestar entity. Primarily, Polestar is exposed to currency transaction risk in entities with SEK and CNY as the functional currency. The primary risks in these entities are CNY/SEK, USD/SEK, and EUR/SEK due to trade receivables, trade payables, and short-term credit facilities.
Interest rate risk
Polestars main interest rate risk arises from short-term liabilities to credit institutions with variable rates, which exposes Polestar to cash flow interest rate risk. As of December 31, 2021 and 2020, the nominal amount of liabilities to credit institutions with floating interest rates was $642,338 and $363,490, respectively. Polestar closely monitors the effects of changes in the interest rates on its interest rate risk exposures, but Polestar currently does not take any measures to hedge interest rate risks. Interest rate risk associated with these loans is limited given their short-term duration.
Credit risk
Polestar is exposed to counterparty credit risks if contractual partners (e.g., fleet customers) are unable or only partially able to meet their contractual obligations. Polestars credit risk can be divided into financial credit risk and operational credit risk. Credit risk encompasses both the direct risk of default and the risk of a deterioration of creditworthiness as well as concentration risks.
Financial credit risk
Financial credit risk on financial transactions is the risk that Polestar will incur losses as a result of non-payment by counterparties related to Polestars bank accounts, bank deposits, derivative transactions, and other liquid
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assets. In order to minimize financial credit risk, Polestar has adopted a policy of dealing with only well-established international banks or other major participants in the financial markets as counterparties. Further, Polestar also considers the credit risk assessment of Polestars counterparties by the capital markets and priority is placed on high creditworthiness and balanced risk diversification. The rating of financial counterparties used during the years ended December 31, 2021, 2020 and 2019 were in the range of BBB to A+.
Operational credit risk
Operational credit risk arises from trade receivables. It refers to the risk that a counterparty will default on its contractual obligations which would, in turn, result in financial loss to Polestar. Polestars trade receivables mostly consist of receivables resulting from the global sales of vehicles and technology. The credit risk from trade receivables encompasses the default risk of customers. Polestar evaluates for concentrations of credit risk at the customer level based on the outstanding trade receivables balance of each respective customer account. As of December 31, 2021, an unrelated customer accounted for $23,031 (12.54%) of the Groups total trade receivables (i.e., trade receivables plus trade receivablesrelated parties). As of December 31, 2020, Volvo Cars accounted for $194,503 (63.21%) of the Groups total trade receivables and an unrelated customer accounted for $32,392 (10.53%). Refer to Note 23Related party transactions in the accompanying Consolidated Financial Statements for more details on related parties. Historically, Polestar has not incurred any losses from these customers, and it does not have any contractual right to off-set its payables and receivables.
Polestar has four categories of customers when considering sales of vehicles: (1) end customers who pay up-front for vehicles, (2) fleet customers, and (3) dealers and (4) financial service providers. All credit risk related to sales to end customers who pay up-front for vehicles is eliminated due to the nature of the payment. To mitigate risk related to fleet customers, credit risk reviews are performed prior to entering into related sales agreements. Depending on the creditworthiness of its customers, Polestar may establish credit limits to reduce credit risks. Polestar sells vehicles to financial service providers, who then form separate contractual relationships with end customers. To reduce the risk related to such financial service providers, Polestar has selected a few credible financing providers in each market. Credit risk reviews, establishment of credit limits, and selection of credible financial service providers must be strictly followed and monitored, globally. The maximum amount exposed to credit risk is the carrying amount of trade receivables.
Liquidity risk
Liquidity risk is the risk that Polestar is unable to meet ongoing financial obligations on time. Polestar faces liquidity risk as all loans from financial institutions are short-term in nature, generally with a credit term of one year or less.
Trade payables with related parties represent working capital arrangements under which Polestars liquidity needs are highly dependent on the continued flexible payment terms offered to Polestar by its related parties. These flexible payment terms are not a contractual right and may be called upon in the future. Refer to Note 23Related party transactions in the accompanying Consolidated Financial Statements for additional information on these arrangements.
Polestar needs to have adequate cash and highly liquid assets on hand to ensure it can meet its short-term financing obligations and other working capital needs. Polestar manages its liquidity by holding adequate volumes of liquid assets such as cash, cash equivalents and accounts receivable, by maintaining credit facilities in addition to the cash inflows generated by its business operations, and through capital contributions from private equity investors.
As of December 31, 2021 and 2020, Polestar held cash and cash equivalents of $756,677 and $316,424, respectively, that were available for managing liquidity risk. Polestar entered into short-term financing arrangements with credit institutions to enhance short term liquidity and financing needs. Refer to Note 21
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Liabilities to credit institutions in the accompanying Consolidated Financial Statements for further details on short-term borrowings. Polestars short-term and mid-term liquidity management takes into account the maturities of financial assets and financial liabilities and estimates of cash flows from business operations.
Polestar has established a liquidity risk management framework for management of its short, medium and long-term funding and liquidity management requirements and prepares long-term planning in order to mitigate funding and re-financing risks. Depending on liquidity needs, Polestar will enter into financing and debt agreements and/or lending agreements. All draws on loans are evaluated against future liquidity needs and investment plans.
Internal control over financial reporting
Polestar management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.
As a private company, Polestar is not required to evaluate internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a) of the Sarbanes-Oxley Act, or Section 404. As a result of becoming a public company, Polestar will be required, pursuant to Section 404, to furnish a report by our management on, among other things, the effectiveness of our internal control over financial reporting for its annual report on Form 20-F. This assessment will need to include disclosures of any material weaknesses identified by Polestars management in its internal control over financial reporting.
In connection with the preparation of Polestars Consolidated Financial Statements for the years ended December 31, 2021 and 2020, Polestar identified material weaknesses in its internal control over financial reporting.
As of December 31, 2020, Polestars management determined Polestar did not design and maintain an effective control environment with the appropriate associated control activities, including over its IT environment, as evidenced by internal controls that were not formalized and lacked evidence of review. In addition, the accounting department does not have a sufficient number of personnel with SEC technical accounting expertise to perform supervisory reviews and monitor activities over financial reporting matters and controls. Remediation of this material weakness is ongoing and management has determined there is still a material weakness as of December 31, 2021. Further, as of December 31, 2021 Polestar management determined Polestar does not have the appropriate process and controls to recognize revenue in accordance with agreements with customers. Moreover, Polestar does not have the appropriate process and controls to properly recognize intangible assets at period end in accordance with their service agreement for the upcoming model PS4.
The material weaknesses related to the control environment and control activities resulted in adjustments to certain accounts and disclosures. The deficiencies associated with the IT environment and lack of SEC technical accounting expertise did not result in any material adjustments to Polestars Consolidated Financial Statements; however, such deficiencies could result in misstatements potentially impacting financial statement accounts and disclosures that would not be prevented or detected in a timely manner. The deficiency related to revenue recognition in accordance with agreements with customers resulted in material adjustments that were corrected prior to the issuance of Polestars Consolidated Financial Statements for the year ended December 31, 2021. Lastly, the deficiency related to the proper recognition period of an intangible asset resulted in a material adjustment to the Consolidated Statement of Financial Position that was corrected prior to the issuance of Polestars Consolidated Financial Statements for the year ended December 31, 2021.
Polestar is in the process of designing and implementing measures to improve its control environment and internal control over financial reporting. To remediate these material weaknesses, Polestar has taken and plans to take the following actions:
| continue hiring additional accounting and finance resources with appropriate technical accounting and reporting experience to execute key controls related to various financial reporting processes; |
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| continue to document, evaluate, remediate, and test internal controls over financial reporting, including those that operate at a sufficient level of precision and frequency or that evidence the performance of the control; and |
| assess existing entity-level controls and information technology general controls and, as necessary, design and implement enhancements to such controls. |
Polestar and its independent registered public accounting firm were not required to, and did not, perform an evaluation of Polestars internal controls over financial reporting as of December 31, 2021 or any prior period in accordance with the provisions of the Sarbanes-Oxley Act. Accordingly, Polestar cannot assure that it has identified all, or that it will not in the future have additional, material weaknesses. Material weaknesses may still exist when ListCo reports on the effectiveness of internal controls over financial reporting as required under Section 404 of the Sarbanes-Oxley Act after the completion of the Business Combination.
Polestar will monitor the effectiveness of internal control over financial reporting in the areas affected by the material weaknesses described above and will continue to perform additional procedures prescribed by management. Refer to the section Risk Factors for more information on risks related to material weakness in Polestars internal controls.
Implications of the JOBS Act
During 2021, Polestars annual gross revenue exceeded the $1.07 billion threshold, and therefore Polestar no longer qualifies as an emerging growth company.
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POLESTAR AUTOMOTIVE HOLDING UK LIMITEDS MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Polestar Automotive Holding UK Limited (ListCo, we, our, or us) was incorporated as a private company under the laws of England and Wales on September 15, 2021 as a direct wholly owned subsidiary of Parent. ListCo is registered as a USD company. As of December 31, 2021, ListCo had no operating activities and only nominal capitalization.
ListCo was formed for the purpose of becoming the ultimate parent company in the Polestar Group following the transactions contemplated in the Business Combination Agreement by and among ListCo, Polestar Group, and GGI. Merger Sub is ListCos only direct wholly owned subsidiary and was incorporated on September 15, 2021 to facilitate the consummation of the Business Combination Agreement. At December 31, 2021, Merger Sub had no assets, liabilities, or operations.
In connection with the Business Combination Agreement, Merger Sub will merge with and into GGI, pursuant to which the separate corporate existence of Merger Sub will cease, with GGI being the surviving corporation and becoming a wholly owned subsidiary of the Company. Following the consummation of the transactions contemplated by the Business Combination Agreement, the Company will be the surviving publicly-traded corporation. However, the consummation of the transactions contemplated by the Business Combination Agreement is subject to numerous conditions, and there can be no assurances that such conditions will be satisfied. Refer to The Business Combination Agreement included elsewhere in this proxy statement/prospectus for more information.
Results of operations
From inception to December 31, 2021, we had no operating activities.
Liquidity and capital resources
As of December 31, 2021, we had no cash or cash equivalents.
From inception to December 31, 2021, we did not have any operating, investing, or financing cash flows.
Contractual obligations and commitments
As of December 31, 2021, we have no contractual obligations and commitments outside of our related party transaction with Polestar Group. Refer to Note 2Related Party Transaction with Polestar Group in the accompanying Consolidated Financial Statements for more detail.
Off-balance sheet arrangements
As of December 31, 2021, we do not have any off-balance sheet arrangements.
Critical accounting policies and estimates
We prepare our Consolidated Financial Statements in accordance with the IFRS issued by the International Accounting Standards Board (IASB). Refer to Note 1 - Significant accounting policies in the accompanying Consolidated Financial Statements for discussion of the accounting policies applied by us. From inception to December 31, 2021, we did not have operating activities or become party to transactions requiring the application of significant, difficult, subjective, or complex accounting judgements.
Quantitative and qualitative disclosures about market risk
As of December 31, 2021, we had no material exposure to market risk.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 Amendments to Financial Disclosures about Acquired and Disposed Businesses.
The unaudited pro forma condensed combined statement of financial position as of December 31, 2021 combines the historical consolidated statement of financial position of Polestar Automotive Holding Limited and the historical balance sheet of GGI on a pro forma basis as if the Business Combination had been consummated and the Warrant Amendment Proposal had been approved on December 31, 2021.
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021, combines the historical consolidated statement of operations of Polestar Automotive Holding Limited and GGI for such periods on a pro forma basis as if the Business Combination and related transactions had been consummated and the Warrant Amendment Proposal had been approved on January 1, 2021, the beginning of the earliest period presented.
The unaudited pro forma condensed combined financial information has been presented for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the Post-Combination Company will experience. Further, the unaudited pro forma condensed combined financial information may not be useful in predicting the future financial condition and results of operations of the Post-Combination Company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma adjustments represent Polestar managements estimates based on information available as of the date of the unaudited pro forma condensed combined financial information and is subject to differ materially from the information presented as additional information becomes available and analyses are performed. Polestar management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to Polestar management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
This information should be read together with the following:
| Polestar Automotive Holding Limiteds audited financial statements and related notes as of December 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019; |
| Polestars Managements Discussion and Analysis of Financial Condition and Results of Operations; |
| GGIs audited financial statements and related notes as of December 31, 2021 and 2020 and for the year ended December 31, 2021 and for the period from December 21, 2020 (inception) through December 31, 2020; |
| GGIs Managements Discussion and Analysis of Financial Condition and Results of Operations, and other financial information included elsewhere in this proxy statement/prospectus. |
Description of the Business Combination
On September 27, 2021, GGI entered into the Business Combination Agreement with Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub. Pursuant to the Business Combination Agreement and in connection therewith, among other things and subject to the terms and conditions contained therein:
| in connection with the Merger, prior to the Closing, Parent will, and will cause ListCo, Polestar Singapore, Polestar Sweden and their respective subsidiaries to, complete the Pre-Closing Reorganization; |
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| as consideration for the Pre-Closing Reorganization, ListCo will issue to Parent Post-Combination Company Class A Shares and Post-Combination Company Class B Shares, such that, following the Pre-Closing Reorganization, Parent will hold an aggregate number of Post-Combination Company Shares equal to approximately (a) $20,003,000,000 divided by $10, less (b) (i) the aggregate principal amount due in respect the Parent Convertible Notes, divided by (ii) the applicable conversion price of such notes, less (c) 58,882,610, which represents the aggregate number of Post-Combination Company Preference Shares issued pursuant to the Volvo Cars Preference Subscription Agreement; |
| following the Pre-Closing Reorganization at the Closing, Merger Sub will merge with and into GGI in the Merger, pursuant to which the separate corporate existence of Merger Sub will cease and GGI will be the surviving corporation and will become a wholly owned subsidiary of ListCo; |
| at the Effective Time and by virtue of the Merger: |
| any units of GGI that are outstanding immediately prior to the Effective Time held by GGI stockholders will be automatically separated and the holder thereof will be deemed to hold one share of GGI Class A Common Stock and one-fifth of a GGI Public Warrant, which underlying securities will be converted as described below; |
| each share of GGI Class A Common Stock issued and outstanding immediately prior to the Effective Time, other than those held in treasury, will be exchanged for one Class A ADS; |
| each share of GGI Class F Common Stock issued and outstanding immediately prior to the Effective Time, other than those held in treasury, will be exchanged for one newly issued Class A ADS; and |
| all GGI Common Stock held in treasury will be canceled and extinguished without consideration; |
| in the event the Warrant Amendment Proposal is approved prior to the Effective Time, pursuant to the Class C Warrant Amendment, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-1 ADS representing one Post-Combination Company Class C-1 Share. Each Post-Combination Company Class C-1 Share will be exercisable to acquire a Post-Combination Company Class A Share (in the form of a Class A ADS) at an exercise price of $11.50 per share. In addition, each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-2 ADS representing one Post-Combination Company Class C-2 Share. Each Post-Combination Company Class C-2 Share will be exercisable to acquire a Post-Combination Company Class A Share (in the form of a Class A ADS) at an exercise price of $11.50 per share; |
| in the event that the Warrant Amendment Proposal is not approved prior to the Effective Time, pursuant to the Warrant Amendment Agreement, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one Public ADW. In addition, each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one PP ADW; |
| ListCo will adopt the Post-Combination Articles, to provide for, among other things, that (i) the initial Post-Combination Company Board will include nine directors, each serving staggered three-year terms, (ii) for a period of three years following the Closing, a majority of the Post-Combination Company Board will be (a) independent under applicable stock exchange rules and (b) unaffiliated with the Volvo Cars or Geely, and (iii) for a period of three years following the Closing, except as required by applicable law, the Post-Combination Company Board may not convene a general meeting which proposes a resolution to remove an independent director unless a majority of the directors (including at least two independent directors) approve of such resolution and following any such removal, a majority of the directors (including at least two independent directors) must approve the appointment of any new independent director to fill the vacancy; |
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| Parent, Parent Shareholders, ListCo, the GGI Sponsor and the independent directors of GGI entered into the Registration Rights Agreement; |
| prior to the Closing (but after the completion of the Pre-Closing Reorganization), ListCo and Parent will approve and adopt the Equity Plan and the Employee Stock Purchase Plan, which reserve 10,000,000 Class A ADSs and 2,000,000 Post-Combination Company Class A ADSs for issuance at Closing, respectively. Two kinds of programs will be adopted under the Equity Plan: At Listing (Exceptional) awards and Post Listing awards. The At Listing awards are a one-time issuance of restricted shares of Class A common stock in a value equal to a certain percentage of the awardees base salary. The Post-Listing award is an annual issuance of restricted shares and performance shares of Class A common stock equal to a certain percentage of the awardees base salary, depending on the awardees position at the Post-Combination Company, with a 3-year vesting period; and |
| in addition to the above, certain equity programs will be adopted: a Bonus Shares program and awards of restricted stock units (RSUs) and performance stock units (PSUs), each of which will be implemented under the Equity Plan, and a Share Purchase and Matching program, which will be implemented under the Employee Stock Purchase Plan. The Bonus Shares program will be mandatory for all employees in the relevant jurisdictions and includes a one-time issuance of Class A ADSs in a value equal to 4% of the awardees base salary, subject to vesting. Grants of RSUs and PSUs will be made to certain employees of the Company as selected by the Post-Combination Company Board; it is presently anticipated that RSUs will vest over two years and PSUs will vest based on achievement of certain Company financial performance and environmental, social and governance (ESG) metrics over three years, in each case, subject to continued service. The Share Purchase and Matching program includes an annual share matching program whereby the awardee is offered the opportunity to invest up to 1% of their base compensation on a recurring basis and receive a match in the form of shares of Class A common stock in equal value for free, subject to satisfaction of a one-year holding period for the corresponding purchased shares. |
In addition and in connection with the foregoing,
| pursuant to the Registration Rights Agreement, the Registration Rights Holders and their permitted transferees are entitled to registration rights in respect of certain Post-Combination Company securities, ADS and ADWs at the Closing; |
| pursuant to the Parent Shareholder Acknowledgement, that Parent and the Parent shareholders have undertaken that (i) the initial Post-Combination Company Board will include nine directors, a majority of whom will be independent directors, (ii) for a period of three years following the Closing, Parent and the Parent shareholders will not vote in favor of the removal any independent directors of ListCo unless at least two independent directors vote in favor of such removal, (iii) for a period of three years following the Closing, Parent and the Parent shareholders will not require ListCo to convene a general meeting for the purpose of removing an independent director, and (iv) for three years following the Closing, Parent and the Parent shareholders will not vote in favor of any amendment to the Post-Combination Articles relating to the composition of the Post-Combination Company Board or the appointment or removal of ListCo directors. The GGI Sponsor will have third party beneficiary rights to enforce the aforementioned undertakings; |
| pursuant to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, each GGI Initial Stockholder has, among other things, agreed to (i) vote their GGI Class F Common Stock in favor of the Business Combination Proposal and any other proposals for the Stockholder Special Meeting included in this proxy statement/prospectus, and against any alternative business combination, (ii) waive all adjustments to the conversion ratio set forth in the Current GGI Certificate with respect to the GGI Class F Common Stock, (iii) be bound by certain transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants, and (iv) not transfer any Class A ADSs issued pursuant to the Business Combination Agreement during the period beginning on |
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the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein. In addition, the GGI Sponsor has agreed to the forfeiture of up to 1,540,835 shares of GGI Class F Common Stock; |
| pursuant to the Parent Lock-Up Agreement, each Parent Shareholder has, subject to certain exceptions, among other things, agreed not to transfer any equity security of ListCo issued to them pursuant to the Business Combination Agreement or other transaction documents contemplated by the Business Combination Agreement during the period commencing the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein; |
| pursuant to the Initial PIPE Subscription Agreements, the Initial PIPE Investors agreed to purchase, substantially concurrently with the Closing, an aggregate of approximately 7.43 million Post- Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.09 per share in a private placement, for an aggregate amount of approximately $67.5 million. In connection with the December PIPE Assignment, on December 17, 2021, GGI and ListCo entered into the December PIPE Subscription Agreements to assign a portion of the GGI Sponsor and Snita commitments, as applicable, to purchase Class A ADSs to the December PIPE Investors, which include certain affiliates and employees of the GGI Sponsor. Pursuant to the December PIPE Subscription Agreements, the December PIPE Investors agreed to purchase, substantially concurrently with the Closing, approximately 14.3 million Post-Combination Company Class A Shares in the form of Class A ADSs for an average price of approximately $9.54 per Class A ADS, reflecting an aggregate investment amount of approximately $136.0 million. In connection with the March PIPE Assignment on March 24, 2022, GGI and ListCo entered into the March PIPE Subscription Agreements to assign a portion of the GGI Sponsor and Snita commitments, as applicable, to purchase Class A ADSs to the March PIPE Investors, which include certain affiliates and employees of the GGI Sponsor. Pursuant to the March PIPE Subscription Agreements, the March PIPE Investors have agreed to subscribe for approximately 2.8 million Class A ADSs for an average price of approximately $9.57 per Class A ADSs, reflecting an aggregate investment of approximately $27.2 million. The December PIPE Subscription Agreements and March PIPE Subscription Agreements are substantially similar to the Initial PIPE Subscription Agreements, except with regard to purchase price. As a result of the December PIPE Assignment and the March PIPE Assignment, the PIPE Investors, which include certain affiliates and employees of the GGI Sponsor have subscribed for an aggregate investment of $230.7 million. The issuance of the PIPE Shares pursuant to the PIPE Subscription Agreements is contingent upon, among other customary closing conditions, the substantially concurrent consummation of the Business Combination. Pursuant to the PIPE Subscription Agreements, ListCo agreed to file with the SEC (at ListCos sole cost and expense), within 30 calendar days after the date of Closing, the Resale Registration Statement the resale of the PIPE Shares, and to use its commercially reasonable efforts to have the Resale Registration Statement declared effective as soon as practicable after the filing thereof; |
| pursuant to the Sponsor Subscription Agreement, the GGI Sponsor initially agreed to purchase an additional 9,075,908 Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.09 per share on the date of Closing, for an aggregate investment of approximately $82.5 million. Pursuant to the Sponsor Subscription Agreement, the GGI Sponsor had the right to assign its commitment to purchase the Class A ADSs under the Sponsor Subscription Agreement in advance of the Closing. In connection with the December Sponsor Assignment on December 17, 2021, (i) the GGI Sponsor assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $63.0 million to the December PIPE Investors and (ii) GGI, ListCo and the GGI Sponsor amended and restated the Sponsor Subscription Agreement to reflect the December Sponsor Assignment. In connection with the March Sponsor Assignment on March 24, 2022, (i) the GGI Sponsor further assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $11.4 million to certain investors and (ii) GGI, ListCo and the GGI Sponsor amended the Sponsor Subscription Agreement to reflect the |
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March Sponsor Assignment. As a result, pursuant to the Sponsor Subscription Agreement, Sponsor has agreed to purchase approximately 891,000 Class A ADSs for a purchase price of approximately $9.09 per Class A ADS on the date of Closing, for an aggregate investment of approximately $8.1 million. The Sponsor Subscription Agreement is substantially similar to the Initial PIPE Subscription Agreements, except that the GGI Sponsor has the right to syndicate its commitment to acquire the Class A ADSs to be purchased under the Sponsor Subscription Agreement in advance of the Closing. |
| pursuant to the Volvo Cars PIPE Subscription Agreement, Snita initially agreed to purchase an additional 10.0 million Post-Combination Company Class A Shares in the form of Class A ADS for a purchase price of $10.00 per share on the date of Closing, for an aggregate investment amount equal to approximately $100.0 million. Pursuant to the Volvo Cars Subscription Agreement, Snita has the right to assign its commitment to purchase the Class A ADSs under the Volvo Cars Subscription Agreement in advance of the Closing. In connection with the December Volvo Assignment on December 17, 2021, (i) Snita assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $73.0 million to purchase the Class A ADSs to the December PIPE Investors and (ii) GGI, ListCo and Snita amended and restated the Volvo Car Subscription Agreement to reflect the December Volvo Assignment. In connection with the March Volvo Assignment on March 24, 2022, (i) Snita further assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $15.8 million to certain investors and (ii) GGI, ListCo and Snita amended the Volvo Cars Subscription Agreement to reflect the March Volvo Assignment. As a result, pursuant to the Volvo Cars Subscription Agreement Snita has agreed to purchase approximately 1.1 million Class A ADSs for a purchase price of $10 per Class A ADS on the date of Closing, for an aggregate investment of approximately $11.2 million. The Volvo Cars Subscription Agreement is substantially similar to the Initial PIPE Subscription Agreements, except with regard to purchase price. Snita may, in accordance with the terms of the Volvo Cars Subscription Agreement, syndicate its commitment to acquire the Class A ADSs to be purchased under the Volvo Cars Subscription Agreement in advance of the Closing; and |
| pursuant to the Volvo Cars Preference Subscription Agreement, Snita has agreed to purchase, upon and subject to the Closing, for the Post-Combination Company Preference Shares for an aggregate subscription price of $10 per share, for an aggregate investment amount equal to $588,826,100. The proceeds of such subscription will be used to satisfy certain accounts payable that are or will be due and payable by certain subsidiaries of Parent to Volvo Cars. As of the date hereof, it is currently anticipated that all of the Post-Combination Company Preference Shares will convert into Post-Combination Company Class A Shares at Closing, in accordance with, and subject to, the terms of the Post-Combination Company Preference Shares. |
As a result of the Business Combination, Polestar Automotive Holding Limiteds subsidiaries and GGI will become direct wholly owned subsidiaries of ListCo and each of the shareholders of Polestar Group and the GGI stockholders will own all the issued and outstanding shares of ListCo.
For more information on the Business Combination, please see the sections titled The Business Combination Agreement and Related Agreements.
Accounting for the Business Combination
The Business Combination will be accounted for as a capital restructuring in accordance with IFRS. Under this method of accounting, GGI will be treated as the acquired company for financial reporting purposes, and Polestar Group will be the accounting acquirer. This determination was based on evaluation of the following facts and circumstances:
| Parent Shareholders will have the largest voting interest in the Post-Combination Company under all redemption scenarios; |
336
| the Post-Combination Company Board will have four members nominated by Parent, compared to only one nominated by the GGI Sponsor. Additionally, Parent will have the ability to appoint the remaining members of the Post-Combination Company Board as deemed necessary; |
| Parents senior management will be the senior management of the Post-Combination Company; |
| Polestar Group operations will substantially comprise the ongoing operations of the Post-Combination Company; and |
| Polestar Group is the larger entity, in terms of substantive operations and employee base. |
The Business Combination, which is not within the scope of IFRS 3 Business Combinations as GGI does not meet the definition of a business, will be accounted for within the scope of IFRS 2 Share-based Payment. For accounting purposes, the transaction will be treated as the equivalent of Parent issuing shares for the net assets of GGI, accompanied by a recapitalization. The net assets of GGI will be stated at historical cost, with no goodwill or other intangible assets recorded. Any excess fair value of Post-Combination Company Shares issued over the fair value of GGIs identifiable net assets acquired represents compensation for the service of a stock exchange listing for its shares and is expensed as incurred.
Basis of Pro Forma Presentation
The unaudited pro forma condensed combined financial information has been prepared using the assumptions below with respect to the potential redemption by GGIs stockholders for cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account:
Scenario 1 Assuming no redemptions: This presentation assumes that no GGI Public Stockholders exercise redemption rights with respect to their GGI Class A Common Stock upon consummation of the Business Combination; and
Scenario 2 Assuming contractual maximum redemptions: This presentation assumes that GGI Public Stockholders exercise redemption rights with respect to 10,004,938 shares of GGI Class A Common Stock upon consummation of the Business Combination at a redemption price of approximately $10.00 per share. The redemption amount in Scenario 2 represents the maximum amount of redemptions that would still enable GGI to have sufficient cash to satisfy the Minimum Cash Condition as set forth in the Business Combination Agreement. Scenario 2 includes all adjustments contained in Scenario 1 and presents additional adjustments to reflect the effect of the redemptions assumed in Scenario 2.
Included in the shares outstanding and weighted average shares outstanding as presented in the pro forma combined financial statements are an aggregate of 2,125,300,000 and 2,115,295,062 Post-Combination Company Class A Shares and Post-Combination Company Class B Shares to be issued to GGI stockholders and Parent under Scenario 1 and Scenario 2, respectively.
337
The foregoing scenarios are for illustrative purposes only and if the actual facts are different than these assumptions, then the amounts and shares outstanding in the unaudited pro forma condensed combined financial information will be different and those changes could be material. Accordingly, the actual financial position and results of operations may differ significantly from the pro forma amounts presented herein. The following summarizes the number of Post-Combination Company Shares outstanding under the redemption scenarios:
Assuming no redemptions(1) | Assuming contractual maximum redemptions(2) |
|||||||||||||||||||||||
Ownership in shares |
Equity% | Voting% | Ownership in shares |
Equity% | Voting% | |||||||||||||||||||
GGI Public Stockholders |
80,000,000 | 3.8 | % | 0.5 | % | 69,995,062 | 3.3 | % | 0.4 | % | ||||||||||||||
GGI Initial Stockholders, including Sponsor Subscription Shares and Founder Shares |
19,350,374 | 0.9 | % | 0.1 | % | 19,350,374 | 0.9 | % | 0.1 | % | ||||||||||||||
PIPE Shares |
24,532,236 | 1.1 | % | 0.1 | % | 24,532,236 | 1.2 | % | 0.1 | % | ||||||||||||||
Parent Shareholders |
2,001,417,390 | 94.2 | % | 99.3 | % | 2,001,417,390 | 94.6 | % | 99.4 | % | ||||||||||||||
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2,125,300,000 | 100 | % | 100 | % | 2,115,295,062 | 100 | % | 100 | % | |||||||||||||||
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1) | The no redemption scenario excludes 159,397,500 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI Private Placement warrant holders, 138,898 vested shares pursuant with the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
2) | The contractual maximum redemption scenario excludes 158,647,130 Earn Out Shares, 9,000,000 Post-Combination Company Class C Shares issued to GGI Private Placement warrant holders, 138,898 vested shares pursuant with the Equity Plan and Employee Stock Purchase Plan and 270,833 vested shares under a consulting services agreement. |
338
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2021
Scenario 1 Assuming no redemptions |
Scenario 2 Assuming contractual maximum redemptions |
|||||||||||||||||||||||||||||||
(in thousands of USD, except for per |
Polestar Automotive Holding Limited |
Gores Guggenheim (After Reclassification - Note 2) |
Transaction Accounting Adjustments |
FN | Pro Forma Combined |
Transaction Accounting Adjustments |
FN | Pro Forma Combined |
||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Non-current assets |
||||||||||||||||||||||||||||||||
Intangible assets and goodwill |
1,368,356 | | | 1,368,356 | 1,368,356 | |||||||||||||||||||||||||||
Property, plant and equipment |
208,193 | | | 208,193 | 208,193 | |||||||||||||||||||||||||||
Vehicles under operating lease |
120,626 | | | 120,626 | 120,626 | |||||||||||||||||||||||||||
Other non-current assets |
1,682 | | | 1,682 | 1,682 | |||||||||||||||||||||||||||
Deferred tax asset |
3,850 | | | 3,850 | 3,850 | |||||||||||||||||||||||||||
Investments and cash held in Trust Account |
800,056 | (800,056 | ) | A | | | ||||||||||||||||||||||||||
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|
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|
|||||||||||||||||||||
Total non-current assets |
1,702,707 | 800,056 | (800,056 | ) | 1,702,707 | | 1,702,707 | |||||||||||||||||||||||||
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|
|||||||||||||||||||||
Current assets |
||||||||||||||||||||||||||||||||
Cash and cash equivalents |
756,677 | 303 | 800,056 | A | 1,712,463 | 1,612,407 | ||||||||||||||||||||||||||
588,826 | G | (100,056 | ) | B.2 | ||||||||||||||||||||||||||||
(86,823 | ) | C | ||||||||||||||||||||||||||||||
248,125 | D | |||||||||||||||||||||||||||||||
(588,826 | ) | G | ||||||||||||||||||||||||||||||
(5,875 | ) | I | ||||||||||||||||||||||||||||||
Marketable securities |
1,258 | | 1,258 | 1,258 | ||||||||||||||||||||||||||||
Trade receivables |
157,753 | | | 157,753 | 157,753 | |||||||||||||||||||||||||||
Trade receivablesrelated parties |
14,688 | | | 14,688 | 14,688 | |||||||||||||||||||||||||||
Accrued incomerelated parties |
5,103 | | | 5,103 | 5,103 | |||||||||||||||||||||||||||
Inventories |
545,743 | | | 545,743 | 545,743 | |||||||||||||||||||||||||||
Current tax assets |
5,562 | | | 5,562 | 5,562 | |||||||||||||||||||||||||||
Prepaid assets |
1,477 | 5,875 | I | 5,875 | 5,875 | |||||||||||||||||||||||||||
(1,477 | ) | I | ||||||||||||||||||||||||||||||
Other current assets |
120,202 | | (28,847 | ) | C | 91,355 | 91,355 | |||||||||||||||||||||||||
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|
|||||||||||||||||||||
Total current assets |
1,606,986 | 1,780 | 931,034 | 2,539,800 | (100,056 | ) | 2,439,744 | |||||||||||||||||||||||||
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|
|||||||||||||||||||||
Total assets |
3,309,693 | 801,836 | 130,978 | 4,242,507 | (100,056 | ) | 4,142,451 | |||||||||||||||||||||||||
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|||||||||||||||||||||
Equity |
||||||||||||||||||||||||||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized, none issued or outstanding (HistoricalGGI) |
| | | | ||||||||||||||||||||||||||||
Preferred Stock (ListCo) |
(588,826 | ) | G | | | |||||||||||||||||||||||||||
588,826 | G |
339
Scenario 1 Assuming no redemptions |
Scenario 2 Assuming contractual maximum redemptions |
|||||||||||||||||||||||||||||||
(in thousands of USD, except for per |
Polestar Automotive Holding Limited |
Gores Guggenheim (After Reclassification - Note 2) |
Transaction Accounting Adjustments |
FN | Pro Forma Combined |
Transaction Accounting Adjustments |
FN | Pro Forma Combined |
||||||||||||||||||||||||
Class A Common Stock, $0.0001 par value; 400,000,000 shares authorized (HistoricalGGI) |
| (8 | ) | B.1 | | | ||||||||||||||||||||||||||
1 | B.2 | |||||||||||||||||||||||||||||||
8 | E.1 | |||||||||||||||||||||||||||||||
(1 | ) | E.2 | ||||||||||||||||||||||||||||||
Share Capital (ListCo)Class A shares |
(98 | ) | E.1 | (484 | ) | (474 | ) | |||||||||||||||||||||||||
(59 | ) | G | 10 | E.2 | ||||||||||||||||||||||||||||
(295 | ) | F | ||||||||||||||||||||||||||||||
(4 | ) | K | ||||||||||||||||||||||||||||||
(27 | ) | D | ||||||||||||||||||||||||||||||
(1 | ) | J | ||||||||||||||||||||||||||||||
Share Capital (ListCo)Class B shares |
(1,642 | ) | F | (1,642 | ) | (1,642 | ) | |||||||||||||||||||||||||
Credit: Share capital (ListCo)Class C-2 Stock |
(9 | ) | H | (9 | ) | (9 | ) | |||||||||||||||||||||||||
Class F Common Stock, $0.0001 par value; 40,000,000 shares authorized, 20,000,000 shares issued and outstanding at December 31, 2021 (Historical--GGI) |
(2 | ) | 2 | E.1 | | | ||||||||||||||||||||||||||
Currency translation reserve |
16,784 | 16,784 | 16,784 | |||||||||||||||||||||||||||||
Share capital |
(1,865,909 | ) | | 1,865,909 | F | | | |||||||||||||||||||||||||
Additional paid-in-capital |
| (799,992 | ) | B.1 | (3,658,001 | ) | (3,583,474 | ) | ||||||||||||||||||||||||
(1,388 | ) | J | 100,055 | B.2 | ||||||||||||||||||||||||||||
57,923 | C | |||||||||||||||||||||||||||||||
(263,506 | ) | D | ||||||||||||||||||||||||||||||
(125,455 | ) | E.1 | ||||||||||||||||||||||||||||||
(34,551 | ) | H | ||||||||||||||||||||||||||||||
(588,767 | ) | G | (25,528 | ) | E.2 | |||||||||||||||||||||||||||
(1,863,972 | ) | F | ||||||||||||||||||||||||||||||
(3,066 | ) | M | ||||||||||||||||||||||||||||||
(35,227 | ) | K | ||||||||||||||||||||||||||||||
Other contributed capital |
(35,231 | ) | | 35,231 | K | | | |||||||||||||||||||||||||
Accumulated deficit |
1,761,860 | 131,095 | (2,557 | ) | C | 3,331,589 | 25,519 | E.2 | 3,351,967 | |||||||||||||||||||||||
254,081 | E.1 | (5,141 | ) | L.2 | ||||||||||||||||||||||||||||
(128,538 | ) | E.1 | ||||||||||||||||||||||||||||||
15,408 | D | |||||||||||||||||||||||||||||||
1,477 | I | |||||||||||||||||||||||||||||||
1,389 | J | |||||||||||||||||||||||||||||||
3,066 | M | |||||||||||||||||||||||||||||||
1,294,308 | L.1 | |||||||||||||||||||||||||||||||
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|||||||||||||||||||||
Total deficit (equity) |
(122,496 | ) | 131,093 | (320,360 | ) | (311,763 | ) | 94,915 | (216,848 | ) | ||||||||||||||||||||||
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340
Scenario 1 Assuming no redemptions |
Scenario 2 Assuming contractual maximum redemptions |
|||||||||||||||||||||||||||||||
(in thousands of USD, except for per |
Polestar Automotive Holding Limited |
Gores Guggenheim (After Reclassification - Note 2) |
Transaction Accounting Adjustments |
FN | Pro Forma Combined |
Transaction Accounting Adjustments |
FN | Pro Forma Combined |
||||||||||||||||||||||||
Class A subject to possible redemption, 80,000,000 shares at December 31, 2021 (at redemption value of $10 per share) (HistoricalGGI) |
| | | | ||||||||||||||||||||||||||||
Non-current liabilities |
||||||||||||||||||||||||||||||||
Contract liability- revenue related non-current |
(28,922 | ) | | | (28,922 | ) | (28,922 | ) | ||||||||||||||||||||||||
Deferred tax liabilities |
(509 | ) | | | (509 | ) | (509 | ) | ||||||||||||||||||||||||
Other non-current provisions |
(38,711 | ) | (800,000 | ) | 800,000 | B.1 | (38,711 | ) | (38,711 | ) | ||||||||||||||||||||||
Other non-current liabilities |
(11,764 | ) | | | (11,764 | ) | (11,764 | ) | ||||||||||||||||||||||||
Other non-current interest-bearing liabilities |
(66,575 | ) | (66,575 | ) | (66,575 | ) | ||||||||||||||||||||||||||
Deferred underwriting compensation |
(28,000 | ) | 28,000 | C | | | ||||||||||||||||||||||||||
Earn out liability |
(1,294,308 | ) | L.1 | (1,294,308 | ) | 5,141 | L.2 | (1,289,167 | ) | |||||||||||||||||||||||
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Total non-current liabilities |
(146,481 | ) | (828,000 | ) | (466,308 | ) | (1,440,789 | ) | 5,141 | (1,435,648 | ) | |||||||||||||||||||||
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Current liabilities |
||||||||||||||||||||||||||||||||
Trade payables |
(114,296 | ) | | 24,132 | C | (90,164 | ) | (90,164 | ) | |||||||||||||||||||||||
Trade payablesrelated parties |
(1,427,678 | ) | 588,826 | G | (838,852 | ) | (838,852 | ) | ||||||||||||||||||||||||
Accrued expensesrelated parties |
(315,756 | ) | (315,756 | ) | (315,756 | ) | ||||||||||||||||||||||||||
Advance payments from customers |
(36,415 | ) | (36,415 | ) | (36,415 | ) | ||||||||||||||||||||||||||
Current provisions |
(44,042 | ) | | | (44,042 | ) | (44,042 | ) | ||||||||||||||||||||||||
Liabilities to credit institutions |
(642,338 | ) | | | (642,338 | ) | (642,338 | ) | ||||||||||||||||||||||||
Current tax liabilities |
(13,089 | ) | | | (13,089 | ) | (13,089 | ) | ||||||||||||||||||||||||
Interest-bearing current liabilities |
(10,283 | ) | | (10,283 | ) | (10,283 | ) | |||||||||||||||||||||||||
Interest-bearing current liabilitiesrelated parties |
(13,789 | ) | | (13,789 | ) | (13,789 | ) | |||||||||||||||||||||||||
Contract liabilitiesrevenue related current |
(58,368 | ) | | | (58,368 | ) | (58,368 | ) | ||||||||||||||||||||||||
Other current liabilities |
(364,662 | ) | | | (364,662 | ) | (364,662 | ) | ||||||||||||||||||||||||
Accrued expenses, formation and offering costs |
(6,729 | ) | 6,172 | C | (557 | ) | (557 | ) |
341
Scenario 1 Assuming no redemptions |
Scenario 2 Assuming contractual maximum redemptions |
|||||||||||||||||||||||||||||||
(in thousands of USD, except for per |
Polestar Automotive Holding Limited |
Gores Guggenheim (After Reclassification - Note 2) |
Transaction Accounting Adjustments |
FN | Pro Forma Combined |
Transaction Accounting Adjustments |
FN | Pro Forma Combined |
||||||||||||||||||||||||
State franchise tax accrual |
(200 | ) | | (200 | ) | (200 | ) | |||||||||||||||||||||||||
Public warrants derivative liability (Historical--GGI) |
(61,440 | ) | 61,440 | H | | | ||||||||||||||||||||||||||
Derivative Liability Class C-1 Common Stock |
(61,440 | ) | H | (61,440 | ) | (61,440 | ) | |||||||||||||||||||||||||
Private warrants derivative liability (HistoricalGGI) |
(34,560 | ) | 34,560 | H | | | ||||||||||||||||||||||||||
Notes and advances payablerelated party |
(2,000 | ) | 2,000 | C | | | ||||||||||||||||||||||||||
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Total current liabilities |
(3,040,716 | ) | (104,929 | ) | 655,690 | (2,489,955 | ) | | (2,489,955 | ) | ||||||||||||||||||||||
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Total liabilities |
(3,187,197 | ) | (932,929 | ) | 189,382 | (3,930,744 | ) | 5,141 | (3,925,603 | ) | ||||||||||||||||||||||
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Total equity and liabilities |
(3,309,693 | ) | (801,836 | ) | (130,978 | ) | (4,242,507 | ) | 100,056 | (4,142,451 | ) | |||||||||||||||||||||
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342
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2021
Scenario 1 Assuming no redemptions |
Scenario 2 Assuming contractual maximum redemptions |
|||||||||||||||||||||||||||||||
(in thousands of USD, except for |
Polestar Automotive Holding Limited |
Gores Guggenheim |
Transaction Accounting Adjustments |
FN | Pro Forma Combined |
Transaction Accounting Adjustments |
FN | Pro Forma Combined |
||||||||||||||||||||||||
Revenue |
1,337,181 | | | 1,337,181 | 1,337,181 | |||||||||||||||||||||||||||
Cost of sales |
(1,336,321 | ) | | | (1,336,321 | ) | (1,336,321 | ) | ||||||||||||||||||||||||
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Gross profit |
860 | | | 860 | | 860 | ||||||||||||||||||||||||||
Selling, general and administrative expenses |
(714,724 | ) | | 2,557 | S | (723,003 | ) | (723,003 | ) | |||||||||||||||||||||||
(3,066 | ) | N | ||||||||||||||||||||||||||||||
(979 | ) | O | ||||||||||||||||||||||||||||||
(3,472 | ) | Q | ||||||||||||||||||||||||||||||
(3,319 | ) | R | ||||||||||||||||||||||||||||||
Research and development expenses |
(232,922 | ) | | | (232,922 | ) | (232,922 | ) | ||||||||||||||||||||||||
Professional fees and other expenses |
(8,215 | ) | (8,215 | ) | (8,215 | ) | ||||||||||||||||||||||||||
State franchise taxes, other than income tax |
(200 | ) | | (200 | ) | (200 | ) | |||||||||||||||||||||||||
Loss from change in fair value of warrant liability |
(72,750 | ) | | (72,750 | ) | (72,750 | ) | |||||||||||||||||||||||||
Allocated expense for warrant issuance cost |
(832 | ) | (832 | ) | (832 | ) | ||||||||||||||||||||||||||
Other operating income and expenses, net |
(48,053 | ) | | (254,081 | ) | T.1 | (302,134 | ) | (25,519 | ) | T.2 | (327,653 | ) | |||||||||||||||||||
Finance income |
32,970 | | 32,970 | 32,970 | ||||||||||||||||||||||||||||
Finance expenses |
(45,249 | ) | | (15,408 | ) | U | (60,657 | ) | (60,657 | ) | ||||||||||||||||||||||
Other incomeinterest income |
56 | | | 56 | 56 | |||||||||||||||||||||||||||
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Loss before income taxes |
(1,007,118 | ) | (81,941 | ) | (277,768 | ) | (1,366,827 | ) | (25,519 | ) | (1,392,346 | ) | ||||||||||||||||||||
Income tax expense |
(336 | ) | | | (336 | ) | (336 | ) | ||||||||||||||||||||||||
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Net loss |
(1,007,454 | ) | (81,941 | ) | (277,768 | ) | (1,367,163 | ) | (25,519 | ) | (1,392,682 | ) | ||||||||||||||||||||
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Weighted average number of common shares outstanding |
229,341,491 | |||||||||||||||||||||||||||||||
Basic and diluted net income (loss) per share |
(4.39 | ) | (1.73 | ) | ||||||||||||||||||||||||||||
Weighted average basic and diluted shares outstanding of nonredeemable ordinary shares |
81,151,581 | 2,125,709,731 | 2,115,704,793 | |||||||||||||||||||||||||||||
Basic and diluted net loss per share (in U.S. dollars) |
(1.73 | ) | P | (0.64 | ) | P | (0.66 | ) |
343
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. Basis of Presentation
The unaudited pro forma condensed combined statement of financial position as of December 31, 2021 assumes that the Business Combination occurred on December 31, 2021. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021 presents the pro forma effect to the Business Combination as if it had been completed on January 1, 2021. These periods are presented on the basis that Polestar Group is the accounting acquirer.
The unaudited pro forma condensed combined financial information was derived from and should be read in conjunction with the following historical financial statements and accompanying notes, which are included elsewhere in this proxy statement/prospectus:
| Polestar Automotive Holding Limiteds audited financial statements and related notes as of December 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 |
| the audited financial statements of GGI as of December 31, 2021 and 2020 and for the year ended December 31, 2021 and for the period from December 21, 2020 (inception) through December 31, 2020. |
The adjustments presented on the unaudited pro forma condensed combined financial information have been identified and presented to provide an understanding of the Post-Combination Company upon consummation of the Business Combination for illustrative purposes. The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, No. 33-10786. Release No. 33-10786 replaces the existing pro forma adjustment criteria and simplified requirements to depict the accounting for the transaction (Transaction Accounting Adjustments) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (Managements Adjustments). Polestar Group has elected not to present Managements Adjustments and will only be presenting Transaction Accounting Adjustments in the following unaudited pro forma condensed combined financial information. The historical financial information has been adjusted to reflect the pro forma adjustments that are directly attributable to the Business Combination.
Polestar Group and GGI have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The adjustments presented in the unaudited pro forma condensed combined financial information have been identified and presented to provide relevant information necessary for an accurate understanding of the Post-Combination Company after giving effect to the Business Combination. Polestar Automotive Holding Limiteds management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
The pro forma adjustments reflecting the consummation of the Business Combination are based on certain currently available information and certain assumptions and methodologies that Polestar Automotive Holding Limiteds management believes are reasonable under the circumstances. The unaudited pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. Polestar Automotive Holding Limited believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to Polestar Automotive Holding Limiteds management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information excludes the impact of the 12-month single currency, green trade facility entered into on February 28, 2022 and related drawdown on March 24, 2022; as this
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event is unrelated to the Business Combination. See Note 25Subsequent Events in Polestar Automotive Holding Limiteds audited financial statements and related notes as of December 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019.
The unaudited pro forma condensed combined financial information reflects the approval of the Warrant Amendment Proposal, as the Class C-1 and Class C-2 Shares to be issued by the Post-Combination Company in exchange for the Public and Private Warrants, respectively. Class C-1 and Class C-2 shares will maintain effectively the same terms as the existing Public and Private Warrants, resulting in similar economic benefits to the holder.
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the Post-Combination Company. They should be read in conjunction with the historical financial statements and notes thereto of Polestar Automotive Holding Limited and GGI.
The unaudited pro forma condensed combined financial information does not reflect the income tax effects of the pro forma adjustments based on the statutory rate in effect for the historical periods presented. Polestar Automotive Holding Limiteds management believes this unaudited pro forma condensed combined financial information to not be meaningful given the combined entity incurred significant losses during the historical period presented.
2. U.S. GAAP to IFRS Policy Adjustment
Adjustment to GGI U.S. GAAP to IFRS
The historical financial statements of Polestar Automotive Holding Limited have been prepared in accordance with IFRS as issued by the IASB and in its presentation currency of the U.S. dollar. The historical financial statements of GGI have been prepared in accordance with U.S. GAAP in its presentation currency of the U.S. dollar. The unaudited pro forma condensed combined financial information reflects IFRS, the basis of accounting used by Polestar Automotive Holding Limited and what will be used by the registrant, the Post-Combination Company.
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The adjustment required to convert GGIs financial statements from U.S. GAAP to IFRS for purposes of the unaudited pro forma condensed combined financial information is presented in the table below:
GGI Balance Sheet as of December 31, 2021 (In thousands of United States Dollars) |
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Before conversion |
US GAAP to IFRS Conversion |
FN | After conversion |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
303 | | 303 | |||||||||||||
Prepaid assets |
1,477 | | 1,477 | |||||||||||||
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Total current assets |
1,780 | | 1,780 | |||||||||||||
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Investments and cash held in Trust Account |
800,056 | | | 800,056 | ||||||||||||
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Total assets |
801,836 | | 801,836 | |||||||||||||
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accrued expenses, formation and offering costs |
6,729 | | | 6,729 | ||||||||||||
State franchise tax accrual |
200 | | | 200 | ||||||||||||
Public warrants derivative liability |
61,440 | | | 61,440 | ||||||||||||
Private warrants derivative liability |
34,560 | | | 34,560 | ||||||||||||
Notes and advances payablerelated party |
2,000 | | | 2,000 | ||||||||||||
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Total current liabilities |
104,929 | | 104,929 | |||||||||||||
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Deferred underwriting compensation |
28,000 | | | 28,000 | ||||||||||||
Other non-current provisions |
| 800,000 | (1 | ) | 800,000 | |||||||||||
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Total Liabilities |
132,929 | 800,000 | 932,929 | |||||||||||||
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Commitments and contingencies |
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Class A subject to possible redemption, 80,000,000 at December 31, 2021 (at redemption value of $10 per share) |
800,000 | (800,000 | ) | (1 | ) | | ||||||||||
Stockholders equity (deficit): |
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized, none issued or outstanding |
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Common stock: |
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Class A Common Stock, $0.0001 par value; 400,000,000 shares authorized |
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Class F Common Stock, $0.0001 par value; 40,000,000 shares authorized, 20,000,000 issued and outstanding at December 31, 2021 |
2 | | | 2 | ||||||||||||
Additional paid-in-capital |
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Accumulated Deficit |
(131,095 | ) | | | (131,095 | ) | ||||||||||
Total stockholders equity (deficit) |
(131,093 | ) | | (131,093 | ) | |||||||||||
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Total liabilities and stockholders equity (deficit) |
801,836 | | 801,836 | |||||||||||||
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(1) | As of December 31, 2021, under US GAAP shares of GGI Class A Common Stock are classified as temporary equity because they are redeemable at the sole discretion of the shareholder. As GGI shareholders have the right to require GGI to redeem the GGI Class A common stock and GGI has an irrevocable obligation to deliver cash or another financial instrument for such redemption, this is reclassified from temporary equity under U.S. GAAP to other liabilities under IFRS. |
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3. Adjustments to Unaudited Pro Forma Condensed Combined Statement of Financial Position as of December 31, 2021
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
(A) To reflect the release of cash from marketable securities held in the Trust Account that becomes available upon consummation of the Business Combination.
(B.1) To reclassify other non-current provisions related to shares of GGI Class A Common Stock subject to redemption to permanent equity, as the redemption right is removed at the closing of the Business Combination.
(B.2) To reflect the contractual maximum redemption related to shares of GGI Class A Common Stock for cash by the GGI Public Stockholders at the Closing. The $100 million, or 10,004,938 shares, represents the maximum amount of redemptions that would still enable GGI to have sufficient cash to satisfy the Minimum Cash Condition as set forth in the Business Combination Agreement. This amount includes proportionate interest accumulated on the Trust Account.
(C) To reflect the estimated payment of an aggregate of $86.8 million costs incurred and expected to be incurred by GGI and by Polestar Automotive Holding Limited of approximately $51.5 million and $35.3 million, respectively. Except where noted below, these costs consist of, advisory, banking, legal and accounting related transaction costs incurred as part of the Business Combination.
For the GGI transaction costs, $28 million of these costs represent deferred underwriting fees from GGIs IPO. Additionally, $6.2 million relates to estimated legal fees and fees related to proxy/prospectus related filings. These fees have been accrued for in the historical balance sheet as of December 31, 2021 and recorded in the historical statement of operations for the year ended December 31, 2021. They are expected to be settled at the Closing. Of this $6.2 million recorded, $5.8 million are directly attributable to the transaction and reflected as an adjustment to accumulated deficit and additional paid-in capital as they were recorded in the historical statement of operations for the year ended December 31, 2021. This was off-set by a $3.2 million adjustment to accumulated deficit related to additional expenses expected to be settled at the Closing and are not directly attributable to the transaction. These expenses have not yet been recorded in the historical statement of operations for the year ended December 31, 2021. Of the remaining $19.8 million, $17.8 million consists of legal and other professional fees. These fees are related to the Business Combination and reflect an adjustment to additional paid-in capital. Lastly, there was $2 million that relates to a loan from the GGI Sponsor, that will be paid at Closing.
For Polestar Automotive Holding Limiteds transaction costs, $28.8 million of these costs have been recorded in the historical statement of financial position as of December 31, 2021. These fees primarily consist of legal and other professional advisory fees and are directly related to the Business Combination. Therefore, these fees reflect an adjustment to additional paid-in capital. The remaining $11.2 million relates to legal and other professional advisory fees that are expected to be incurred and settled at the Closing. These fees have not yet been accrued for in the historical balance sheet as of December 31, 2021 or recorded in the historical statement of operations for the year ended December 31, 2021, as they have not yet been incurred. These fees are directly related to the Business Combination and as such, reflect an adjustment to additional paid-in capital.
(D) To reflect proceeds of $248 million (net of fees) from the issuance and sale of 26,540,835 Post-Combination Company Class A Shares underlying the Class A ADSs to be purchased pursuant to the Subscription Agreements. The impact to accumulated deficit is related to the discounted Subscription Price of approximately $9.42 per Class A ADS offered to the investors of the Subscription Agreements. The discount of $15 million is a one-time expense recorded to the Statement of Operations. This is reflected in Note T below.
(E.1) To eliminate the accumulated deficit of GGI of $131.1 million at the closing of the Business Combination, offset by the $2.6 million accumulated deficit adjustment discussed in Note C above.
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Additionally, this entry reflects the one for one exchange of 80,000,000 shares of GGI Class A Common Stock and 20,000,000 shares of GGI Class F Common Stock for Post-Combination Company Class A Shares, at the Closing as well as the forfeiture of 1,540,835 shares of GGI Class F Common Stock. In accordance with IFRS 2, the deemed costs of the shares issued by ListCo in excess of the net assets of GGI, which primarily consists of cash and marketable securities held in the Trust Account and certain private warrants liabilities, are accounted for as share-based compensation and reflected as an adjustment to accumulated deficit of $254.1 million.
(E.2) To reflect the share-based compensation adjustment to accumulated deficit of $25.5 million for the deemed cost of the shares issued by the Post-Combination Company in excess of the net assets of GGI in case of contractual maximum redemption and also the adjustment for 10,004,938 shares of GGI Class A Common Stock to be redeemed in case of the contractual maximum redemption scenario.
The share-based compensation for both the no redemption and contractual maximum redemption scenarios are calculated as follows:
Assuming no redemptions |
Assuming contractual maximum redemptions |
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Fair value of Polestar(1) |
[A | ] | $ | 18,708,692 | $ | 18,713,833 | ||||||
Equity interest in the Post-Combination Company that will be issued to GGI stockholders, including GGI Private Placement Warrants converted to Post-Combination Company Class C shares at Closing(2) |
[B | ] | 6.2 | % | 5.8 | % | ||||||
Equity interest in the Post-Combination Company of Parent after the Closing(3) |
93.8 | % | 94.2 | % | ||||||||
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Deemed costs of shares issued by the Post-Combination Company |
[A]*[B] | 1,159,939 | 1,085,402 | |||||||||
Less: SPAC net assets(4) |
668,907 | 568,850 | ||||||||||
Less: Proceeds from the PIPE Investment, Sponsor Subscription Investment and Subscription Investment(5) |
236,951 | 236,951 | ||||||||||
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Share-based compensation |
254,081 | 279,601 |
1) | Fair value of Polestar derived from the equity value of Polestar as stated in the Business Combination Agreement of $20 billion, less the adjustment in respect of Earn Out Shares of $1.3 billion (see notes L.1 and L.2 below). |
2) | GGI equity interest in the Post-Combination Company derived from number of shares outstanding at the Closing, including the GGI Private Placement Warrants converted into the Post-Combination Company Class C shares at the Closing. |
3) | Remaining equity interest Parent has in the Post-Combination Company after the Closing. |
4) | GGI net assets derived from unaudited financial statements as of and for year ended December 31, 2021. Net assets defined as assets less liabilities, excluding cash of $800 million, classified as non-current liabilities, as this was determined to be cash at the time of the Closing. |
5) | Represents amount of net cash expected to be received from the PIPE Investment, Sponsor Subscription investment (see Note D above). This is included as part of the calculation as the Sponsor and third-party ownership interests are factored into the table above. |
(F) To reflect Parent contributing its shares of Polestar to ListCo as part of the Pre-Closing Reorganization in exchange for 294,877,348 Post-Combination Company Class A Shares and 1,642,233,576 Post-Combination Company Class B Shares. Prior to the Pre-Closing Reorganization, the Parent Shareholders held 197,026,729 Class A ordinary shares of Parent and 35,377,866 Class B ordinary shares of Parent due to the conversion of certain Class A ordinary shares of Parent to Class B ordinary shares of Parent that occurred in July 2021.
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(G) To reflect the issuance of Post-Combination Company Preference Shares to Volvo Cars in exchange for cash, which Polestar Automotive Holding Limited will use to pay down outstanding payables owed to Volvo Cars. The cash proceeds will equal Polestar Automotive Holding Limiteds outstanding trade payable to Volvo Cars and its subsidiaries. Each Post-Combination Company Preference Share will be convertible into Post-Combination Company Class A Shares at a conversion price of $10 per Post-Combination Company Class A Share from time to time following the Closing. In essence, this is a capital contribution from Volvo Cars. As of the date hereof, it is anticipated that all of the Post-Combination Preference Shares will convert into Post-Combination Company Class A Shares at Closing. Refer to the Description of the Business Combination section above, for further discussion.
(H) To reflect in the case the Warrant Amendment Proposal is approved, the issuance of Post-Combination Company Class C-1 Shares and Post-Combination Company Class C-2 Shares in the form of Class C-1 ADSs and Class C-2 ADSs as a result of the conversion of GGI Public Warrants and GGI Private Warrants, respectively. GGI Private Warrants or Post-Combination Company Class C-2 Shares are recognized as equity instruments upon consummation of the Business Combination. The Post-Combination Company Class C-1 Shares to be issued for the GGI Public Warrants remain classified as a derivative liability.
(I) To reflect the expense for tail policy providing directors and officers liability insurance coverage for the benefit of those persons who are covered by any comparable insurance policies of GGI. This amount represents the $5.8 million premium paid in full at the Closing related to the liability insurance coverage for the directors and officers of GGI, less the $1.5 million existing prepaid insurance premium as of December 31, 2021.
(J) To reflect the expense for the At Listing Employee Equity Incentive Plan adopted by the Post-Combination Company at the Closing. The award is a one-time issuance of restricted shares of Post-Combination Company Class A Shares offered to executive management and select upper management team members. The value of the award will be equal to a certain percentage of the awardees base salary, depending on the awardees position at the Polestar Group. Receipt of the award is based on the successful public listing of the Post-Combination Company and continued employment of the awardees. One-third of the restricted shares fully vest upon issuance. The remaining restricted shares vest over a two year period from the date of issuance.
(K) To reflect the conversion of convertible notes that are outstanding immediately prior to the Closing into Post-Combination Company Class A Shares. In July 2021, unrelated to the Business Combination, Polestar Automotive Holding Limited entered into a convertible note agreement for $35 million. The convertible notes are non-interest bearing and are not eligible to receive a coupon or dividend for the first 24-months after issuance.
(L.1) To reflect the liability associated with the Earn Out Shares issuable pursuant to the Business Combination Agreement. Up to 159.4 million Earn Out Shares will be available to be delivered by the Post-Combination Company to the Parent shareholders as additional consideration for the Pre-Closing Reorganization under the no redemption scenario. The Parent has a right to receive the Earn Out Shares if certain stock price hurdles are achieved over a five-year period from the 180th day following the Closing. There is diversity in practice for the accounting treatment of these type of agreements but we believe at this time, we should evaluate this in accordance with IAS 32 (Financial InstrumentsPresentation). The Earn Out Shares have, in accordance with the requirements of IAS 32, been recognized as a financial liability measured at fair value in the unaudited condensed combined pro forma statement of financial position as the arrangement may result in the Post-Combination Company issuing a variable number of shares in the future. A valuation assessment was performed for the purpose of determining an estimate of the financial liability using a Monte Carlo simulation using key assumptions for: volatility based on peer company data; risk-free rate; and beginning Post-Combination Company Share price of $10.00. The estimated valuation of the liability as of December 31, 2021 was approximately $1.3 billion with a corresponding charge being directly reflected to accumulated deficit as it is recorded in the same manner as a dividend giving value to existing shareholders effectively as a pro rata dividend. An increase or decrease in volatility of 10% during subsequent periods would result in an increase or decrease in the liability of approximately $0.08 billion, which would be recognized through the pro forma statement of operations.
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(L.2) To reflect the adjustment to the liability associated with the Earn Out Shares under the contractual maximum redemption scenario. Refer to note L.1 for further discussion.
(M) To reflect the expense associated with a consulting services agreement, where Post-Combination Company Class A Shares in the form of Class A ADSs will be issued to a service provider in exchange for the performance of marketing consulting services. 250,000 shares will vest and be issued on the date the Resale Registration Statement becomes effective. 250,000 shares will vest over a 24-month period with one eighth of these shares vesting each quarter. None of these vested shares will be issued prior to the effectiveness of the Resale Registration Statement.
Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2021
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
(N) To reflect the expense associated with the Post-Combination Company Class A Shares to be issued in the form of Class A ADSs as consideration to a service provider for marketing consulting services. Refer to Note M above for further discussion.
(O) To reflect adjustment for tail policy providing directors and officers liability insurance coverage for the benefit of those persons who are covered by any comparable insurance policies of GGI. This compensation expense is not expected to have a continuing impact on the combined results. This expense represents the annual amortization of the premium paid at the Closing related to the six-year insurance policy.
(P) The calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the Business Combination was closed as of January 1, 2021. The pro forma loss per share is calculated based on pro forma net loss divided by the weighted average pro forma basic and diluted number of shares. The pro forma diluted loss per share does not consider the impact of securities other than the ordinary shares, and shares vested under the Equity Incentive Plan and Equity Purchase Plan (see notes J and R, respectively, for further detail) as other securities would be anti-dilutive due to the pro forma net loss position. As such, pro forma basic and diluted loss per share are the same value.
(Q) To reflect the expense for the restricted shares issued under the At Listing Employee Equity Incentive Plan adopted by the Post-Combination Company at the Closing. Refer to note J above for further discussion.
(R) To reflect the expense for the Employee Free Share Equity Purchase Plan adopted by the Post-Combination Company at the Closing of the Business Combination. Under this plan, all employees are offered a one-time issuance of Post-Combination Company Class A Shares in a value equal to 4% of the awardees base salary. Receipt of the award is based on employment at the public listing date and continued employment of the awardees for one-year after the listing date. This expense represents a one-time cost to the pro forma statement of operations.
(S) To reflect an adjustment for transaction costs that were recorded in the statement of operations of GGI and are directly attributable and incremental to the Business Combination. These are not expected to have a continuing impact on the combined results.
(T.1) To reflect the IFRS 2 share-based compensation expenses for the deemed listing services received by the Post-Combination Company from GGI, which is the difference between the fair value of the shares issued by the Post-Combination Company in excess of the net assets of GGI that the Post-Combination Company acquired, under the no redemption scenario. This expense represents a one-time cost to the pro forma statement of operations. This compensation expense is not expected to have a continuing impact on the combined results. See note E.1 above for further details.
(T.2) To reflect the incremental IFRS 2 share-based compensation expense (discussed above in note T.1) under the contractual maximum redemption scenario. This expense represents a one-time cost to the pro forma statement of operations. This compensation expense is not expected to have a continuing impact on the combined results.
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(U) To reflect the expense associated with the discounted price of $9.09, $9.40 and $9.57 offered to the investors of the Sponsor, PIPE Subscription Agreements and affiliates of the Sponsor. Refer to note D above for further discussion.
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The following table sets forth the historical comparative share information for the Post-Combination Company and GGI on a standalone basis and pro forma combined per share information after giving effect to the Business Combination, (1) assuming (a) no GGI Public Stockholders exercise redemption rights with respect to their GGI Class A Common Stock upon the consummation of the Business Combination, (b) GGIs transaction expenses do not exceed the GGI transaction expenses cap, (c) no issuance of Earn Out Shares or shares pursuant to the Equity Plan or Employee Stock Purchase Plan, (d) the conversion of the Post-Combination Company Preference Shares and Polestars convertible notes and (e) no conversion or redemption of any of the Class C ADSs or ADWs; and (2) assuming (a) that GGI Public Stockholders exercise their redemption rights with respect to a maximum of 10,004,938 shares of GGI Class A Common Stock upon consummation of the Business Combination, (b) GGIs transaction expenses do not exceed GGIs transaction expenses cap, (c) no issuance of Earn Out Shares or shares pursuant to the Equity Plan or Employee Stock Purchase Plan, (d) the conversion of the Post-Combination Company Preference Shares and Polestars convertible notes and (e) no conversion or redemption of any of the Class C ADSs or ADWs.
The financial statements of Polestar Automotive Holding Limited have been prepared in accordance with IFRS as issued by the IASB and in its functional and presentation currency of U.S. dollars. The historical financial statements of GGI have been prepared in accordance with US GAAP in its functional and presentation currency of U.S. dollars.
The historical information should be read in conjunction with the historical financial statements of GGI and Polestar Automotive Holding Limited included elsewhere in this proxy statement/prospectus. The pro forma combined per share information is derived from, and should be read in conjunction with, the information contained in the section of this proxy statement/prospectus titled Unaudited Pro Forma Condensed Combined Financial Information.
The pro forma combined share information below does not purport to represent what the actual results of operations or the earnings per share would have been if the companies had been combined during the periods presented, nor to project the Post-Combination Companys results of operations or earnings per share (EPS) for any future date or period.
The earnings per share have been calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination and related transactions, assuming the shares were outstanding since January 1, 2021. As the Business Combination and related transactions are being reflected as if they had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issued in connection with the Business Combination have been outstanding for the entire period presented. Basic and diluted loss per share for Post-Combination Company Class A Shares and Post-Combination Company Class B Shares are the same, as each class of common stock is entitled to the same dividend participation rights and economic terms.
Combined Pro Forma | ||||||||||||||||
As of and for the year ended December 31, 2021 | Polestar Automotive Holding Limited (Historical) |
GGI (Historical) |
Assuming no redemptions |
Assuming contractual maximum redemptions |
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December 31, 2021 book value per share(1) |
$ | 0.53 | $ | (1.62 | ) | $ | 0.15 | $ | 0.11 | |||||||
Weighted average shares: |
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Weighted average of outstanding sharesbasic(2) |
229,341,491 | 81,151,581 | 2,125,709,731 | 2,115,704,793 | ||||||||||||
Earnings (loss) per share: |
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Earnings (loss) per outstanding shares, basic and diluted |
$ | (4.39 | ) | $ | (1.73 | ) | $ | (0.64 | ) | $ | (0.66 | ) |
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1) | Book value per share is calculated using the formula: Total shareholders equity divided by weighted-average shares outstanding. No cash dividends were paid during the periods presented. |
2) | Weighted-average shares outstanding includes shares vested under the Equity Plans and consulting services agreement. |
For the purposes of calculating diluted loss per share, management assumed that all GGI Public Warrants and GGI Private Placement Warrants will not be exercised. Further, the effect of shares granted to employees pursuant to the Equity Plan and Employee Stock Purchase Plan as a result of consummation of Business Combination were not included in the calculation of diluted loss per share, nor were the Earn Out Shares available for issuance under the Business Combination Agreement, as this results in anti-dilution. The number of shares excluded from the calculation are represented in the tables below.
As of December 31, 2021 | Assuming no redemptions |
Assuming contractual maximum redemptions |
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Number of GGI Public Warrants converted to Post-Combination Company Class C Shares at Closing |
16,000,000 | 16,000,000 | ||||||
Number of GGI Private Placement Warrants converted to Post-Combination Company Class C Shares at Closing |
9,000,000 | 9,000,000 | ||||||
Number of Earn Out Shares available to be issued to the Parent Shareholders |
159,397,500 | 158,647,130 | ||||||
Number of Shares available under the Equity Incentive and Equity Purchase Plans |
138,898 | 138,898 | ||||||
Number of Shares available under a consulting services agreement |
270,833 | 270,833 | ||||||
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Total |
184,807,231 | 184,056,861 | ||||||
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MANAGEMENT OF THE POST-COMBINATION COMPANY
Management and Post-Combination Company Board
The following table provides information about those persons who are expected to serve as directors and executive officers of the Post-Combination Company. The address for each of the directors and executive officers is Assar Gabrielssons Väg 9, 405 31 Göteborg, Sweden. For biographical information concerning the executive officers and non-employee directors, see below:
Name |
Age |
Title | ||||
Håkan Samuelsson |
70 | Director Nominee (Chairman) | ||||
Thomas Ingenlath |
57 | Chief Executive Officer and Director | ||||
Johan Malmqvist |
46 | Chief Financial Officer | ||||
Dennis Nobelius |
49 | Chief Operating Officer | ||||
Carla De Geyseleer |
53 | Director Nominee | ||||
Karen C. Francis |
59 | Director Nominee | ||||
Donghui (Daniel) Li |
51 | Director Nominee | ||||
Dr. Karl-Thomas Neumann |
60 | Director Nominee | ||||
David Richter |
56 | Director Nominee | ||||
James Rowan |
56 | Director Nominee | ||||
Zhe (David) Wei |
51 | Director Nominee |
Executive Officers
Thomas Ingenlath joined Polestar as its Chief Executive Officer in July 2017 from Volvo Cars, where he served as the Senior Vice President of Design from July 2012. Mr. Ingenlath has also agreed to serve on the Post-Combination Company Board. Prior to joining Polestar, he held various design management roles at koda Auto from December 1999 to December 2005 and the Volkswagen Group from January 2006 to December 2011. Mr. Ingenlath brings over 20 years of design, innovation and leadership experience in the automotive industry to Polestar. Mr. Ingenlath holds an undergraduate Diplom degree from Pforzheim University in Transportation Design and a Masters of Art from the Royal College of Art in vehicle design.
ListCo believes that Mr. Ingenlath is qualified to serve on the board of the Post-Combination Company based on his significant executive experience at Polestar and in the automobile industry.
Johan Malmqvist joined Polestar as its Chief Financial Officer in September 2021 from Dole Food Company, where he served as Chief Financial Officer from July 2014 to September 2021. Previously, he served as the Chief Financial Officer of Perstorp AB from May 2009 to June 2014 and Duni AB from Aug 1998 to May 2009. Mr. Malmqvist brings over 20 years of financial experience across multiple sectors to Polestar. Mr. Malmqvist holds a BA from San Diego State University in International Business and a Master of Science Business Administration from San Diego State University with specialization in Finance.
Dennis Nobelius joined Polestar as Chief Operating Officer in September 2020. Since June 2021, Mr. Nobelius also serves on the Advisory Board of StoreDot Ltd, a battery developer and materials innovation leader focusing on fast-charging batteries. He previously served as the Chief Executive Officer of Zenuity (now Zenseact), an assisted and autonomous driving software provider originally set up as a joint venture between Volvo Cars and Veoneer (now wholly owned by Volvo Cars), from September 2016 to September 2020. Mr. Nobelius has 20 years of R&D, operation and leadership experience in the automotive industry, including at Volvo Cars where he served, among others, as Managing Director in Switzerland, Program Leader for all-new Volvo XC90 / S90 / V90 cars and the new Volvo Scalable Product Architecture Platform, Plant Director for final assembly shop at Volvo Cars Torslanda, Program leader for the Volvo C30 car. Mr. Nobelius was also co-founder and Chief Executive Officer for the start-up Expoplanet from May 2000 to September 2001. Mr. Nobelius holds a Ph.D. in R&D Management and an MSc in Industrial Engineering & Management from Chalmers University of Technology.
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Non-Employee Directors
Håkan Samuelsson has agreed to serve as Chairman on the Post-Combination Company Board. Mr. Samuelsson joined the Polestar Board in July 2015. Mr. Samuelsson served as a director of Volvo Cars from August 2010 to March 2022 and as President and Chief Executive Officer of Volvo Cars from October 2012 to March 2022. Mr. Samuelsson started his professional career in 1977 at Scania Group, where he worked for more than 20 years and joined the executive board in January 1996. In 2000, Mr. Samuelsson joined MAN AG and became its Chief Executive Officer in 2005. Mr. Samuelsson also serves as a director of Ideella föreningen Teknikarbetsgivarna i Sverige since July 2013, a director of Ideella Föreningen Teknikföretagen i Sverige since July 2013, a director of Lynk & Co Investment Co., Ltd. since 2017 and a deputy board member of Volvo Trademark Holding Aktiebolag since April 2013. Previously, Mr. Samuelsson was a director at AB Volvo from April 2016 to May 2018, a director at China-Euro Vehicle Technology Aktiebolag from May 2013 to March 2019, a director at Zenuity AB from May 2017 to July 2018, a director at Lynk & Co Europe AB from November 2018 to September 2020. Mr. Samuelsson holds a Master of Science Degree in Mechanical Engineering from KTH Royal Institute of Technology, Sweden.
ListCo believes that Mr. Samuelsson is qualified to serve on the Post-Combination Company Board based on his significant executive experience in the automotive sector.
Carla De Geyseleer has agreed to serve on the Post-Combination Company Board. Ms. De Geyseleer joined the Polestar Board in September 2020 and served as the Chief Financial Officer of Volvo Cars from October 2019 to April 2021. Prior to joining Volvo Cars, Ms. De Geyseleer served as the Chief Financial Officer of Société Générale de Surveillance (SGS), a Swiss-based publicly listed company specialized in testing, inspection and certification services, from November 2014 to October 2019. Prior to her role at SGS, Ms. De Geyseleer served as the Chief Financial Officer at telecom firm Vodafone Libertel in the Netherlands from April 2012 to October 2014 and as a director of financial controlling at Vodafone Germany from April 2010 to April 2012. She also worked for 15 years at the logistics company DHL Express, where she held responsibilities in various operational and corporate positions in multiple countries from 1995 to 2010. Ms. De Geyseleer started her career as an auditor with accountancy firm EY LLP in Belgium. Since January 2019, Ms. De Geyseleer has also served as a director and chair of the audit committee at Hilti AG in Lichtenstein. Ms. De Geylseleer holds a Masters degree in Economic and Financial Sciences, with specialization in Accounting, and an Executive MBA from the Institute for Management Development in Lausanne, Switzerland.
ListCo believes that Ms. Geyseleer is qualified to serve on the Post-Combination Company Board based on her significant experience as a financial executive of publicly listed companies and her experience in the automotive sector.
Karen Francis has agreed to serve on the Post-Combination Company Board. Ms. Francis has served as the Chair of the board of directors of Vontier Corporation (NYSE: VNT) (Vontier), a spinoff from Fortive Corporation focused on mobility and transportation businesses, since its spin-off in 2020. She also serves as a member of the Compensation & Management Development Committee for Vontier. Ms. Francis has also served as director of TuSimple Holdings Inc. (NASDAQ: TSP) since December 2020. Ms. Francis also currently serves on the Audit and Compensation Committees at TuSimple Holdings Inc. Additionally, she has served as a director of Quanergy Systems, Inc. (NYSE: QNGY) (Quanergy Systems) from September 2018 to December 2019 and from September 2021 to the present. She currently chairs the Nominating and Governance Committee at Quanergy Systems. Since July 2021, Ms. Francis serves as Senior Advisor to TPG Capital and is an independent director for private equity and venture capital funded companies in Silicon Valley, including Metawave since August 2018, Nauto since April 2016 and Wind River since July 2019. Furthermore, Ms. Francis has also served as Chair of the board of directors of CelLink Corporation since October 2021. Recently, from March 2021 to November 2021, Ms. Francis served on the Board and as Audit Chair of Reinvent Technology Partners Y (NASDAQ: RTPYU), a which merged with Aurora Innovation, Inc. From December 2016 to November 2019, Ms. Francis also served on the board of directors of Telenav, Inc. (NASDAQ: TNAV), where she served as lead
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independent director, chair of the Compensation Committee and a member of the Nominating and Governance Committee of Telenav, Inc. Prior to joining Telenav, Inc., Ms. Francis served as a director of The Hanover Insurance Group, Inc. (NYSE: THG) from May 2014 to May 2017 and AutoNation, Inc. (NYSE: AN) from February 2016 to April 2018. Ms. Francis served as Chief Executive Officer of AcademixDirect, Inc., a technology innovator in education, from 2009 to 2014 and as its Executive Chairman from 2009 to 2017. From 2004 to 2007, Ms. Francis was Chairman and Chief Executive Officer of Publicis & Hal Riney, based in San Francisco and part of the Publicis global advertising and marketing network. From 2001 to 2002, she served as Vice President of Ford Motor Company, where she was responsible for the corporate venture capital group, as well as global e-business strategies, customer relationship management and worldwide export operations. From 1996 to 2000, Ms. Francis held several positions with General Motors, including serving as General Manager of the Oldsmobile Division.
ListCo believes that Ms. Francis is qualified to serve on the Post-Combination Company Board based on her significant experience in the automotive sector, her knowledge in corporate governance and her track record of successfully building companies and businesses across multiple industries.
Donghui (Daniel) Li (Daniel Li) has agreed to serve on the Post-Combination Company Board. Mr. Li serves as the Chief Executive Officer of Geely since November 2020. Mr. Li joined Geely in April 2011 as Vice President and Chief Financial Officer and has served as a director of Geely since November 2011. From May 2011 to April 2014, he served as Executive Director of Geely Automobile Holdings Co., Ltd. (HK.0175) and from June 2016 to November 2020, he has served as Executive Vice President and Chief Financial Officer of Geely. In April 2012, Mr. Li was appointed as a director of Volvo Cars. In July 2016, he was appointed the position of Executive Director and Vice Chairman of Geely Automobile Holdings Co., Ltd. (HK.0175). Mr. Li has also served as a chairman of Group Lotus and a director of Proton Holdings since September 2017. From September 2018 to March 2021, Mr. Li has served as chairman of Saxo Bank and he continues to serve as a director of Saxo Bank after March 2021. Mr. Li also serves as chairman of LEVC Global since April 2021. Mr. Li holds an MBA degree from the Indiana University Kelley School of Business and graduated from the Beijing Institute of Machinery with a Masters degree in management engineering (with a focus on financial management). He also holds a Bachelors degree in philosophy from China Renmin University.
ListCo believes that Mr. Li is qualified to serve on the Post-Combination Company Board based on his significant executive experience in the automotive sector and his experience in operational management in China.
Dr. Karl-Thomas Neumann has agreed to serve on the Post-Combination Company Board. Dr. Neumann joined the Polestar Board in February 2022. Dr. Neumann is the Chief Executive Officer and Founder of KTN Investment and Consulting since March 2018. He also serves as a director of indie Semiconductor, Inc. since June 2021 and as a director of South Korea based Hyundai-Mobis since March 2019. From April 2018 to June 2019, Dr. Neumann held a management position at Canoo Inc., an electric vehicles company, where his responsibilities included technology and marketing. From March 2013 to March 2018, he was Executive Vice President & President Europe for General Motors Company, where he was also a member of the GM Executive Committee. Dr. Neumann was previously with Volkswagen AG, where he was Chief Executive Officer and Vice President of Volkswagen Group China in Beijing from September 2010 to August 2012. Prior to this position, he held a number of management positions at Volkswagen, beginning in 1999 as Head of Research and Director of Electronics Strategy. From 2004 to 2009, Dr. Neumann was a member of the Executive Board at German automotive supplier Continental AG, responsible for the Automotive Systems Division. From August 2008 to September 2009, he was Chairman of the Executive Board of Continental AG. In December 2009, Dr. Neumann returned to Volkswagen AG and took over company-wide responsibility for electric propulsion. Dr. Neumann began his professional career at the Fraunhofer Institute as a research engineer before moving to Motorola Semiconductor, where he worked as an engineer and strategy director responsible for the automobile industry. Dr. Neumann holds a Ph.D. in Microelectronics from the University of Duisburg, as well as a diploma in Electrical Engineering from the University of Dortmund.
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ListCo believes that Mr. Neumann is qualified to serve on the Post-Combination Company Board based on his significant executive experience in the automotive sector.
David Richter has agreed to serve on the Post-Combination Company Board. Mr. Richter joined the Polestar Board in October 2019 and has wide experience at high-growth technology companies, including leading business development, corporate development, legal, finance and product teams. Mr. Richter is the Vice President of Business and Corporate Development at DoorDash, Inc. (NYSE: DASH) since July 2021. Prior to joining DoorDash, Inc, he worked at Lime from October 2018 to July 2020. He also held the position of Vice President, Global Head of Business and Corporate Development, at Uber Technologies, Inc. (Uber) (NYSE: UBER) from June 2017 through May 2018, leading the business development, corporate development and experiential marketing teams. Mr. Richter first joined Uber in January 2014 as Vice President, Strategic Initiatives. While at Uber, Mr. Richter was also a member of the Executive Leadership Team reporting to the Chief Executive Officer. Mr. Richter holds a J.D. from Yale Law School and a B.A. from Cornell University.
ListCo believes that Mr. Richter is qualified to serve on the Post-Combination Company Board based on his significant experience in the fast-moving shared mobility industry and as a business development and start-up executive.
James Rowan (Jim Rowan) has agreed to serve on the Post-Combination Company Board. Mr. Rowan joined Volvo Cars as its new Chief Executive Officer in March 2022. Prior to his role at Volvo Cars, Mr. Rowan worked with Ember Technologies, Inc. as its a director and Chief Executive Officer from February 2021 to March 2022. Previously, Mr. Rowan served at Dyson as Chief Operating Officer from August 2012 to September 2017, Chief Executive Officer from September 2017 to April 2020 and as a director from August 2012 to July 2020. Mr. Rowan also served as the Chief Operating Officer of BlackBerry (NYSE: BB) from December 2007 to August 2012, Executive Vice President at Celestica from January 2005 to October 2007 and Vice President of Operations at Flex from February 1998 to January 2005. Mr. Rowan also serves as a member of the Shareholders Committee of Henkel AG since April 2021. Mr Rowan was a senior advisor to the global investment firm KKR & Co. Inc. (NYSE: KKR) between November 2020 and February 2022. He has also been the Chairman of Sydrogen from August 2021 to February 2022, a director at PCH International from August 2020 to February 2022, and a director at Nanofilm Technologies International Limited from October 2020 to February 2022. Earlier in his career, Mr. Rowan also held senior management positions at International Components Corporation and was the founder of Electroconnect, a specialist contract electronics manufacturer, which was acquired by Prestwick Holdings in 1992. Mr. Rowan holds a Masters degree in Business with specialization in supply chain management and logistics. Mr. Rowan also holds certifications from Glasgow College of Technology and Glasgow Caledonian University, including a Mechanical Engineering Apprenticeship, as well as an HNC in Mechanical and Production Engineering and an ONC in Electrical & Electronics Engineering.
ListCo believes that Mr. Rowan is qualified to serve on the Post-Combination Company Board based on his significant global experience as a technology executive.
Zhe (David) Wei (David Wei) has agreed to serve on the Post-Combination Company Board. Mr. Wei has over 20 years of experience in both investment and operational management in China. Prior to launching Vision Knight Capital, a private equity investment fund, in 2011, Mr. Wei served from 2007 to 2011 as an executive director and the Chief Executive Officer of Alibaba.com Limited, a leading worldwide wholesale e-commerce company wholly owned by the Alibaba Group (NYSE: BABA). Mr. Wei was the president, from 2002 to 2006, and chief financial officer, from 2000 to 2002, of B&Q (China) Co., Ltd., a subsidiary of Kingfisher PLC, a leading home improvement retailer in Europe and Asia. From 2003 to 2006, Mr. Wei was also the chief representative for Kingfishers China sourcing office, Kingfisher Asia Limited. Prior to joining B&Q and Kingfisher, Mr. Wei served as the head of investment banking at Orient Securities Company Limited from 1998 to 2000 and as corporate finance manager at Coopers & Lybrand (now part of PricewaterhouseCoopers) from 1995 to 1998. Mr. Wei was appointed as an independent non-executive director of PCCW Ltd. (HKSE: 0008)
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(PCCW) in November 2011 and was re-designated to a non-executive director of PCCW in May 2012. Mr. Wei also serves as a director of Zall Smart Commerce Group Ltd. (HKSE: 02098) since April 2016 and as a director at JNBY Design Limited (HKSE: 03306) since June 2013. Mr. Wei was a director of Informa PLC (LON: INF) from June 2018 to May 2019, a director of Zhong Ao Home Group Limited (HKSE: 01538) from April 2015 to June 2020, an independent director of Leju Holdings Limited (NYSE: LEJU) from April 2014 to March 2021, an independent director of OneSmart International Education Group Limited (NYSE: ONE) from March 2018 to April 2021, and as a director of several private companies. Mr. Wei holds a Bachelors degree in international business management from Shanghai International Studies University and has completed a corporate finance program at the London Business School.
ListCo believes that Mr. Wei is qualified to serve on the Post-Combination Company Board based on his significant experience in investment and operational management in China.
The following information concerning the management of the Post-Combination Company and the Post-Combination Company Board is based on the provisions of the Post-Combination Articles, attached as Annex B to this proxy statement/prospectus and which are expected to be in effect in such form as of the Closing. However, the Post-Combination Articles may be changed at any time prior to consummation of the Business Combination by mutual agreement of the parties to the Business Combination Agreement or after consummation of the Business Combination by amendment in accordance with their terms. If the Post-Combination Articles are amended, the below summary may cease to accurately reflect the Post-Combination Articles as so amended.
Controlled Company
ListCo intends to apply to list Class A ADSs and the Public ADWs or Class C-1 ADSs on Nasdaq under the symbols PSNY and PSNYW, respectively, upon the Closing. ListCo cannot assure you that the Class A ADSs and the Public ADWs or Class C-1 ADSs will be approved for listing or remain listed on Nasdaq. Under Nasdaq listing requirements, the Post-Combination Company will qualify for certain of the controlled company exemptions under the corporate governance rules of Nasdaq, including being exempt from the requirements of having:
| a majority of the board of directors consist of independent directors (however, pursuant to the Post-Combination Articles and Shareholder Acknowledgment Agreement, for the three years following the Closing, the Post-Combination Company Board must be comprised of a majority of independent directors); |
| the compensation committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; |
| the nominating and governance committee be composed entirely of independent directors with a written charter addressing the committees purpose and responsibilities; and |
| there be an annual performance evaluation of the compensation and nominating and corporate governance committees. |
Other than as specified above, the Post-Combination Company may in the future elect to avail itself of these exemptions. As a result, its shareholders will not have the same protections afforded to shareholders of companies that are subject to all of Nasdaqs corporate governance requirements.
Foreign Private Issuer
As a foreign private issuer, the Post-Combination Company will be subject to different U.S. securities laws compared to domestic U.S. issuers. As long as the Post-Combination Company continues to qualify as a foreign
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private issuer under the Exchange Act, the Post-Combination Company will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
| the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; |
| the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and |
| the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. |
In addition, the Post-Combination Company will not be required to file annual reports and financial statements with the SEC as promptly as U.S. domestic companies whose securities are registered under the Exchange Act, and will not be required to comply with Regulation FD, which restricts the selective disclosure of material information.
Further, the Post-Combination Company will be exempt from certain corporate governance requirements of Nasdaq by virtue of being a foreign private issuer. Although the foreign private issuer status will exempt the Post-Combination Company from most of Nasdaqs corporate governance requirements, the Post-Combination Company has decided to voluntarily comply with these requirements, except for the requirement to have a compensation committee and a nominating and corporate governance committee consisting entirely of independent directors.
Furthermore, Nasdaq rules also generally require each listed company to obtain shareholder approval prior to the issuance of securities in certain circumstances in connection with the acquisition of the stock or assets of another company, equity based compensation of officers, directors, employees or consultants, change of control and certain transactions other than a public offering. As a foreign private issuer, the Post-Combination Company is exempt from these requirements and may elect not to obtain shareholders approval prior to any further issuance of Class A ADSs other than as may be required by the laws of England and Wales.
Subject to requirements under the Post-Combination Articles and Shareholder Acknowledgment Agreement that the Post-Combination Company Board be comprised of a majority of independent directors for the three years following the Closing, the Post-Combination Company may in the future elect to avail itself of these exemptions or to follow home country practices with regard to other matters. As a result, its shareholders will not have the same protections afforded to shareholders of companies that are subject to all of Nasdaqs corporate governance requirements.
Board of Directors
Board Structure and Composition
Following Closing, the Initial Directors will be divided into three classes of directors, designated as Class I, Class II and Class III. The Post-Combination Company Board will be authorized to assign members of the Post-Combination Company Board already in office to such classes at the time the classification becomes effective. The Post-Combination Company Board will also be authorized to assign any persons who take office as directors after the date the Post-Combination Articles are adopted to any such Class; provided, however, that the classes are as close to equal size as possible. In the event of any increase in the number of directors, the additional directorships resulting from such increase will be apportioned by the Post-Combination Company Board among the classes of directors so as to maintain such classes as nearly equal as possible. No decrease in the number of directors will shorten the term of any incumbent director.
The term of office of directors serving in Class I, consisting of Thomas Ingenlath, Daniel Li and David Richter, will expire at the Post-Combination Companys first annual general meeting. The term of office of directors serving in Class II, consisting of Carla De Geyseleer, Karl-Thomas Neumann and Håkan Samuelsson will expire
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at the Post-Combination Companys second annual general meeting. The term of office of directors serving in Class III, consisting of Karen Francis, Jim Rowan and David Wei, will expire at the Post-Combination Companys third annual general meeting. At each succeeding annual general meeting following the third annual general meeting following Closing, directors will be elected to serve for a term of three years to succeed the directors of the class whose terms expire at such annual general meeting.
For a period of three years following the Closing, a majority of the Post-Combination Company Board will be (a) independent under applicable stock exchange rules and (b) unaffiliated with Volvo Cars/Geely. In addition, for a period of three years following the Closing, except as required by applicable law, the Post-Combination Company Board may not convene a general meeting which proposes a resolution to remove an independent director unless a majority of the directors (including at least two independent directors) approve of such resolution and following any such removal, a majority of the directors (including at least two independent directors) must approve the appointment of any new independent director to fill the vacancy.
In addition, pursuant to the Shareholder Acknowledgement Agreement, Parent and the Parent shareholders have undertaken that (i) the initial Post-Combination Company Board will include nine directors, a majority of whom will be independent directors, (ii) for a period of three years following the Closing, Parent and the Parent shareholders will not vote in favor of the removal of any independent director of the Post-Combination Company unless at least two independent directors vote in favor of such removal, (iii) for a period of three years following the Closing, Parent and the Parent shareholders will not require the Post-Combination Company to convene a general meeting for the purpose of removing an independent director, and (iv) for three years following the Closing, Parent and the Parent shareholders will not vote in favor of any amendment to the Post-Combination Articles relating to the composition of the Post-Combination Company Board or the appointment or removal of Post-Combination Company directors. The GGI Sponsor will have third party beneficiary rights to enforce the aforementioned undertakings.
Director Independence
Upon the consummation of the Business Combination, the Post-Combination Company Board anticipates that Karen Francis, Carla De Geyseleer, Karl-Thomas Neumann, David Richter and David Wei will qualify as independent, as defined under the listing rules of Nasdaq.
Election of Directors
The holders of the Post-Combination Company Shares will have the right to elect the Post-Combination Company Board at a general meeting of shareholders by a simple majority of the votes validly cast. Subject to the requirements of the Post-Combination Articles, the Post-Combination Company Board may by ordinary resolution appoint a person who is willing to act to be a director, either to fill a vacancy or as an addition to the then-existing Post-Combination Company Board but the total number of directors shall not exceed fifteen. The Post-Combination Company Board will also have power at any time to appoint any person who is willing to act as a director, either to fill a vacancy or as an addition to the then-existing Post-Combination Company Board but the total number of directors shall not exceed fifteen.
Service Contracts of Directors
There are no service contracts between ListCo and any of its current non-employee directors providing for benefits upon termination of their service. For a discussion of compensation, including post-termination benefits, of employee directors, see the section titled Historical Compensation of Key Management and Directors below.
Committees of the Board of Directors
The Post-Combination Company Board will have three standing committees: an audit committee, a compensation committee and a nominating and governance committee. The appointments of the members of each committee by the ListCo board will be effective on the date of the consummation of the Business
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Combination and the members of each committee will serve until their successors are elected and qualified, unless they are earlier removed or resign. Following the Business Combination, each committee will report to the Post-Combination Company Board as it deems appropriate and as the Post-Combination Company Board may request. The composition, duties and responsibilities of the standing committees are set forth below. In the future, the Post-Combination Company Board may establish other committees, as it deems appropriate, to assist it with its responsibilities.
Audit Committee
The Post-Combination Companys audit committee will consist of Carla De Geyseleer, David Richter and David Wei, with Carla De Geyseleer serving as the chair of the audit committee. All of the Post-Combination Companys audit committee members will be independent directors, in accordance with Nasdaq and the SEC requirements for a company listed on Nasdaq.
The Post-Combination Companys audit committee, among other matters, will oversee (1) the Post-Combination Companys financial reporting, auditing and internal control activities; (2) the integrity and audits of the Post-Combination Companys financial statements; (3) the Post-Combination Companys compliance with legal and regulatory requirements; (4) the qualifications and independence of the Post-Combination Companys independent auditors; (5) the performance of the Post-Combination Companys internal audit function and independent auditors; and (6) the Post-Combination Companys overall risk exposure and management.
Duties of the audit committee will include the following:
| annually review and assess the adequacy of the audit committee charter and review the performance of the audit committee; |
| be responsible for recommending the appointment, retention and termination of the Post-Combination Companys independent auditors and determine the compensation of the Post-Combination Companys independent auditors; |
| review the plans and results of the audit engagement with the independent auditors; |
| evaluate the qualifications, performance and independence of the Post-Combination Companys independent auditors; |
| have authority to approve in advance all audit and non-audit services by the Post-Combination Companys independent auditors, the scope and terms thereof and the fees therefor; review the adequacy of the Post-Combination Companys internal accounting controls; |
| ensure the Post-Combination Company maintains a robust risk management function, including in respect of IT and cybersecurity risk management; and |
| meet at least quarterly with the Post-Combination Companys chief financial officer and the Post-Combination Companys independent auditors. |
The audit committee has the power to investigate any matter brought to its attention within the scope of its duties and to retain counsel for this purpose where appropriate. Each of the audit committee members meet the financial literacy requirements of Nasdaq listing standards and Carla De Geyseleer qualifies as an audit committee financial expert, as defined in the rules of the SEC. The designation does not impose on the audit committee financial expert any duties, obligations or liabilities that are greater than those generally imposed on members of the Post-Combination Companys audit committee and the Post-Combination Company Board.
The audit committee will operate under a written charter, to be effective on the date of the consummation of the Business Combination, which satisfies the applicable rules of the SEC and the listing standards of Nasdaq, and which will be available on the Post-Combination Companys website upon the consummation of the Business
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Combination. All audit services to be provided to the Post-Combination Company and all permissible non-audit services, other than de minimis non-audit services, to be provided to the Post-Combination Company by the Post-Combination Companys independent registered public accounting firm will be approved in advance by the audit committee.
Compensation Committee
The Post-Combination Companys compensation committee will consist of Karen Francis, Daniel Li, Jim Rowan and Håkan Samuelsson, with Håkan Samuelsson serving as the chair of the compensation committee.
The compensation committee will have the sole authority to retain, and terminate, any compensation consultant to assist in the evaluation of employee compensation and to approve the consultants fees and the other terms and conditions of the consultants retention. The compensation committee will, among other matters:
| at the request of the Post-Combination Company Board, review and make recommendations to the Post-Combination Company Board relating to management succession planning; |
| administer, review and make recommendations to the Post-Combination Company Board, regarding the Post-Combination Companys compensation plans; |
| review and approve the Post-Combination Companys corporate goals and objectives with respect to compensation for executive officers and evaluates each executive officers performance in light of such goals and objectives to set his or her annual compensation, including salary, bonus and equity and non-equity incentive compensation, subject to approval by the Post-Combination Company Board; and |
| provide oversight of managements decisions regarding the performance, evaluation and compensation of other officers. |
The compensation committee will operate under a written charter, to be effective on the date of the consummation of the Business Combination, which satisfies the applicable rules of the SEC and Nasdaq listing standards, and will be available on the Post-Combination Companys website upon the consummation of the Business Combination.
Nominating and Governance Committee
The Post-Combination Companys nominating and governance committee will consist of Karen Francis, Daniel Li, Jim Rowan and Håkan Samuelsson, with Håkan Samuelsson serving as the chair of the nominating and governance committee. The nominating and governance committee will, among other matters:
| select and recommend to the Post-Combination Company Board nominees for election by the shareholders or appointment by the ListCo Board; |
| annually review with the Post-Combination Company Board the composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity of the Post-Combination Company Board members; |
| make recommendations on the frequency and structure of board meetings and monitor the functioning of the committees of the Post-Combination Company Board; |
| develop and recommend to the Post-Combination Company Board a set of corporate governance guidelines applicable to the Post-Combination Company and periodically review such guidelines and recommend changes to the Post-Combination Company Board for approval as necessary; and |
| oversee the annual self-evaluation of the Post-Combination Company Board. |
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The nominating and corporate governance committee will operate under a written charter, to be effective on the date of the consummation of the Business Combination, which satisfies the applicable rules of the SEC and the Nasdaq listing standards and will be available on the Post-Combination Companys website upon the consummation of the Business Combination.
Code of Conduct
The Post-Combination Company Board will adopt a code of conduct that establishes the standards of ethical conduct applicable to all of the Post-Combination Companys directors, officers, employees, and, as applicable, consultants and contractors. The code addresses, among other things, competition and fair dealing, conflicts of interest, compliance with applicable governmental laws, rules and regulations, company assets, confidentiality requirements and the process for reporting violations of the code. Any waiver of the code with respect to any director or executive officer will be promptly disclosed and posted on the Post-Combination Companys website. Amendments to the code will be promptly disclosed and posted on the Post-Combination Companys website. The code will be available on the Post-Combination Companys website upon the consummation of the Business Combination.
Historical Compensation of Key Management and Directors
ListCo was formed on September 15, 2021 and did not have any key management or directors prior to Closing. The aggregate amount of compensation, including cash, equity awards and other benefits, ListCos executive officers (Thomas Ingenlath, Johan Malmqvist and Dennis Nobelius) received from Polestar for the year ended December 31, 2021 was approximately $2,308,209. The total compensation paid to Polestars executive officers in fiscal year 2021 consisted solely of base salary, short-term variable pay, and the value of pension benefits and other employee benefits, including, for eligible participants, variable pay pursuant to Polestars cash incentive programs (as described below).
Incentive Programs
Polestar Bonus Program
All employees of Polestar, including each of ListCos executive officers, participate in the Polestar Bonus Program, a short-term cash incentive program, which is approved by the Polestar Board annually. Under the Polestar Bonus Program, employees are eligible to receive an annual cash bonus based on global Polestar KPIs applicable for all markets and all employees.
For fiscal year 2021, the Polestar Bonus Program was based on the following KPIs: (i) operational growth and retail deliveries volume; (ii) financial growth; (iii) customer experience; and (iv) implementation of the Companys sustainability action plans on all department levels. The Polestar Board determined a level of achievement of 130% in respect of such KPIs for fiscal year 2021, resulting in a payout equal to 130% of target bonus levels.
LTVP Program
The Polestar Long Term Variable Pay Program (LTVP Program) is a long-term, cash program for certain management personnel who joined Polestar from Volvo Cars during a start-up period, including Messrs. Ingenlath and Nobelius. Mr. Malmqvist does not participate in the LTVP Program. The LTVP Program mirrors the Volvo Cars Long Term Variable Pay Programs and is administered by Volvo Cars. Awards under the LTVP Program are paid based on achievement of performance conditions and the market value of Volvo Car Group at the end of a three-year performance period. For fiscal year 2021, performance conditions under the LTVP Program were based on (i) value creation, as measured by an independent third-party valuation, and (ii) Volvo Cars Group performance, measured based on average three-year Operating Margin and average three-year Revenue Growth.
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Employee Agreements
Messrs. Ingenlath, Malmqvist and Nobelius are each party to an employment agreement with Polestar. Pursuant to the employment agreements with Messrs. Ingenlath, Malmqvist and Nobelius, each such executive is eligible to receive an annual base salary and vacation pay and to participate in Polestars cash incentive programs (as described above). In addition, each executive is eligible to participate in Polestars company car scheme, with a portion of the cost borne by the executive, and to participate in collectively and contractually agreed pension and insurance benefit schemes and in accordance with Swedish law. Mr. Nobelius and Mr. Malmqvist are entitled to
health care insurance at the expense of Polestar, and Mr. Malmqvist is also entitled to relocation support in connection with their relocation to Sweden, with company-paid housing costs for three months and housing cost support for an additional nine months.
Messrs. Ingenlath, Malmqvist and Nobelius are each subject to restrictive covenants under their employment agreements relating to assignment of intellectual property and confidentiality. In addition, Mr. Ingenlath is subject to restrictive covenants relating to non-competition, non-solicitation of customers and non-solicitation and non-hire of employees during the term of his employment. In the event Mr. Ingenlath breaches any restrictive covenant under his employment agreement, he may owe liquidated damages to Polestar in respect of each such breach in an amount equal to six times his average monthly gross salary.
Messrs. Ingenlath and Malmqvists employments may be terminated by Polestar subject to 12 months notice and be terminated by the executive subject to six months notice. In the event of termination of employment by Polestar, Messrs. Ingenlath and Malmqvist are each entitled to severance pay equal to 12 times monthly base salary, payable in installments. Mr. Nobeliuss employment may be terminated according to the notice periods stipulated under the applicable collective bargaining agreement. He is not entitled to severance pursuant to his employment agreement.
Health and Welfare and Retirement Benefits
Messrs. Ingenlath, Malmqvist and Nobelius are entitled to certain health and welfare insurances pursuant to the Swedish collective bargaining agreement Teknikavtalet between Teknikarbetsgivarna and Unionen, Sveriges Ingenjörer and Ledarna, including disability and life insurances. They are also entitled to receive Executive Management Health Care Insurance, and travel insurance.
The ITP Pension Plan is an occupational pension plan for private sector salaried employees and is based on a collective bargaining agreement between the Confederation of Swedish Enterprise and the Council for Negotiation and Cooperation. The ITP Pension Plan is divided into two parts: ITP 1 (applicable to employees born 1979 and later), which is a defined contribution plan and ITP 2 (applicable to employees born before 1979), which is primarily a defined benefit plan. Furthermore, it is also possible for employees born in 1978 or earlier that are earning at least 10 Swedish income base amounts to agree with the employer to instead apply the ITP 1 pension plan.
Messrs. Malmqvist and Nobelius are covered by the defined contribution pension plan (ITP 1) as per the Swedish collectively agreed Avtal om ITP och TGL, and the VFF pension (Volvo Företagspension), a defined contribution pension scheme.
Mr. Ingenlath is covered by the defined benefit pension plan (ITP 2) as per the Swedish collectively agreed Avtal om ITP och TGL and the Volvo Management Pension (VMP), a supplementary pension plan.
The defined benefit pension plan (i.e. the ITP 2 pension plan) through the Swedish ITP collective bargaining agreement is a final salary-based plan, and is funded through regular insurance payments. This plan is secured with the mutual insurance company Alecta, and the portion secured through such insurance refers to a defined benefit plan that comprises several employers and is reported according to a pronouncement by the Swedish
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Financial Reporting Board, UFR 10. For 2020, Polestar did not have access to the information to report its proportionate share of the plans obligations, assets under management and cost that would make it possible to report this plan as a defined benefit plan, so it is recorded as a defined contribution plan. Polestar paid premiums of about TUSD 3.340 to Alecta in 2021. Polestars share of the total saving premiums for the ITP pension plan in Alecta as of December 31, 2021 amounted to 0.13056 (0.05375) per cent and Polestars share of the total number of active policy holders amounted to 0.04485 (0.02605) per cent. The collective consolidation level comprises the market value of Alectas assets as a percentage of the insurance obligations calculated in accordance with Alectas actuarial methods and assumptions, which do not conform to IAS 19. The collective funding ratio is normally allowed to vary between 125 and 175 per cent. At year-end 2021, the consolidation level amounts to 171 per cent.
Historical Compensation of Non-Employee Directors
Polestar has established a compensation program for its non-employee directors. Directors who are employed or otherwise remunerated by Volvo Cars or Geely do not receive any compensation for their services as directors.
During the year ended December 31, 2021, the aggregate amount of Polestars non-employee directors compensation paid to or earned by such directors for service on the Polestar Board was approximately $153,881, in the form of a cash retainer for the performance of duties as a director. Polestar also reimbursed its non-employee directors for reasonable out-of-pocket expenses incurred in connection with the performance of their duties as directors, including, without limitation, travel expenses in connection with their attendance in-person at board of directors and committee meetings.
Compensation Arrangements after the Business Combination
The Post-Combination Company expects to be party to letter agreements with the non-employee directors, pursuant to which non-employee directors will receive (i) an annual fee of $200,000 (or $350,000 if the director serves as the chair of the Post-Combination Company Board), (ii) an additional annual fee of $10,000 if the director serves on a committee of the Post-Combination Board (or $20,000 for the chairs of the committees of the Post-Combination Board), and (iii) a Polestar car, subject to certain conditions. Pursuant to the letter agreements, each non-employee director will direct the Company to purchase the maximum number of Class A ADSs as may be purchased in the market at the prevailing rate with 50% of the annual fee (but not including any additional annual fee described above) each non-employee directors is eligible to receive. The Company is also expected to agree to reimburse each non-employee director for reasonable and properly documented expenses they incur in connection with their service as a non-employee director.
No determinations regarding the compensation arrangements that will govern following the Closing for executive officers have been made at this point and current compensation arrangements will remain in effect.
At the Closing, ListCo intends to adopt the Equity Plan and the Employee Stock Purchase Plan (each, as defined and described below).
Equity Plan
ListCo intends to adopt the Polestar Automotive Holding UK PLC 2022 Omnibus Incentive Plan (the Equity Plan), pursuant to which employees of the Post-Combination Company and the Post-Combination Companys affiliates performing services for the Post-Combination Company, including the Post-Combination Companys executive officers, will be eligible to receive awards. The Equity Plan provides for the grant of stock options (in the form of either non-qualified stock options (NSOs) or incentive stock options (ISOs)), stock appreciation rights (SARs), restricted stock, restricted stock units (RSUs), performance awards, other stock-based awards, cash awards and substitute awards intended to align the interests of participants with those of the Post-Combination Companys shareholders. The Annex to the Equity Plan permits grants of awards that may be settled in cash or shares to employees, consultants and non-employee directors of the Post-Combination Company and the Post-Combination Companys affiliates.
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The following description of the Equity Plan is qualified in its entirety by reference to the Equity Plan, a copy of which is included as Annex I of this proxy statement/prospectus.
Securities Offered
Subject to adjustment in the event of certain transactions or changes of capitalization in accordance with the Equity Plan, a total of 10,000,000 shares of Post-Combination Company Class A ADSs (or Class A Shares, as the context may require) have been initially reserved for issuance pursuant to awards under the Equity Plan. The total number of shares reserved for issuance under the Equity Plan will be increased on January 1 of each calendar year during the term of the Equity Plan, by the lesser of (i) 0.5% of the total number of Post-Combination Company Shares outstanding on each December 31 immediately prior to the date of increase or (ii) such number of Post-Combination Company Shares determined by the Post-Combination Company Board. No more than 10,000,000 Post-Combination Company Class A ADSs under the Equity Plan may be issued pursuant to ISOs (subject to the overall limit of shares that may be used in the Equity Plan). Post-Combination Company Class A ADSs subject to an award that expires or is tendered in payment of an option, delivered or withheld to satisfy any tax withholding obligations, covered by a stock-settled SAR or other award that were not issued upon settlement, or shares subject to an award that expires or is canceled, forfeited, or terminated without issuance of the full number of shares to which such award related (only to the extent of such cancellation, forfeiture or termination) will again be available for issuance or delivery pursuant to other awards under the Equity Plan. Any award settled in cash shall not be counted toward the maximum number of shares reserved for issuance under the Equity Plan.
Administration
The Equity Plan will be administered by a committee of the Post-Combination Company Board that has been authorized to administer the Equity Plan, except if no such committee is authorized by the ListCo Board, the Post-Combination Company Board will administer the Equity Plan (as applicable, the Committee). The Committee has broad discretion (subject to the terms and conditions of the Equity Plan) to administer the Equity Plan, including the power to determine the eligible individuals to whom awards will be granted, the number and type of awards to be granted and the terms and conditions of awards. The Committee may also accelerate the vesting or exercise of any award and make all other determinations and to take all other actions necessary or advisable for the administration of the Equity Plan.
Eligibility
Employees of the Post-Combination Company and its affiliates are eligible to receive awards under the Equity Plan. Consultants and non-employee directors of the Post-Combination Company and its affiliates may receive awards granted under the Annex.
Types of Awards
Options. The Post-Combination Company may grant options to the Post-Combination Companys employees and employees of its affiliates, except that ISOs may only be granted to persons who are Post-Combination Companys employees or employees of one of Post-Combination Companys parents or subsidiaries, in accordance with Section 422 of the Code. Except as otherwise permitted by applicable law in the case of eligible employees located outside the United States, the exercise price of an option cannot be less than 100% of the fair market value of a Post-Combination Company Class A ADS on the date on which the option is granted and the option must not be exercisable for longer than ten years following the date of grant. However, in the case of an incentive option granted to an individual who owns (or is deemed to own) more than 10% of the total combined voting power of all classes of Post-Combination Companys equity securities or of the Post-Combination Companys parents or subsidiaries, the exercise price of the option must be at least 110% of the fair market value of a Post-Combination Company Class A ADS on the date of grant and the option must not be exercisable more than five years from the date of grant.
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SARs. A SAR is the right to receive an amount (payable in Post-Combination Company Class A ADSs) equal to the excess of the fair market value of one Post Combination Company Class A ADS on the date of exercise over the grant price of the SAR. Except as otherwise permitted by applicable law in the case of eligible employees located outside the United States, the grant price of a SAR cannot be less than 100% of the fair market value of a Post-Combination Company Class A ADS on the date on which the SAR is granted. The term of a SAR may not exceed ten years. SARs may be granted in connection with, or independent of, other awards. The Committee has the discretion to determine other terms and conditions of an SAR award.
Restricted Stock Awards. A restricted stock award is a grant of Post-Combination Company Class A ADSs subject to the restrictions on transferability and risk of forfeiture imposed by the Committee. Unless otherwise determined by the Committee and specified in the applicable award agreement, the holder of a restricted stock award has rights as a shareholder, including the right to vote the Post-Combination Company Class A ADSs subject to the restricted stock award or to receive dividends on the Post-Combination Company Class A ADSs subject to the restricted stock award during the restriction period. The Committee has the discretion to determine the terms and conditions that the participant will be entitled to dividends payable on the shares of Restricted Stock.
Restricted Stock Units. A RSU is a right to receive Post-Combination Company Class A ADSs at the end of a specified period equal to the fair market value of one Post Combination Company Class A ADS on the date of vesting. RSUs may be subject to the restrictions, including a risk of forfeiture, imposed by the Committee, and holders of RSUs are not entitled to rights as shareholders unless and until shares are delivered in settlement of such RSUs. The Committee may determine that a grant of RSUs will provide a participant a right to receive dividend equivalents, which entitles the participant to receive the equivalent value (in Post-Combination Company Class A ADSs) of dividends paid on the underlying Post-Combination Company Class A ADSs. Dividend equivalents may be paid currently or credited to an account, settled in shares, and may be subject to the same restrictions as the RSUs with respect to which the dividend equivalents are granted.
Performance Awards. A performance award is an award that vests and/or becomes exercisable or distributable subject to the achievement of certain performance goals during a specified performance period, as established by the Committee. Performance awards may be granted alone or in addition to other awards under the Equity Plan, and will be settled in Post-Combination Company Class A ADSs.
Other Share-Based Awards. Other share-based awards are awards denominated and payable in, valued in whole or in part by reference to, or otherwise based on or related to, the value of Post-Combination Company Class A ADSs.
Cash Awards. Under the Annex to the Equity Plan, cash awards may be granted on a free-standing basis or as an element of, a supplement to, or in lieu of any other award. SARs, RSUs and Performance Awards that may be settled in cash may be granted under the Annex to the Equity Plan.
Substitute Awards. Awards may be granted under the Equity Plan in substitution for similar awards held for individuals who become participants as a result of a merger, consolidation or acquisition of another entity by or with the Post-Combination Company or one of its affiliates.
Certain Transactions
If any change is made to the Post-Combination Companys capitalization, such as a stock split, stock combination, stock dividend, exchange of stock or other recapitalization, merger or otherwise, which results in an increase or decrease in the number of outstanding Post-Combination Company Class A ADSs, appropriate adjustments will be made by the Committee in the shares subject to an award under the Equity Plan. The Committee will also have the discretion to make certain adjustments to awards in the event of a change in control (which includes a scheme of arrangement under the Companies Act 2006 enacted under the laws of England and Wales or under any other substantially equivalent local legislation), such as the assumption or substitution of outstanding awards, the purchase of any outstanding awards in cash based on the applicable change in control
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price, the ability for participants to exercise any outstanding stock options, SARs or other stock-based awards upon the change in control (and if not exercised such awards will be terminated), and the acceleration of vesting or exercisability of any outstanding awards.
Clawback
All awards granted under the Equity Plan are subject to reduction, cancelation or recoupment under any written clawback policy that the Post-Combination Company may adopt and that the Post-Combination Company determines should apply to awards under the Equity Plan.
Plan Amendment and Termination
The Post-Combination Company Board or the Committee may amend or terminate any award, award agreement or the Equity Plan at any time, provided that the rights of a participant granted an award prior to such amendment or termination may not be impaired without such participants consent. In addition, shareholder approval will be required for any amendment to the extent necessary to comply with applicable law or exchange listing standards. The Committee will not have the authority, without the approval of shareholders, to amend any outstanding option or share appreciation right to reduce its exercise price per share. The Equity Plan will remain in effect for a period of ten years (unless earlier terminated by the Post-Combination Company Board).
Material U.S. Federal Income Tax Consequences
The following is a general summary under current law of the principal United States federal income tax consequences related to awards under the Equity Plan. This summary deals with the general federal income tax principles that apply and is provided only for general information. Some kinds of taxes, such as state, local and foreign income taxes and federal employment taxes, are not discussed. This summary is not intended as tax advice to participants, who should consult their own tax advisors.
Non-Qualified Stock Options. If an optionee is granted an NSO under the Equity Plan, the optionee should not have taxable income on the grant of the option. Generally, the optionee should recognize ordinary income at the time of exercise in an amount equal to the fair market value of the shares acquired on the date of exercise, less the exercise price paid for the shares. The optionees basis in the Post-Combination Company Class A ADSs for purposes of determining gain or loss on a subsequent sale or disposition of such shares generally will be the fair market value of the Post-Combination Company Class A ADSs on the date the optionee exercises such option. Any subsequent gain or loss will be taxable as a long-term or short-term capital gain or loss. The Post Combination Company or its subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the optionee recognizes ordinary income.
Incentive Stock Options. A participant receiving ISOs should not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant should not recognize taxable income at the time of exercise. However, the excess of the fair market value of the shares of Post-Combination Company Class A ADSs received over the option exercise price is an item of tax preference income potentially subject to the alternative minimum tax. If stock acquired upon exercise of an ISO is held for a minimum of two years from the date of grant and one year from the date of exercise and otherwise satisfies the ISO requirements, the gain or loss (in an amount equal to the difference between the fair market value on the date of disposition and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and the Post Combination Company will not be entitled to any deduction. If the holding period requirements are not met, the ISO will be treated as one that does not meet the requirements of the Code for ISOs and the participant will recognize ordinary income at the time of the disposition equal to the excess of the amount realized over the exercise price, but not more than the excess of the fair market value of the shares on the date the ISO is exercised over the exercise price, with any remaining gain or loss being treated as capital gain or capital loss. The Post Combination Company or its subsidiaries or affiliates generally are not entitled to a federal income tax deduction upon either the exercise of an ISO or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the participant recognizes ordinary income on disposition of the shares.
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Other Awards. The current federal income tax consequences of other awards authorized under the Equity Plan generally follow certain basic patterns: SARs are taxed and deductible in substantially the same manner as NSOs; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant through a Section 83(b) election); RSUs, dividend equivalents and other stock or cash based awards are generally subject to tax at the time of payment. The Post Combination Company or its subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the award recipient recognizes ordinary income.
Section 409A of the Code
Certain types of awards under the Equity Plan may constitute, or provide for, a deferral of compensation subject to Section 409A of the Code. Unless certain requirements set forth in Section 409A of the Code are complied with, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% penalty tax (and, potentially, certain interest, penalties and additional state taxes). To the extent applicable, the Equity Plan and awards granted under the Equity Plan are intended to be structured and interpreted in a manner intended to either comply with or be exempt from Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance that may be issued under Section 409A of the Code. To the extent determined necessary or appropriate by the plan administrator, the Equity Plan and applicable award agreements may be amended to further comply with Section 409A of the Code or to exempt the applicable awards from Section 409A of the Code.
THE DISCUSSION ABOVE IS INTENDED ONLY AS A SUMMARY AND DOES NOT PURPORT TO BE A COMPLETE DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO RECIPIENTS OF AWARDS UNDER THE EQUITY PLAN. AMONG OTHER ITEMS THIS DISCUSSION DOES NOT ADDRESS ARE TAX CONSEQUENCES UNDER THE LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION, OR ANY TAX TREATIES OR CONVENTIONS BETWEEN THE UNITED STATES AND FOREIGN JURISDICTIONS. THIS DISCUSSION IS BASED UPON CURRENT LAW AND
INTERPRETATIONAL AUTHORITIES WHICH ARE SUBJECT TO CHANGE AT ANY TIME.
Employee Stock Purchase Plan
ListCo intends to adopt the Polestar Automotive Holding UK PLC 2022 Employee Stock Purchase Plan (the Employee Stock Purchase Plan). The following is a summary of the material features of the Employee Stock Purchase Plan. This summary is qualified in its entirety by reference to the complete text of the Employee Stock Purchase Plan, a copy of which is filed as Annex J of this proxy statement/prospectus.
Purpose of the Employee Stock Purchase Plan
The purpose of the Employee Stock Purchase Plan is to provide the Post-Combination Companys employees and employees of the Post-Combination Companys participating subsidiaries with the opportunity to purchase Class A ADSs (or Class A Shares, as the context may require) through accumulated payroll deductions during successive offering periods. ListCo believes that the Employee Stock Purchase Plan enhances such employees sense of participation in the Post-Combination Companys performance, aligns their interests with those of the Post-Combination Companys shareholders, and is a necessary and powerful incentive and retention tool that benefits the Post-Combination Companys shareholders.
Eligibility and Administration
The Employee Stock Purchase Plan will be administered by a committee of the Post-Combination Company Board that has been authorized to administer the Employee Stock Purchase Plan, except if no such committee is authorized by the Post-Combination Company Board, the Post-Combination Company Board will administer the Employee Stock Purchase Plan. Such committee, as the administrator of the Employee Stock Purchase Plan, administers and has authority to interpret the terms of the Employee Stock Purchase Plan and determine
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eligibility of participants. The administrator may designate certain of the Post-Combination Companys subsidiaries as participating designated subsidiaries in the Employee Stock Purchase Plan and may change these designations from time to time. The Post-Combination Companys employees and employees of the Post-Combination Companys participating designated subsidiaries are eligible to participate in the Employee Stock Purchase Plan if they meet the eligibility requirements under the Employee Stock Purchase Plan established from time to time by the administrator. However, an employee may not be granted rights to purchase shares under the Employee Stock Purchase Plan if such employee, immediately after the grant, would own (directly or through attribution) shares possessing 5% or more of the total combined voting power or value of all classes of the Post-Combination Companys outstanding stock and stock of any of the Post-Combination Companys subsidiaries.
Eligible employees become participants in the Employee Stock Purchase Plan by enrolling and authorizing payroll deductions prior to the first day of the applicable offering period. Non-employee directors and consultants are not eligible to participate in the Employee Stock Purchase Plan. Employees who choose not to participate, or are not eligible to participate at the start of an offering period but who become eligible thereafter, may enroll in any subsequent offering period.
Shares Available for Awards
A total of 2,000,000 Class A ADSs are reserved for issuance under the Employee Stock Purchase Plan, which reserve amount will be increased on the first day of each fiscal year during the term of the Employee Stock Purchase Plan following the fiscal year in which the effective date of the Employee Stock Purchase Plan occurs by the lesser of (a) 0.1% of the total number of shares of Post-Combination Company Shares outstanding on the last day of the immediately preceding fiscal year, (b) a lesser amount determined by the Post-Combination Company Board or (c) 2,000,000. The number of shares subject to the Employee Stock Purchase Plan may be adjusted for changes in the Post-Combination Companys capitalization and certain corporate transactions, as described below under the heading Adjustments. ListCo cannot precisely predict its share usage under the Employee Stock Purchase Plan as it will depend on a range of factors including the level of the Post-Combination Companys employee participation, the contribution rates of participants, the trading price of Class A ADSs and the Post-Combination Companys future hiring activity.
Participating in an Offering
Offering Periods and Purchase Periods. Class A ADSs are offered to eligible employees under the Employee Stock Purchase Plan during offering periods. Offering periods under the Employee Stock Purchase Plan commence when determined by the administrator. The length of an offering period under the Employee Stock Purchase Plan is determined by the administrator and may be up to 27 months long. Employee payroll deductions are used to purchase Class A ADSs on the exercise date of an offering period. The exercise date for each offering period is the final trading day in the offering period. The administrator may, in its discretion, modify the terms of future offering periods.
Enrollment and Contributions. The Employee Stock Purchase Plan permits participants to purchase Class A ADSs through payroll deductions of at least 1% of their eligible compensation, but not more than 5% of their eligible compensation as of each payroll date during an offering period. The administrator will establish the maximum number of shares that may be purchased by a participant during any offering period. In addition, except as described below under Matching Shares, no participant is permitted to accrue the right to purchase stock at a rate in excess of $25,000 worth of shares during any calendar year.
Purchase Rights. On the first trading day of each offering period, each participant is automatically granted an option to purchase Class A ADSs. The option expires on the last trading day of the applicable offering period and is exercised at that time to the extent of the payroll deductions accumulated during the offering period. Any remaining balance is carried forward to the next offering period unless the participant has elected to withdraw from the Employee Stock Purchase Plan, as described below, or has ceased to be an eligible employee. In the
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case of the portion of the Employee Stock Purchase Plan intended to qualify under the provisions of Section 423 of the Code, in no event will a participant be permitted to purchase more than 25,000 shares during each offering period (subject to certain adjustments).
Purchase Price. The purchase price of the Class A ADSs under the Employee Stock Purchase Plan, in the absence of a contrary designation by the administrator, is 85% of the lower of the fair market value of Class A ADSs on the first trading day of the offering period or on the final trading day of the offering period. The fair market value per Class A ADS under the Employee Stock Purchase Plan generally is the closing sales price of Class A ADSs on the date for which fair market value is being determined, or if there is no closing sales price for Class A ADSs on the date in question, the closing sales price for Class A ADSs on the last preceding date for which such quotation exists.
Withdrawal and Termination of Employment. Participants may voluntarily end their participation in the Employee Stock Purchase Plan at any time during an offering period prior to the end of the offering period by delivering written notice to the Post-Combination Company, and can elect to either (i) be paid their accrued payroll deductions that have not yet been used to purchase Class A ADSs or (ii) exercise their option at the end of the applicable offering period, and then be paid any remaining accrued payroll deductions. Participation in the Employee Stock Purchase Plan ends automatically upon a participants termination of employment and any remaining accrued payroll deductions in the participants account will be paid to such participant following such termination.
Adjustments
In the event of certain transactions or events affecting the Class A ADSs, such as any stock split, reverse stock split, stock dividend, combination or reclassification of the Class A ADSs, or any other increase or decrease in the number of Class A ADSs effected without receipt of consideration by the Post-Combination Company, the administrator will make equitable adjustments to the Employee Stock Purchase Plan and outstanding rights under the Employee Stock Purchase Plan. In addition, in the event of a proposed sale of all or substantially all of the Post-Combination Companys assets, a merger with or into another corporation, or other transaction as set forth by the administrator in an offering document, each outstanding option will be assumed or an equivalent option will be substituted by the successor corporation or a parent or subsidiary of the successor corporation. If the successor corporation or a parent or subsidiary of the successor corporation refuses to assume or substitute outstanding options, any offering periods then in progress will be shortened with a new exercise date prior to the proposed sale or merger. The administrator will notify each participant in writing at least 10 business days prior to such new exercise date that the exercise date has been changed and the participants option will be automatically exercised on such new exercise date. Further, in the event of a proposed dissolution or liquidation, any offering periods then in progress will be shortened with a new exercise date prior to the proposed dissolution or liquidation, and the administrator will notify each participant in writing in a similar manner as described above.
Matching Shares
The administrator may provide special terms, establish supplements to, or amendments, restatements or alternative versions of the Employee Stock Purchase Plan, subject to the share limits described above, in order to facilitate grants of awards subject to the laws and/or stock exchange rules of countries outside of the United States and to provide benefits under the Employee Stock Purchase Plan to employees located in the United States in excess of the limitations under Section 423 of the Code. Subject to the administrators determination, eligible employees located within or outside the United States may elect to have an amount credited to their plan account (in the case of eligible employees located in the United States, which may be in excess of the $25,000 limitation under Section 423 of the Code), which amounts will be used to purchase Class A ADSs on the open market on such participants behalf (based on the full fair market value of such Class A ADSs). In addition, the administrator may, in its discretion, offer matching shares denominated in Class A ADSs on a quarterly basis to
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all eligible employees, in an amount equal to up to 100% of the number of Class A ADSs credited to the participants plan account prior to the last day of the applicable purchase period, provided that a participant may not receive an aggregate value of matching shares in respect of any calendar year in excess of 1% of the participants eligible compensation. To receive matching shares, the participant must (i) be an eligible employee on the date the matching shares are offered, and (ii) retain the Class A ADSs purchased during the applicable quarter until the date following the one-year anniversary of the purchase with respect to which the matching shares are credited to the participants account.
Transferability
A participant may not transfer rights granted under the Employee Stock Purchase Plan other than by will or the laws of descent and distribution, and such rights are generally exercisable only by the participant.
Plan Amendment and Termination
The Post-Combination Company Board may amend, suspend or terminate the Employee Stock Purchase Plan at any time and from time to time. However, shareholder approval must be obtained for any amendment that increases the aggregate number or changes the type of shares that may be sold pursuant to rights under the Employee Stock Purchase Plan, changes the designation or class of employees who are eligible to participate in the Employee Stock Purchase Plan or changes the Employee Stock Purchase Plan in any way that would cause the Employee Stock Purchase Plan to no longer be an employee stock purchase plan under Section 423(b) of the Code.
Material U.S. Federal Income Tax Consequences
The U.S. federal income tax consequences of the Employee Stock Purchase Plan under current income tax law are summarized in the following discussion, which deals with the general tax principles applicable to the Employee Stock Purchase Plan and is intended for general information only. Other federal taxes and foreign, state and local income taxes are not discussed, and may vary depending on individual circumstances and from locality to locality.
Except as described above under Matching Shares, the Employee Stock Purchase Plan, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Section 423 of the Code. Under the applicable Code provisions, no income will be taxable to a participant until the sale or other disposition of the shares purchased under the Employee Stock Purchase Plan. This means that an eligible employee will not recognize taxable income on the date the employee is granted an option under the Employee Stock Purchase Plan. In addition, the employee will not recognize taxable income upon the purchase of shares. Upon such sale or disposition of shares, the participant generally will be subject to tax in an amount that depends upon the length of time such shares are held by the participant prior to selling or disposing of them. If the shares are sold or disposed of more than two years from the date of grant and more than one year from the date of purchase, or if the participant dies while holding the shares, the participant (or the participants estate) will recognize ordinary income measured as the lesser of (1) the excess of the fair market value of the shares at the time of such sale or disposition (or death) over the purchase price or (2) the excess of the fair market value of the shares at the time the option was granted over the purchase price. Any additional gain will be treated as long-term capital gain. If the shares are held for the holding periods described above but are sold for a price that is less than the purchase price, there is no ordinary income and the participating employee has a long-term capital loss for the difference between the sale price and the purchase price.
If the shares are sold or otherwise disposed of before the expiration of the holding periods described above, or in the event a U.S. participant receives matching Class A ADSs as described above under Matching Shares, the participant will recognize ordinary income generally measured as the excess of the fair market value of the shares on the date the shares are purchased over the purchase price and the Post-Combination Company will be entitled
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to a tax deduction for compensation expense in the amount of ordinary income recognized by the employee. Any additional gain or loss on such sale or disposition will be long-term or short-term capital gain or loss, depending on how long the shares were held following the date they were purchased by the participant prior to disposing of them. If the shares are sold or otherwise disposed of before the expiration of the holding periods described above but are sold for a price that is less than the purchase price, the participant will recognize ordinary income equal to the excess of the fair market value of the shares on the date of purchase over the purchase price (and the Post-Combination Company will be entitled to a corresponding deduction), but the participant generally will be able to report a capital loss equal to the difference between the sales price of the shares and the fair market value of the shares on the date of purchase.
THE DISCUSSION ABOVE IS INTENDED ONLY AS A SUMMARY AND DOES NOT PURPORT TO BE A COMPLETE DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO RECIPIENTS OF AWARDS UNDER THE EMPLOYEE STOCK PURCHASE PLAN. AMONG OTHER ITEMS THIS DISCUSSION DOES NOT ADDRESS ARE TAX CONSEQUENCES UNDER THE LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION, OR ANY TAX TREATIES OR CONVENTIONS BETWEEN THE UNITED STATES AND FOREIGN JURISDICTIONS. THIS DISCUSSION IS BASED UPON CURRENT LAW AND INTERPRETATIONAL AUTHORITIES WHICH ARE SUBJECT TO CHANGE AT ANY TIME.
Insurance and Indemnification
To the extent permitted by the Companies Act and the Post-Combination Articles, ListCo is empowered to indemnify its directors and officers, as well as members of Polestar Groups senior management against liabilities in connection with their service at Polestar. ListCo will also enter into indemnification agreements with its directors and officers, as well as members of Polestar Groups senior management. These agreements, among other things, will require ListCo to indemnify such directors, officers and members of Polestar Groups senior management for certain expenses, including attorneys fees, judgments, fines and settlement amounts incurred by a director, officer or member of Polestar Groups senior management in any action or proceeding arising out of their services in the Polestar Group. The Post-Combination Company plans to maintain an insurance policy pursuant to which such persons will also be insured against liability for actions taken in their respective capacities.
ListCo believes that the indemnification of directors, officers and members of Polestar Groups senior management is necessary to attract and retain qualified persons. Insofar as such indemnification for liabilities arising under the Securities Act may be permitted to such individuals or control persons in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
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BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth information regarding the beneficial ownership of GGI Common Stock as of February 24, 2022, by:
| each person known by GGI to beneficially own more than 5% of the outstanding shares of GGI Common Stock; |
| each of GGIs current executive officers and directors; and |
| all of GGIs current executive officers and directors as a group. |
Unless otherwise indicated, GGI believes that all persons named in the table have sole voting and investment power with respect to all shares beneficially owned by them. The following table does not reflect record or beneficial ownership of the GGI Warrants because such warrants are not exercisable within 60 days of the date of this proxy statement/prospectus.
GGI Common Stock(1) | ||||||||
Name of Beneficial Owner |
Number | Percentage | ||||||
Executive Officers and Directors: |
||||||||
Alec E. Gores(2)(3) |
19,925,000 | 19.9 | % | |||||
Mark R. Stone |
| * | ||||||
Andrew M Rosenfield |
| * | ||||||
Andrew McBride |
| * | ||||||
Randall Bort |
25,000 | * | ||||||
Elizabeth Marcellino |
25,000 | * | ||||||
Nancy Tellem |
25,000 | * | ||||||
All directors and executive officers as a group (7 individuals) |
20,000,000 | 20.0 | % | |||||
Five Percent or More Holders: |
||||||||
Gores Guggenheim Sponsor LLC(2)(3) |
19,925,000 | 19.9 | % |
* | Less than one percent. |
(1) | This table is based on 80,000,000 shares of GGI Common Stock outstanding as of February 24, 2022. Beneficial ownership is determined in accordance with the rules of the SEC. Except as described in the footnotes below and subject to applicable community property laws and similar laws, GGI believes that each person listed above has sole voting and investment power with respect to such shares. Unless otherwise indicated, the business address of each of the entities, directors and executives in this table is 6260 Lookout Road, Boulder, CO 80301. |
(2) | Represents Founder Shares which are automatically convertible into shares of GGI Common Stock at the Closing, subject to adjustment. Percentage ownership assumes all shares are converted to GGI Common Stock. |
(3) | Represents shares held by Gores Guggenheim Sponsor LLC which is jointly controlled indirectly by Mr. Gores and GGP Sponsor Holdings LLC. GGP Sponsor Holdings LLC is controlled by Mr. Rosenfield. Each of Mr. Gores and GGP Sponsor Holdings LLC may be deemed to beneficially own 19,925,000 shares of GGI Common Stock and ultimately exercises voting and dispositive power of the securities held by Gores Guggenheim Sponsor LLC. Voting and disposition decisions with respect to such securities are jointly made by Mr. Gores and GGP Sponsor Holdings LLC. Each of Mr. Gores, GGP Sponsor Holdings LLC and Mr. Rosenfield disclaim beneficial ownership of these securities except to the extent of any pecuniary interest therein. |
The following table shows the beneficial ownership of Post-Combination Company Shares in the form of American Depositary shares following the consummation of the Business Combination by:
| each person known to ListCo who will beneficially own more than 5% of the Post-Combination Company Shares issued and outstanding immediately after the consummation of the Business Combination; |
| each person who will become an executive officer or a director of ListCo upon consummation of the Business Combination; and |
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| all of the executive officers and directors of the ListCo as a group upon consummation of the Business Combination. |
Unless otherwise indicated, ListCo believes that all persons named in the table have sole voting and investment power with respect to all shares beneficially owned by them. Except as otherwise noted herein, the number and percentage of Post-Combination Company Shares beneficially owned is determined in accordance with Rule 13d-3 of the Exchange Act, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any Post-Combination Company Shares as to which the holder has sole or shared voting power or investment power and also any Post-Combination Company Shares which the holder has the right to acquire within 60 days of the date of this proxy statement/prospectus through the exercise of any option, warrant or any other right.
The expected beneficial ownership of Post-Combination Company Shares following the Business Combination, assuming no redemptions, is based on an aggregate of 2,125,300,000 Post-Combination Company Shares.
The expected beneficial ownership of Post-Combination Company Shares following the Business Combination, assuming the contractual maximum redemption of shares of GGI Common Stock, is based on an aggregate of 2,115,295,062 Post-Combination Company Class A Shares. See Unaudited Pro Forma Condensed Combined Financial Information.
In the no redemptions and the maximum redemptions scenarios, the expected beneficial ownership percentages in the below table assume that (i) the Post-Combination Company Preference Shares held by Snita are converted into Class A ADSs at the Closing, (ii) the Parent Convertible Notes are converted into Class A ADSs at the Closing, (iii) the Post-Combination Company Warrants or Post-Combination Company Class C Shares remain outstanding after the Closing of the Business Combination and may be exercised at a later date, (iv) no Earn Out Shares have been issued, and (v) none of the shares that vested pursuant to the Equity Plan and Employee Stock Purchase Plan have been issued.
Unless otherwise noted, the business address of each beneficial owner is Assar Gabrielssons Väg 9, 405 31 Göteborg, Sweden.
Post-Combination Company Shares | ||||||||||||||||
Assuming No Redemption | Assuming Maximum Redemption of Shares of GGI Common Stock |
|||||||||||||||
Name of Beneficial Owner | Number | Percentage | Number | Percentage | ||||||||||||
Executive Officers and Directors: |
||||||||||||||||
Thomas Ingenlath |
| (1) | | (1) | | (1) | | (1) | ||||||||
Johan Malmqvist |
| | | | ||||||||||||
Dennis Nobelius |
| | | | ||||||||||||
Håkan Samuelsson |
| (1) | | (1) | | (1) | | (1) | ||||||||
Carla De Geyseleer |
| (1) | | (1) | | (1) | | (1) | ||||||||
Karen C. Francis |
20,892 | (2) | * | 20,892 | (2) | * | ||||||||||
Donghui (Daniel) Li |
| | | | ||||||||||||
Dr. Karl-Thomas Neumann |
| | | | ||||||||||||
David Richter |
| | | | ||||||||||||
James Rowan |
| | | | ||||||||||||
Zhe (David) Wei |
| | | | ||||||||||||
All directors and executive officers as a group (eleven individuals) |
| | | | ||||||||||||
Five Percent or More Holders: |
||||||||||||||||
Li Shufu(3) |
2,001,417,390 | 94.2 | % | 2,001,417,390 | 94.6 | % |
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* | Less than one percent. |
(1) | Does not include Class A ADSs which the individuals may acquire or have acquired at their behest pursuant to an arrangement with PSINV AB, a subsidiary of Volvo Cars. |
(2) | Represents Class A ADSs that Ms. Francis has purchased in connection with the March Sponsor Assignment. |
(3) | Includes 299,183,814 Class A ADSs and 1,642,233,576 Post-Combination Company Class B Shares in the form of American depositary shares for which Parent will be the record holder. Also includes 60,000,000 Class A ADSs for which Snita will be the record holder. 42.7% of Parent is owned by PSD Investment Limited and 48.8% of Parent is owned by Volvo Cars as of March 4, 2022. As of March 4, 2022, Li Shufu controls PSD Investment Limited and owns approximately 91.1% of equity interests in Geely, which owns approximately 82.0% of equity interests in Volvo Cars. Consequently, since voting and dispositive decisions with respect to such securities are ultimately made by Li Shufu, he is deemed to have beneficial ownership over 2,001,417,390 Class A ADSs. Li Shufu disclaims beneficial ownership of these securities except to the extent of any pecuniary interest therein. The business address of Li Shufu and Parent is 13/F, Gloucester Tower, The Landmark, 15 Queens Road Central, Central, Hong Kong and the business address of Snita is Stationswerg 2, 4153 RD Beesd, Netherlands. |
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
GGI Relationships and Related Party Transactions
Founder Shares
On February 10, 2021, GGI issued an aggregate of 21,562,500 Founder Shares to the GGI Sponsor for an aggregate purchase price of $25,000 in cash, or approximately $0.001 per share.
The Founder Shares are identical to GGI Class A Common Stock included in the GGI Public Units sold in the GGI IPO except that the Founder Shares are convertible under the circumstances described below. The Founder Shares included an aggregate of up to 2,812,500 shares subject to forfeiture by the GGI Sponsor depending on the extent to which the underwriters over-allotment is exercised. As a result of the underwriters election to partially exercise their over-allotment option, 1,562,500 Founder Shares were forfeited on May 9, 2021, and the remaining 20,000,000 Founder Shares are no longer subject to forfeiture. On March 22, 2021, the GGI Sponsor transferred 25,000 Founder Shares to each of GGIs three independent directors at their original purchase price. Pursuant to the Business Combination Agreement, the Founder Shares will be converted into Class A ADSs upon the Closing.
GGI Private Placement Warrants
On March 25, 2021, GGI completed the private sale of an aggregate of 8,500,000 GGI Private Placement Warrants to the GGI Sponsor at a price of $2.00 per GGI Private Placement Warrant, each exercisable to purchase one share of GGI Class A Common Stock at $11.50 per share, generating gross proceeds to GGI of $17,000,000. Additionally, on April 22, 2021, GGI completed the private sale of an aggregate of 500,000 GGI Private Placement Warrants to the GGI Sponsor at a price of $2.00 per GGI Private Placement Warrant, each exercisable to purchase one share of GGI Class A Common Stock at $11.50 per share, generating gross proceeds to GGI of $1,000,000. The GGI Private Placement Warrants have terms and provisions that are identical to those of the GGI Public Warrants sold as part of the units in the GGI IPO, except that the GGI Private Placement Warrants may be physical (cash) or net share (cashless) settled and are not redeemable so long as they are held by the GGI Sponsor or its permitted transferees, and are entitled to certain registration rights. The sale of the GGI Private Placement Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
If GGI does not complete an initial business combination by March 25, 2023, the proceeds of the sale of the GGI Private Placement Warrants will be used to fund the redemption of the GGI Class A Common Stock, subject to the requirements of applicable law, and the GGI Private Placement Warrants will expire worthless unless GGI amends the Current GGI Certificate and amends certain other agreements into which GGI has entered to extend the life of GGI.
In connection with the Business Combination, in the event the Warrant Amendment Proposal is approved, at the Effective Time and pursuant to the Class C Warrant Amendment, each GGI Private Placement Warrant will convert into a Class C-2 ADS, exercisable for Class A ADSs and subject to substantially the same terms as were applicable to such GGI Warrant under the Existing Warrant Agreement. In the event the Warrant Amendment Proposal is not approved, at the Effective Time and pursuant to the Warrant Amendment Agreement, each GGI Private Placement Warrant will convert into a PP ADW, of which the underlying Post-Combination Company Warrant will be exercisable for Post-Combination Company Class A ADSs and subject to substantially the same terms as were applicable to the GGI Private Placement Warrants under the Existing Warrant Agreement.
Registration Rights
Holders of the Founder Shares, GGI Private Placement Warrants and warrants of GGI that may be issued upon conversion of working capital loans (and any shares of GGI Class A Common Stock issuable upon the exercise of such GGI Private Placement Warrants and warrants), if any, have registration rights pursuant to a registration
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rights agreement. The holders of these securities are entitled to make up to three demands that GGI register under the Securities Act such securities for resale (in the case of the Founder Shares, following the conversion of Founder Shares to GGI Class A Common Stock) underlying the GGI Public Warrants and the Founder Shares. In addition, the holders have certain piggy-back registration rights with respect to registration statements filed by GGI subsequent to its completion of a business combination and rights to require GGI to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that GGI will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. GGI will bear the expenses incurred in connection with the filing of any such registration statements.
Related Party Notes
GGI may pay, but has not paid, the GGI Sponsor or any of GGIs existing officers or directors, or any entity with which they are affiliated, a finders fee, consulting fee or other compensation in connection with identifying, investigating and completing an initial business combination. These individuals will be reimbursed for any out of pocket expenses incurred in connection with activities on GGIs behalf, such as identifying potential target businesses and performing due diligence on suitable business combinations. GGIs audit committee will review on a quarterly basis all payments that were made to the GGI sponsor, officers, directors or GGIs or their affiliates and will determine which fees and expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on payments that may be made to the GGI Sponsor, officers, directors or any of their respective affiliates.
In addition, in order to finance transaction costs in connection with an intended initial business combination, the GGI Sponsor or an affiliate of the GGI Sponsor or certain of GGIs officers and directors may, but are not obligated to, loan GGI funds as may be required. If GGI completes its initial business combination, it would repay such loaned amounts. In the event that GGIs initial business combination does not close, GGI may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $2.00 per warrant at the option of the lender. Such warrants would be identical to the GGI Private Placement Warrants, including as to exercise price, exercisability and exercise period. GGI does not expect to seek loans from parties other than the GGI Sponsor or an affiliate of the GGI Sponsor as GGI does not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Trust Account. Except as described below, no loans from the GGI Sponsor, affiliates of the GGI Sponsor or GGIs officers or directors are anticipated as of the date of this proxy statement/prospectus, with respect to the Business Combination.
On April 20, 2021, the GGI Sponsor made available to GGI a loan of up to $4,000,000 pursuant to a promissory note issued by GGI to the GGI Sponsor. The proceeds from the note will be used for on-going operational expenses and certain other expenses in connection with the Business Combination. The note is unsecured, non-interest bearing and matures on the earlier of: (i) March 11, 2023 or (ii) the date on which GGI consummates the Business Combination. As of December 31, 2021, the amount advanced by the GGI Sponsor to GGI was $2,000,000, which was increased to $2,500,000 as of March 1, 2022.
After GGIs initial business combination, members of GGIs management team who remain with GGI may be paid consulting or management or other fees from the combined company with any and all amounts being fully disclosed to GGI stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to GGI stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider GGIs initial business combination, as applicable, as it will be up to the Post-Combination Company Board to determine executive and director compensation. No such consulting or management fees or similar arrangements have been agreed in connection with the Business Combination or are anticipated by Polestar as of the date of this proxy statement/prospectus.
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Administrative Services Agreement
On March 22, 2021, GGI entered into an agreement to pay monthly recurring expenses to The Gores Group of $20,000 for office space, utilities and secretarial support. Services commenced on the date GGI securities were first listed on the Nasdaq and will terminate upon the earlier of the consummation by GGI of an initial business combination or the liquidation of GGI.
For the period commencing March 25, 2021 through December 31, 2021 GGI has paid the affiliate $185,806.
Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement
On September 27, 2021, concurrently with the execution of the Business Combination Agreement, GGI, Parent, ListCo, the GGI Initial Stockholders entered into the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, pursuant to which each GGI Initial Stockholder has, among other things, agreed to (i) vote their GGI Class F Common Stock in favor of the Business Combination Proposal and any other proposals for the Stockholder Special Meeting included in this proxy statement/prospectus, and against any alternative business combination, (ii) waive all adjustments to the conversion ratio set forth in the Current GGI Certificate with respect to the GGI Class F Common Stock, (iii) be bound by certain transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants, and (iv) not to transfer any Class A ADSs issued pursuant to the Business Combination Agreement in respect of shares of GGI Class F Common Stock during the period beginning on the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein. In addition, the GGI Sponsor has agreed to the forfeiture of up to 1,501,651 shares of GGI Class F Common Stock. On December 17, 2021, the parties to the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement entered into the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement Amendment. The Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement Amendment provides for amendments to the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement to increase the amount of GGI Class F Common Stock that will be canceled by the GGI Sponsor in connection with the Closing from 1,501,651 shares of GGI Class F Common Stock to 1,540,835 shares of GGI Class F Common Stock;
Sponsor Subscription Agreement
On September 27, 2021, GGI and ListCo entered into the Sponsor Subscription Agreement with GGI Sponsor, pursuant to which, the GGI Sponsor agreed to purchase an additional 2.15 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.09 per share on the date of Closing, for an aggregate investment of approximately $82.5 million. Pursuant to the Sponsor Subscription Agreement, the GGI Sponsor has the right to assign its commitment to purchase the Class A ADSs under the Sponsor Subscription Agreement in advance of the Closing. In connection with the December Sponsor Assignment on December 17, 2021, (i) the GGI Sponsor assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $63.0 million to the December PIPE Investors and (ii) GGI, ListCo and the GGI Sponsor amended and restated the Sponsor Subscription Agreement to reflect the December Sponsor Assignment. In connection with the March Sponsor Assignment on March 24, 2022, (i) the GGI Sponsor further assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $11.4 million to certain investors and (ii) GGI, ListCo and the GGI Sponsor amended the Sponsor Subscription Agreement to reflect the March Sponsor Assignment. As a result, pursuant to the Sponsor Subscription Agreement, Sponsor has agreed to purchase approximately 891,000 Class A ADSs for a purchase price of approximately $9.09 per Class A ADS on the date of Closing, for an aggregate investment of approximately $8.1 million. The Sponsor Subscription Agreement is substantially similar to the Initial PIPE Subscription Agreements, except that the GGI Sponsor has the right to syndicate its commitment to acquire the Class A ADSs to be purchased under the Sponsor Subscription Agreement in advance of the Closing.
December PIPE Subscription Agreements
On December 17, 2021, Mark Stone, the Chief Executive Officer of GGI, and certain of his immediate family members entered into December PIPE Subscription Agreements pursuant to which Mr. Stone and his immediate
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family members collectively agreed to purchase, substantially concurrently with Closing, an aggregate of 171,841 Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.57 per Class A ADS, for an amount of approximately $1.64 million.
On December 17, 2021, Andrew McBride, the Chief Financial Officer and Secretary of GGI, entered into a December PIPE Subscription Agreement pursuant to which Mr. McBride agreed to purchase, substantially concurrently with Closing, an aggregate of 20,892 Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.57 per Class A ADS, for an amount of approximately $200,000.
On December 17, 2021, Nancy Tellem, a member of the GGI Board, entered into a December PIPE Subscription Agreement pursuant to which Ms. Tellem agreed to purchase, substantially concurrently with Closing, an aggregate of 15,670 Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.57 per Class A ADS, for an amount of approximately $150,000.
Polestar Relationships and Related Party Transactions
Business Combination Related Agreements
PIPE Subscription Agreements. On September 27, 2021, GGI and ListCo entered into the Initial PIPE Subscription Agreements with the Initial PIPE Investors, pursuant to which the Initial PIPE Investors agreed to purchase, substantially concurrently with the Closing, an aggregate of approximately 7.43 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.09 per share in a private placement, for an aggregate amount of approximately $67.5 million. On December 17, 2021, GGI and ListCo entered into the December PIPE Subscription Agreements with the December PIPE Investors, which include certain affiliates and employees of the GGI Sponsor. Pursuant to the December PIPE Subscription Agreements, the December PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of 14.3 million Post-Combination Company Class A Shares in the form of Class A ADSs for an average price of approximately $9.54 per Class A ADS, for an amount of approximately $136.0 million. On March 24, 2022, GGI and ListCo entered into the March PIPE Subscription Agreements with the March PIPE Investors, which include certain affiliates and employees of the GGI Sponsor. Pursuant to the March PIPE Subscription Agreements, the March PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of 2.8 million Post-Combination Company Class A Shares in the form of Class A ADSs for an average price of approximately $9.57 per Class A ADS, for an amount of approximately $27.2 million. The December PIPE Subscription Agreements and the March PIPE Subscription Agreements are substantially similar to the Initial PIPE Subscription Agreements, except with regard to purchase price.
As a result of the December PIPE Assignment and the March PIPE Assignments, the aggregate investment amount and number of Class A ADSs to be purchased pursuant to the Subscription Agreements remains unchanged.
The issuance of the PIPE Shares pursuant to the PIPE Subscription Agreements is contingent upon, among other customary closing conditions, the substantially concurrent consummation of the Business Combination. Pursuant to the PIPE Subscription Agreements, ListCo agreed to file with the SEC (at ListCos sole cost and expense), within 30 calendar days after the date of Closing, the Resale Registration Statement registering the resale of the PIPE Shares, and to use its commercially reasonable efforts to have the Resale Registration Statement declared effective as soon as practicable after the filing thereof.
Sponsor Subscription Agreement. On September 27, 2021, GGI and ListCo entered into the Sponsor Subscription Agreement with GGI Sponsor, pursuant to which, the GGI Sponsor agreed to purchase an additional 2.15 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $9.09 per share on the date of Closing, for an aggregate investment of approximately $82.5 million. Pursuant to the Sponsor Subscription Agreement, the GGI Sponsor has the right to assign its commitment to purchase the Class A ADSs under the Sponsor Subscription Agreement in advance of the Closing. In connection with the December Sponsor
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Assignment on December 17, 2021, (i) the GGI Sponsor assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $63.0 million to the December PIPE Investors and (ii) GGI, ListCo and the GGI Sponsor amended and restated the Sponsor Subscription Agreement to reflect the December Sponsor Assignment. In connection with the March Sponsor Assignment on March 24, 2022, (i) the GGI Sponsor further assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $11.4 million to certain investors and (ii) GGI, ListCo and the GGI Sponsor amended the Sponsor Subscription Agreement to reflect the March Sponsor Assignment. As a result, pursuant to the Sponsor Subscription Agreement, Sponsor has agreed to purchase approximately 891,000 Class A ADSs for a purchase price of approximately $9.09 per Class A ADS on the date of Closing, for an aggregate investment of approximately $8.1 million. The Sponsor Subscription Agreement is substantially similar to the Initial PIPE Subscription Agreements, except that the GGI Sponsor has the right to syndicate its commitment to acquire the Class A ADSs to be purchased under the Sponsor Subscription Agreement in advance of the Closing.
Volvo Cars PIPE Subscription Agreement. On September 27, 2021, GGI and ListCo entered into the Volvo Cars PIPE Subscription Agreement with Snita, a corporation organized under the laws of Netherlands and a wholly owned indirect subsidiary of Volvo Cars, pursuant to which Snita has agreed to purchase an additional 10 million Post-Combination Company Class A Shares in the form of Class A ADSs for a purchase price of $10.00 per share on the date of Closing. Pursuant to the Volvo Cars Subscription Agreement, Snita has the right to assign its commitment to purchase the Class A ADSs under the Volvo Cars Subscription Agreement in advance of the Closing. In connection with the December Volvo Assignment on December 17, 2021, (i) Snita assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $73.0 million to purchase the Class A ADSs to the December PIPE Investors and (ii) GGI, ListCo and Snita amended and restated the Volvo Car Subscription Agreement to reflect the December Volvo Assignment. In connection with the March Volvo Assignment on March 24, 2022, (i) Snita further assigned a portion of its commitment to purchase Class A ADSs, in an aggregate investment amount equaling approximately $15.8 million to certain investors and (ii) GGI, ListCo and Snita amended the Volvo Cars Subscription Agreement to reflect the March Volvo Assignment. As a result, pursuant to the Volvo Cars Subscription Agreement Snita has agreed to purchase approximately 1.1 million Class A ADSs for a purchase price of $10 per Class A ADS on the date of Closing, for an aggregate investment of approximately $11.2 million. The Volvo Cars Subscription Agreement is substantially similar to the Initial PIPE Subscription Agreements, except with regard to purchase price. Snita may, in accordance with the terms of the Volvo Cars Subscription Agreement, syndicate its commitment to acquire the Class A ADSs to be purchased under the Volvo Cars Subscription Agreement in advance of the Closing.
The foregoing descriptions of the Subscription Agreements do not purport to be complete and are qualified in their entirety by the terms and conditions of the PIPE Subscription Agreements, a form of which is attached hereto as Annex F.
Volvo Cars Preference Subscription Agreement. On September 27, 2021, ListCo entered into the Volvo Cars Preference Subscription Agreement with Snita. Pursuant to the Volvo Cars Preference Subscription Agreement, Snita agreed to purchase, upon and subject to the Closing, for the Post-Combination Company Preference Shares for an aggregate subscription price of $10.00 per share, for an aggregate investment amount equal to the Volvo Cars Preference Amount. The proceeds of such subscription will be used to satisfy certain accounts payable that are or will be due and payable by certain subsidiaries of Parent to Volvo Cars. As of the date hereof, it is currently anticipated that all of the Post-Combination Company Preference Shares will convert into Post-Combination Company Class A Shares at Closing, in accordance with, and subject to, the terms of the Post-Combination Company Preference Shares.
Registration Rights Agreement. On September 27, 2021, ListCo, Parent, the Parent Shareholders, the GGI Sponsor and the independent directors of GGI entered into a Registration Rights Agreement, which was amended by the Registration Rights Agreement Amendment No. 1 to provide for certain administrative changes to reflect
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the Amendment No. 1 to the Business Combination Agreement and the December PIPE Subscription Agreements and further amended by the Registration Rights Agreement Amendment No. 2 to provide for certain administrative changes to reflect the Amendment No. 2 to the Business Combination Agreement and the March PIPE Subscription Agreements, which provides customary demand and piggyback registration rights. Pursuant to the Registration Rights Agreement, ListCo agreed that, as soon as practicable, and in any event within 30 days after the Closing, ListCo will file with the SEC a shelf registration statement. In addition, ListCo will use its reasonable best efforts to have the registration statement declared effective as soon as practicable after the filing thereof, but no later than the 60th day (or the 90th day if the registration statement is reviewed by, and received comments from, the SEC) following the filing deadline, in each case subject to the terms and conditions set forth therein. On December 17, 2021, the parties to the Registration Rights Agreement entered into the Registration Rights Agreement Amendment to provide for certain administrative changes to reflect the Amendment No. 1 to the Business Combination Agreement and the December PIPE Subscription.
The foregoing summary of the Registration Rights Agreement is not complete and is qualified in its entirety by the terms and conditions of the Registration Rights Agreement, a copy of which is attached hereto as Annexes G-1, G-2 and G-3.
Parent Lock-Up Agreement. On September 27, 2021, Parent, ListCo and the Parent Shareholders entered into the Parent Lock-Up Agreement, a form of which is attached as Annex L to this proxy statement/prospectus. Pursuant to the Parent Lock-Up Agreement, each Parent Shareholder has, subject to certain exceptions, among other things, agreed not to transfer any equity security of ListCo issued to them pursuant to the Business Combination Agreement or other transaction documents contemplated by the Business Combination Agreement during the period commencing the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein.
Sponsor and Supporting Sponsor Lock-Up Agreement. On September 27, 2021, concurrently with the execution of the Business Combination Agreement, GGI, Parent, ListCo, the GGI Initial Stockholders entered into the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, pursuant to which each GGI Initial Stockholder has, among other things, agreed to (i) vote their GGI Class F Common Stock in favor of the Business Combination Proposal and any other proposals for the Stockholder Special Meeting included in this proxy statement/prospectus, and against any alternative business combination, (ii) waive all adjustments to the conversion ratio set forth in the Current GGI Certificate with respect to the GGI Class F Common Stock, (iii) be bound by certain transfer restrictions with respect to their GGI Common Stock, GGI Public Warrants and GGI Private Placement Warrants, and (iv) not to transfer any Class A ADSs issued pursuant to the Business Combination Agreement in respect of shares of GGI Class F Common Stock during the period beginning on the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein. In addition, the GGI Sponsor has agreed to the forfeiture of up to 1,501,651 shares of GGI Class F Common Stock, which was increased to 1,533,873 shares of GGI Class F Common Stock in connection with the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement Amendment No. 1, and further increased to 1,540,835 shares of GGI Class F Common Stock in connection with the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement Amendment No. 2.
Warrant Amendment Agreement. In the event that the Warrant Amendment Proposal is not approved, at the Closing, GGI, ListCo and Computershare will enter into the Warrant Amendment Agreement, substantially in the form attached as Annex E to this proxy statement/prospectus. The Warrant Amendment Agreement will amend the Existing Warrant Agreement to provide that at the Effective Time, each GGI Public Warrant and GGI Private Placement Warrant will be assumed by ListCo and be converted into the right to receive one ADW, subject to the terms and conditions set forth therein. In addition, under the Warrant Amendment Agreement, GGI will assign to ListCo all of its rights, interests, and obligations in and under the Existing Warrant Agreement as of the Effective Time, subject to the terms and conditions set forth therein.
Class C Warrant Amendment. In the event that the Warrant Amendment Proposal is approved, at the Closing, GGI, ListCo and Computershare will enter into the Class C Warrant Amendment, substantially in the form attached as Annex D to this proxy statement/prospectus. The Class C Warrant Amendment will amend the
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Existing Warrant Agreement to provide that, at the Effective Time, (i) each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-1 ADS representing one Post-Combination Company Class C-1 Share representing the right to acquire one Post-Combination Company Class A ADS (or one Post-Combination Company Class A Share if at the time of exercise ListCo no longer uses the ADR Facility) at an exercise price of $11.50 per Class C-1 ADS, subject to adjustment, terms and limitations as described in the Post-Combination Articles, (ii) each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one Class C-2 ADS representing one Post-Combination Company Class C-2 Share representing the right to acquire one Class A ADS (or one Post-Combination Company Class A Share if at the time of exercise ListCo no longer uses the ADR Facility) at an exercise price of $11.50 per Class C-2 ADS, subject to adjustment, terms and limitations described in the Post-Combination Articles and (iii) the Existing Warrant Agreement will be terminated and be of no further force or effect promptly following the Effective Time, in the case of each of clauses (i), (ii) and (iii) above, subject to the terms and conditions set forth therein.
Shareholder Acknowledgment. On September 27, 2021, Parent, the Parent Shareholders and ListCo entered into the Shareholders Acknowledgement Agreement which provides, among other things, that Parent and the Parent shareholders undertake that (i) at Closing, the initial Post-Combination Company Board will include nine directors, a majority of whom will be independent directors, (ii) for a period of three years following the Closing, Parent and the Parent shareholders will not vote in favor of the removal any independent directors of the Post-Combination Company unless at least two independent directors vote in favor of such removal, (iii) for a period of three years following the Closing, Parent and the Parent shareholders will not require the Post-Combination Company to convene a general meeting for the purpose of removing an independent director, and (iv) for three years following the Closing, Parent and the Parent shareholders will not to vote in favor of any amendment to the Post-Combination Articles relating to the composition of the Post-Combination Company Board or the appointment or removal of Post-Combination Company directors. The GGI Sponsor will have third party beneficiary rights to enforce the aforementioned undertakings
Agreements with Volvo and Geely
The Framework Assignment and License Agreement among Volvo Car Corporation and Polestar Performance AB, dated October 31, 2018 and the Car Model Assignment and License Agreement, dated as of October 31, 2018, between Volvo Car Corporation and Polestar Performance AB, as supplemented by the Side Letter, dated as of October 31, 2018, between Volvo Car Corporation, Polestar Performance AB and Polestar New Energy Vehicle Co. Ltd., as amended by the Amendment Agreement to the Car Model Assignment and License Agreement, dated as of May 5, 2021, between Volvo Car Corporation and Polestar Performance AB are agreements governing the assignment of and license to technology for use in the Polestar 1 and Polestar 2. These agreements provide that Polestar Performance AB will pay Volvo Car Corporation a fee based on specified percentages of Volvo Car Corporations costs plus an arms length mark-up. The Car Model Assignment and License Agreement remains in force during the validity of the license period of the license granted under the contract. The Framework Assignment and License Agreement remains in effect until six months after all Car Model Assignment and License Agreements entered into between the parties have expired or been terminated. Further, the Car Model Assignment and License Agreement may terminate within 60 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has certain termination and cancellation rights under the agreements. Pursuant to the Side Letter, dated as of October 31, 2018, between Volvo Car Corporation, Polestar Performance AB and Polestar New Energy Vehicle Co. Ltd., the Car Model Assignment and License Agreement described here and the Car Model Assignment and License Agreement in the paragraph below are meant to constitute the same agreement. On December 23, 2020, Volvo Car Corporation and Polestar Performance AB entered into a Settlement Agreement relating to a dispute that arose pursuant to the Car Model Assignment and License Agreement. The Settlement Agreement provided that Volvo Car Corporation would compensate Polestar Performance AB for costs and losses associated with delayed deliveries of certain components and the delivery of defective components resulting in a recall of Polestar vehicles. Volvo Car Corporation agreed to settle these claims under the Car Model and License Agreement.
The Framework Assignment and License Agreement, dated as of October 31, 2018, between Volvo Car Corporation and Polestar New Energy Vehicle Co. Ltd. and the Car Model Assignment and License Agreement, dated as of
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October 31, 2018, between Volvo Car Corporation and Polestar New Energy Vehicle Co. Ltd, as supplemented by the Side Letter, dated as of October 31, 2018, between Volvo Car Corporation, Polestar Performance AB and Polestar New Energy Vehicle Co. Ltd., as supplemented by the Supplement to Car Model Assignment and License Agreement, dated as of September 23, 2019, between Volvo Car Corporation and Polestar New Energy Vehicle Co. Ltd., as amended by the Amendment Agreement to the Car Model Assignment and License Agreement, dated as of June 2020, between Volvo Car Corporation and Polestar New Energy Vehicle Co. Ltd., as amended by the Novation Agreement, dated as of December 8, 2020, by and among Polestar New Energy Vehicle Co., Ltd., Polestar Automotive China Distribution Co., Ltd. and Volvo Car Corporation are agreements governing the assignment of and license to technology related to Polestar vehicles. Fees paid under the agreements are in part based on actual development costs and take into account the full cost incurred plus an arms length mark-up. The fee also takes into account the value of Existing Know-How and Technology (as defined in the Car Model Assignment and License Agreement). The hourly rates charged under the agreements are reviewed and updated annually by the parties. The Framework Assignment and License Agreement remains in effect until six months after all Car Model Assignment and License Agreements entered into between the parties have expired or been terminated. Further, the Framework Assignment and License Agreement may terminate within 60 days of written notice for breach of the Framework Assignment and License Agreement or of a Car Model Assignment and License Agreement or immediately upon the insolvency of either party. The Car Model Assignment and License Agreement remains in force during the validity of the license period of the license granted under the contract. Further, a Car Model Assignment and License Agreement may terminate within 60 days of written notice for breach or immediately upon the insolvency of the other party. Polestar also has additional termination and cancellation rights under the Car Model Assignment and License Agreements. The termination of the Framework Assignment and License Agreement terminates all of the Car Model Assignment and License Agreements, while the termination of one Car Model Assignment and License Agreement does not automatically affect the validity of the Framework Assignment and License Agreement or any other Car Model Assignment and License Agreement. Pursuant to the Side Letter, the termination of one Car Model Assignment and License Agreement gives Volvo Car Corporation the right to immediately terminate the other Car Model Assignment and License Agreement.
PHEV IP Sub-License Agreement, dated as of September 4, 2018, between Volvo Personvagnar AB and Polestar Performance AB is a sub-license agreement relating to certain technology used in Polestar vehicles. The agreement provides that Polestar Performance AB will pay Volvo Cars a per vehicle fee determined in accordance with the agreement and paid on a monthly basis. The agreement may terminate within 90 days of written notice for breach or immediately upon the insolvency of the other party.
PHEV IP Sub-License Agreement, dated as of September 7, 2018, between Volvo Personvagnar AB and Polestar New Energy Vehicle Co. Ltd, as amended by the Novation Agreement, dated as of December 8, 2020, by and among Polestar New Energy Vehicle Co., Ltd., Polestar Automotive China Distribution Co., Ltd. and Volvo Car Corporation is a sublicense agreement relating to certain technology used in Polestar vehicles. The agreement provides that Polestar Performance AB will pay Volvo Cars a per vehicle fee determined in accordance with the agreement and paid on a monthly basis. In addition, if an Event of Default (as defined in the agreement) occurs, the non-defaulting party may terminate the agreement with immediate effect.
Change Management Agreement, dated as of June 12, 2020, between Volvo Car Corporation and Polestar Performance AB is an agreement regulating certain updates and upgrades made to certain technology in the Polestar 1. The agreement provides that Polestar Performance AB will pay Volvo Car Corporation a fee based on 100% of Volvo Car Corporations actual development cost, as calculated on a time and material basis applying an arms length mark-up. The hourly rates charged under the agreement are reviewed and updated annually. The agreement remains in effect during the validity of the license period of the license granted under the agreement unless terminated upon 12 months written notice. In addition, the agreement may terminate within 60 days of written notice for breach or immediately upon the insolvency of the other party. Further, Polestar Performance AB also has certain termination and cancellation rights under the agreement.
Service Agreement, dated as of October 31, 2018, between Volvo Car Corporation and Polestar New Energy Vehicle Co. Ltd., as amended by the Novation Agreement, dated as of December 8, 2020, by and among Polestar New Energy Vehicle Co., Ltd., Polestar Automotive China Distribution Co., Ltd. and Volvo Car Corporation is a service agreement governing certain sourcing services provided by Volvo Car Corporation to Polestar
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Automotive China Distribution Co., Ltd. (to which Polestar New Energy Vehicle Co., Ltd. transferred its rights and obligations under the agreement in accordance with a novation agreement). The agreement provides that Polestar Automotive China Distribution Co., Ltd. will pay Volvo Car Corporation a semi-annual service charge calculated on a time and material basis applying an arms length mark-up to the full cost incurred, and the hourly rates are reviewed and updated annually by mutual agreement of the parties. The agreement terminates on the date of the final status report, though either party may terminate for convenience upon 60 days written notice. Polestar Automotive China Distribution Co., Ltd. also has the right to cancel for convenience the services performed under the agreement upon 30 days written notice. In addition, the agreement may terminate within 14 days of written notice for breach or immediately upon the insolvency of the other party.
Service Agreement, dated as of November 17, 2020, between Volvo Cars Technology (Shanghai) Co., Ltd. and Polestar New Energy Vehicle Co., Ltd. is a service agreement under which Volvo Cars Technology (Shanghai) Co., Ltd. provides Polestar New Energy Vehicle Co., Ltd. with procurement services needed for Polestar vehicle maintenance at the Chengdu plant. The agreement provides that Polestar New Energy Vehicle Co., Ltd. will pay Volvo Cars Technology (Shanghai) Co., Ltd. a monthly service charge based on the actual hours required for the services to be performed charged at hourly rates. The hourly rates used to calculate the service charge are calculated using the full cost incurred plus an arms length markup, and the hourly rates are determined by Volvo Cars Technology (Shanghai) Co., Ltd. on an annual basis. The agreement remains in effect until the services are complete. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar New Energy Vehicle Co., Ltd. also has certain service cancelation rights and has an immediate termination right with respect to certain breaches by Volvo Cars Technology (Shanghai) Co., Ltd. The Service Agreement, dated as of November 13, 2020, between Volvo Car Corporation and Polestar New Energy Vehicle Co., Ltd. also governs procurement services needed for Polestar vehicles at the Chengdu plant and its terms largely mirror the previously described agreement, but with Volvo Car Corporation acting as the service provider under the contract.
Service Agreement, dated as of October 31, 2018, between Volvo Car Corporation and Polestar New Energy Vehicle Co. Ltd., as amended by the Novation Agreement, dated as of December 8, 2020, by and among Polestar New Energy Vehicle Co., Ltd., Polestar Automotive China Distribution Co., Ltd. and Volvo Car Corporation is a service agreement under which Volvo Cars provides Polestar New Energy Vehicle Co. Ltd. and Polestar Automotive China Distribution Co., Ltd. with manufacturing engineering services connected with Polestar 1 and Polestar 2, respectively. The agreement provides that the applicable Polestar entity will pay Volvo Cars a semi-annual service charge based on the estimated hours required for the services to be performed charged at hourly rates. The hourly rates used to calculate the service charges are calculated using the full cost incurred plus an arms length markup, and the hourly rates are determined by the parties on an annual basis. This agreement remains in effect until the date of the final status report as described in the agreement. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate within 14 days of written notice for breach or immediately upon the insolvency of the other party. The applicable Polestar entity also has the right to cancel the services performed for convenience upon 30 days written notice. The Service Agreement, dated as of December 21, 2018, between Daqing Volvo Car Manufacturing Co. Ltd. and Polestar New Energy Vehicle Co. Ltd., as amended by the Novation Agreement, dated as of December 8, 2020, by and among Polestar New Energy Vehicle Co., Ltd., Polestar Automotive China Distribution Co., Ltd. and Daqing Volvo Car Manufacturing Co. Ltd. also governs the provision of manufacturing engineering services in relation to the production of Polestar vehicles and its terms largely mirror the previously described agreement, but with Daqing Volvo Car Manufacturing Co. Ltd. acting as the service provider. On December 23, 2020, Volvo Car Corporation and Polestar New Energy Vehicle Co. Ltd. entered into a Settlement Agreement relating to a dispute that arose pursuant to the Service Agreement. The Settlement Agreement provided that Volvo Car Corporation would compensate Polestar New Energy Vehicle Co. Ltd. for costs and losses associated with delayed deliveries of certain components and the delivery of defective components resulting in a recall of Polestar vehicles.
Service Agreement, dated as of October 31, 2018, between Volvo Car Corporation and Polestar New Energy Vehicle Co. Ltd., as amended by the Novation Agreement, dated as of December 8, 2020, by and among Polestar New Energy Vehicle Co., Ltd., Polestar Automotive China Distribution Co., Ltd. and Volvo Car Corporation is a
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service agreement under which Volvo Car Corporation provides Polestar New Energy Vehicle Co. Ltd. and Polestar Automotive China Distribution Co., Ltd. with logistics engineering services connected with the Polestar 1 and Polestar 2, respectively. The agreement provides that the applicable Polestar entity will pay Volvo Car Corporation a semi-annual service charge based on the estimated hours required for the services to be performed charged at hourly rates. The hourly rates used to calculate the service charges are calculated using the full cost incurred plus an arms length markup, and the hourly rates are determined by the parties on an annual basis. The agreement remains in effect until the date of the final status report as described in the agreement. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate within 14 days of written notice for breach or immediately upon the insolvency of the other party. The applicable Polestar entity also has the right to cancel the services performed for convenience upon 30 days written notice. The Service Agreement, dated as of December 21, 2018, between Volvo Car (Asia Pacific) Investment Holding Co. Ltd. and Polestar New Energy Vehicle Co. Ltd., as amended by the Novation Agreement, dated as of December 8, 2020, by and among Polestar New Energy Vehicle Co., Ltd., Polestar Automotive China Distribution Co., Ltd and Volvo Car (Asia Pacific) Investment Holding Co. Ltd. also governs the provision of logistics engineering services in relation to the production of Polestar vehicles and its terms largely mirror the previously described agreement, but with Volvo Car (Asia Pacific) Investment Holding Co. Ltd. acting as the service provider.
Service Agreement, dated as of August 19, 2018, between Zhongjia Automobile Manufacturing (Chengdu) Co. Ltd. and Polestar New Energy Vehicle Co. Ltd., as amended by the Amendment Agreement to the Service Agreement, dated as of August 26, 2020, between Zhongjia Automobile Manufacturing (Chengdu) Co., Ltd. and Polestar New Energy Vehicle Co., Ltd., AB is a service agreement governing certain services that Zhongjia Automobile Manufacturing (Chengdu) Co. Ltd. provides to Polestar New Energy Vehicle Co. Ltd. relating to the electrocoating of the Polestar 1. The agreement provides that Polestar New Energy Vehicle Co. Ltd. will pay Zhongjia Automobile Manufacturing (Chengdu) Co. Ltd. a monthly service fee based on an actual total cost basis with a mark-up to an arms length price using the cost plus method. This service charge is reviewed and updated annually by the parties and is based on a benchmarking study. The agreement remains in effect until terminated. The agreement may be terminated for convenience by either party upon six months written notice. Further, the agreement may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar New Energy Vehicle Co. Ltd. also has additional service cancellation and termination rights under the agreement.
Service Agreement, dated as of December 17, 2019 between Volvo Car Belgium NV, Ltd. and Polestar Performance AB, as amended by the Amendment to the Service Agreement, dated as of March 4, 2020, between Volvo Car Belgium NV, Ltd. and Polestar Performance AB governs the performance of various services relating to Polestar vehicles that are provided by Volvo Car Belgium NV, Ltd. to Polestar Performance AB at ESDIC in Gent, Belgium. The agreement provides that Polestar Performance AB will pay Volvo Car Belgium NV, Ltd. a monthly service charge based on hourly rates using the cost plus method. The hourly rates are determined annually by Volvo Car Belgium NV, Ltd., and Polestar Performance AB reimburses Volvo Car Belgium NV, Ltd. for all of its costs incurred to provide the services. The agreement remains in effect until the services are completed or the agreement is otherwise terminated. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has additional service cancellation and termination rights under the agreement.
Component Supply Agreement, dated as of 2018, between Polestar New Energy Vehicle Co., Ltd. and Zhejiang Haoqing Automobile Manufacturing Co., Ltd. Chengdu Branch is a supply agreement governing Zhejiang Haoqing Automobile Manufacturing Co., Ltd. Chengdu Branchs purchase of components from Polestar New Energy Vehicle Co., Ltd. The agreement provides that Zhejiang Haoqing Automobile Manufacturing Co., Ltd. Chengdu Branch must compensate Polestar New Energy Vehicle Co., Ltd. in the aggregate for all components that Polestar New Energy Vehicle Co., Ltd. supplies during a calendar year. Such compensation is calculated using an arms length pricing principle. The agreement automatically extends on January 1 of each year unless terminated. The agreement, in whole or in part, may be terminated immediately upon the insolvency of the other party, and either party may terminate for convenience upon 12 months written notice.
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General Distributor Agreement, effective as of January 1, 2020, between Zhejiang Haoqing Automobile Manufacturing Co., Ltd. Chengdu Branch and Polestar Automotive China Distribution Co., Ltd. is an agreement governing the manufacturing and distribution of Polestar products. The agreement provides that Zhejiang Haoqing Automobile Manufacturing Co., Ltd. Chengdu Branch will supply certain goods to Polestar Automotive China Distribution Co., Ltd., which Polestar Automotive China Distribution Co., Ltd. will then distribute either itself or through an authorized dealer. Polestar Automotive China Distribution Co., Ltd. will compensate Zhejiang Haoqing Automobile Manufacturing Co., Ltd. Chengdu Branch for the full cost of the contract products. The agreement may be terminated only in two years intervals by giving two months notice with effect as per December 31 of any subsequent second year. Unless a termination notice is given, the agreement continues in effect for an additional two years. Further each party may immediately terminate the agreement for good cause as described in and pursuant to the agreement.
License, License Assignment and Service Agreement, dated as of February 15, 2021, between Volvo Car Corporation and Polestar Performance AB is a license assignment and service agreement under which Volvo Car Corporation provides development services to Polestar Performance AB. The agreement relates to certain technology to be developed, assigned or licensed by Volvo Car Corporation to Polestar Performance AB for use in future model year programs of the Polestar 2. The monthly fee paid under the agreement is based on estimated development costs using the cost plus method and the actual hours required for the services billed at an hourly rate. The hourly rates are determined by Volvo Car Corporation on an annual basis. The agreement remains in effect during the performance of the services and the validity of the license period of the license granted under the agreement. Either party may terminate within 60 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has additional service cancellation and termination rights under the agreement. In the event of certain breaches by Volvo Car Corporation, Polestar Performance AB is also entitled to terminate the agreement with 120 days written notice. While Polestar Performance AB may cancel the delivery of Polestar Technology or PS Unique Volvo Technology (each as defined in the agreement) for convenience upon 30 days written notice, both parties are limited in their ability to cancel the delivery of Volvo Technology (as defined in the agreement).
License and License Assignment Agreement, dated as of February 15, 2021, between Volvo Car Corporation and Polestar Automotive China Distribution Co. Ltd. is a license agreement under which Volvo Car Corporation will provide certain development services for Polestar Automotive China Distribution Co. Ltd. relating to the development of technology to be used in future model year programs of the Polestar 2. The terms of the agreement largely mirror those of the License, License Assignment and Service Agreement described in the above paragraph.
Car Model Manufacturing Agreement, dated as of November 28, 2018, between First Automobile Branch of Zhejiang Haoqing Automobile Manufacturing Co., Ltd. and Polestar New Energy Vehicle Co. Ltd., as amended by the Novation Agreement, dated as of July 7, 2021, between Polestar New Energy Vehicle Co., Ltd., Polestar Automotive China Distribution (Taizhou) Co., Ltd. and First Automobile Branch of Zhejiang Haoqing Automobile Manufacturing Co., Ltd. is an agreement governing the manufacturing of the Polestar 2 at the manufacturing plant in Luqiao. Under the agreement, Asia Euro Automobile Manufacturing (Taizhou) Co., Ltd. manufactures and assembles the vehicle up to close-to-final status, and First Automobile Branch of Zhejiang Haoqing Automobile Manufacturing Co., Ltd. then completes and sells the completed product to Polestar Automotive China Distribution (Taizhou) Co., Ltd. (who replaced Polestar New Energy Vehicle Co., Ltd. pursuant to the novation agreement). The products are priced based on their full cost of production, including Polestar Automotive China Distribution (Taizhou) Co., Ltd.s pro rata portion of the common cost of the plant, plus a mark-up that is reviewed and adjusted according to certain benchmarks. The prices for vehicles produced in the plant are determined annually based on reserved volumes and the estimated cost for producing the vehicles, as determined by First Automobile Branch of Zhejiang Haoqing Automobile Manufacturing Co., Ltd., and are subject to review and amendment on a monthly basis. The agreement terminates seven years after becoming effective, and either party may terminate within 60 days of written notice for breach or immediately upon the insolvency of the other party. If Polestar Automotive China Distribution (Taizhou) Co., Ltd.
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discontinues having vehicles produced at the Luqiao plant under the agreement prior to its termination, Polestar Automotive China Distribution (Taizhou) Co., Ltd. must pay certain exit costs.
Car Model Manufacturing Agreement, dated as of November 26, 2018, between Asia Euro Automobile Manufacturing (Taizhou) Co., Ltd. and Polestar Performance AB, as supplemented by the Supplement Car Manufacturing Agreement, dated as of May 2021, between Polestar Performance AB and Asia Euro Manufacturing (Taizhou) Co. Ltd., as amended by the Amendment Car Model Manufacturing Agreement, dated as of July 7, 2021, between Polestar Performance AB and Asia Euro Automobile Manufacturing (Taizhou) Co. Ltd. is an agreement governing the manufacturing of completed Polestar 2 vehicles at the Luqiao plant by Asia Euro Automobile Manufacturing (Taizhou) Co. Ltd. and sold to Polestar Performance AB. The terms of the agreement largely mirror those of the Car Model Manufacturing Agreement described in the paragraph above.
License, License Assignment and Service Agreement, dated as of June 30, 2019, between Volvo Car Corporation and Polestar Performance AB, as supplemented by the Side Letter, dated as of June 30, 2019, between Volvo Car Corporation, Volvo Cars (China) Investment Co., Ltd., Polestar Performance AB and Polestar New Energy Vehicle Co. Ltd., as amended by the Amendment Agreement to the License, License Agreement and Service Agreement, dated as of December 19, 2019, between Volvo Car Corporation and Polestar Performance AB is a license assignment and service agreement relating to certain development services and technology. The agreement remains in effect during the performance of the services and the validity of the license period of the license granted under the agreement. Either party may terminate within 60 days of written notice for breach or immediately upon the insolvency of the other party. In the event of certain breaches by Volvo Car Corporation, Polestar Performance AB is also entitled to terminate the agreement with 120 days written notice. While Polestar Performance AB may cancel the delivery of Polestar Technology or PS Unique Volvo Technology (each as defined in the agreement) for convenience upon 30 days written notice, both parties are limited in their ability to cancel the delivery of Volvo Technology (as defined in the agreement).
License Agreement, dated as of June 30, 2019, between Volvo Car Corporation and Polestar New Energy Vehicle Co. Ltd., as supplemented by the Side Letter, dated as of June 30, 2019, between Polestar Performance AB, Polestar New Energy Vehicle Co., Ltd., Volvo Car Corporation and Volvo Cars (China) Investment Co. Ltd., as amended by the Novation Agreement, dated as of December 8, 2020, by and among Polestar New Energy Vehicle Co., Ltd., Polestar Automotive China Distribution Co., Ltd. and Volvo Car Corporation is a license agreement relating to certain technology associated with the Polestar 3 in China. The agreement remains in effect during the validity of the license period of the license granted under the agreement. Either party may terminate within 60 days of written notice for breach or immediately upon the insolvency of the other party. In the event of certain breaches by Volvo Car Corporation, Polestar is also entitled to terminate the agreement with 120 days written notice. While Polestar may cancel the delivery of PS Unique Volvo Technology (as defined in the agreement) for convenience upon 30 days written notice, both parties are limited in their ability to cancel the delivery of Volvo Technology (as defined in the agreement).
Service Agreement, dated as of June 30, 2019, between Volvo Car Corporation and Polestar New Energy Vehicle Co. Ltd., as supplemented by the Side Letter, dated as of June 30, 2019, between Volvo Car Corporation, Volvo Cars (China) Investment Co., Ltd., Polestar Performance AB and Polestar New Energy Vehicle Co. Ltd., as amended by the Novation Agreement, dated as of December 8, 2020, by and among Polestar New Energy Vehicle Co., Ltd., Polestar Automotive China Distribution Co., Ltd. and Volvo Car Corporation is a service agreement in relation to manufacturing engineering, logistic engineering and direct material procurement services for the Polestar 3 provided by Volvo Car Corporation to the applicable Polestar entity in all countries except China. The agreement remains in effect during the performance of the services and the validity of the license period of the license granted to the applicable Polestar entity. Either party may terminate within 60 days of written notice for breach or immediately upon the insolvency of the other party. The applicable Polestar entity also has the right to cancel the services performed by Volvo Car Corporation for convenience upon 90 days written notice.
Service Agreement, dated as of June 30, 2019, between Volvo Cars (China) Investment Co., Ltd. and Polestar New Energy Vehicle Co. Ltd., as supplemented by the Side Letter, dated as of June 30, 2019, between Volvo Car
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Corporation, Volvo Cars (China) Investment Co., Ltd., Polestar Performance AB and Polestar New Energy Vehicle Co. Ltd., as amended by the Amendment Agreement to the Service Agreement, dated as of November 28, 2019, between Volvo Cars (China) Investment Co. Ltd. and Polestar New Energy Vehicle Co. Ltd., as amended by the Novation Agreement, dated as of December 8, 2020, by and among Polestar New Energy Vehicle Co., Ltd., Polestar Automotive China Distribution Co., Ltd. and Volvo Cars (China) Investment Co., Ltd. is a service agreement in relation to manufacturing engineering, logistic engineering and procurement services for the Polestar 3 provided to the applicable Polestar entity in China. The agreement provides that the applicable Polestar entity will pay three affiliates of Volvo Cars (China) Investment Co., Ltd. ((i) Volvo Car (Asia Pacific) Investment Holding Co., Ltd., (ii) Volvo Cars Technology (Shanghai) Co., Ltd. and (iii) Zhongjia Automobile (Chengdu) Co., Ltd.) a fixed fee for their services provided under the agreement. The agreement remains in effect during the performance of the services and the validity of the license period of the license granted to the applicable Polestar entity. Either party may terminate within 60 days of written notice for breach or immediately upon the insolvency of the other party. The applicable Polestar entity also has the right to cancel the services performed by Volvo Cars (China) Investment Co., Ltd. for convenience upon 90 days written notice.
The Side Letter, dated as of June 30, 2019, between Volvo Car Corporation, Volvo Cars (China) Investment Co., Ltd., Polestar Performance AB and Polestar New Energy Vehicle Co. Ltd., provides that the intention of these parties is for each of the main agreements described in the four previous paragraphs to actually constitute one agreement. In light of the foregoing, the side letter provides that it is the parties intention to share the total amount payable to the Volvo entities under the four agreements fairly between the Polestar entities as described in the side letter.
Service Agreement, dated as of August 31, 2020, between Volvo Cars Technology (Shanghai) Co., Ltd. and Polestar Automotive China Distribution Co. Ltd. is a service agreement governing certain indirect procurement services provided by Volvo Cars Technology (Shanghai) Co., Ltd. to Polestar Automotive China Distribution Co. Ltd. relating to the production of the Polestar 3 at the Chengdu plant. The agreement provides that Polestar Automotive China Distribution Co. Ltd. will pay Volvo Cars Technology (Shanghai) Co., Ltd. a monthly service charge based on the actual hours required for the services to be performed. The hourly rates are calculated using the full cost incurred plus an arms length mark-up and are determined annually by Volvo Cars Technology (Shanghai) Co., Ltd. The agreement remains in effect until the services are complete. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Automotive China Distribution Co. Ltd. also has additional service cancellation and termination rights under the agreement.
Service Agreement, dated as of September 1, 2020, between Volvo Car Corporation and Polestar Automotive China Distribution Co. Ltd. is a service agreement governing certain indirect procurement services provided by Volvo Car Corporation to Polestar Automotive China Distribution Co. Ltd. relating to the production of the Polestar 3 at Volvo Car Corporations Chengdu plant. The agreement provides that Polestar Automotive China Distribution Co. Ltd. will pay Volvo Car Corporation a monthly service charge based on the actual hours required for the services to be performed. The hourly rates are calculated using the full cost incurred plus an arms length mark-up and are determined annually by Volvo Car Corporation. The agreement remains in effect until the services are complete. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Automotive China Distribution Co. Ltd. also has additional service cancellation and termination rights under the agreement.
License Agreement, dated as of December 23, 2020, between Polestar Performance AB and Volvo Car Corporation is a license agreement relating to certain intellectual property developed by Polestar Performance AB. The agreement remains in effect during the validity of the license period of the license granted under the agreement, which is until model year 2024. Either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party.
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Performance Software Agreement, dated as of January 1, 2020, between Polestar Performance AB and Volvo Car Corporation AB is an agreement relating to the design, development and supply of performance enhancing software by Polestar Performance AB for Volvo Car Corporation AB to distribute in their infrastructure for software download. The agreement remains in effect until either party terminates the agreement. Either party may terminate the agreement for convenience by giving notice to the other party at least six months before the start the start of the next model year, which is week seventeen, day one of each year. If the agreement is terminated for convenience, the agreement will remain in force until the start of the next model year. Either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party.
Financial Undertaking AgreementInvestments for Vehicle Assembly, dated as of February 27, 2020, between Zhongjia Automobile Manufacturing (Chengdu) Co., Ltd. and Polestar Automotive China Distribution Co., Ltd. is an agreement that establishes Polestar Automotive China Distribution Co., Ltd.s binding commitment to pay for investments made by Zhongjia Automobile Manufacturing (Chengdu) Co., Ltd. relating to the production of the Polestar 3 at Volvo Car Corporations Chengdu plant. The agreement also sets forth the parties intention to enter into another agreement governing the actual production of Polestar vehicles at the Chengdu plant. The agreement remains in force until the parties sign the next production agreement for the Polestar vehicles. Either party may terminate within 60 days of written notice for breach or immediately upon the insolvency of the other party. Prior to a certain point specified in the agreement, Polestar Automotive China Distribution Co., Ltd. may terminate the agreement for convenience upon 60 days written notice, and Zhongjia Automobile Manufacturing (Chengdu) Co., Ltd. may terminate in the event of an unremedied material breach.
Service Agreement, dated as of February 2021, between Zhongjia Automobile Manufacturing (Chengdu) Co., Ltd. and Polestar Automotive China Distribution Co. Ltd. is a service agreement under which Polestar Automotive China Distribution Co. Ltd. purchases Zhongjia Automobile Manufacturing (Chengdu) Co., Ltd.s IT services to support the production of the Polestar 3 in the Chengdu plant. The agreement provides that Polestar Automotive China Distribution Co. Ltd. will pay Zhongjia Automobile Manufacturing (Chengdu) Co., Ltd. a monthly service charge based on the actual hours required to perform the services. The hourly rates take into account the full cost incurred plus an arms length mark-up, and such hourly rates are determined by Zhongjia Automobile Manufacturing (Chengdu) Co., Ltd. annually. The agreement remains in effect until the services are complete. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Automotive China Distribution Co. Ltd. also has additional service cancellation and termination rights under the agreement. The Service Agreement, dated as of April 28, 2021, between Volvo Car Corporation and Polestar Automotive China Distribution Co. Ltd. largely mirrors the previously described agreement but with Volvo Car Corporation acting as the service provider.
Financial Undertaking AgreementInvestments for Vehicle Assembly, dated as of March 17, 2021, between Volvo Car Corporation and Polestar Performance AB is an agreement relating to the planned production of Polestar 3 vehicles in Volvo Car Corporations South Carolina, USA plant. The agreement imposes a binding commitment on Polestar Performance AB to fund certain investments, relating to common equipment, for example, necessary to manufacture and assemble Polestar 3 vehicles at the South Carolina plant and confirms both parties intention to enter into a more robust agreement governing production no later than one year before such productions planned start. The agreement provides that the general principle to be applied to the pricing of such vehicle production will be one of actual cost plus a mark-up. The agreement terminates when the more detailed production agreement is signed. In addition, either party may terminate within 60 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has the right to terminate the agreement for convenience upon 60 days written notice. The Financial Undertaking AgreementInvestments for Vehicle Assembly, dated as of March 23, 2021, between Volvo Car Corporation and Polestar Performance AB largely mirrors the previously described agreement but instead imposes investment commitments on Polestar Performance AB relating to Polestar 3 unique equipment (rather than common equipment that is used in the production of both Volvos and Polestars vehicles).
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Service Agreement, dated as of March 24, 2020, between Volvo Car Corporation and Polestar Performance AB is a service agreement under which Volvo Car Corporation will provide design services for a new Polestar vehicle. The agreement provides that Polestar Performance AB will pay Volvo Car Corporation a monthly service charge based on the actual hours required to perform the services. The hourly rates take into account the full cost incurred plus an arms length mark-up, and such hourly rates are determined by Volvo Car Corporation annually. The agreement remains in effect until the services are complete. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has additional service cancellation and termination rights under the agreement.
Service Agreement, dated as of November 27, 2020, between Volvo Car Corporation and Polestar Performance AB is a service agreement under which Volvo Car Corporation will provide complete design services (i.e., from the concept phase until the start of production) for a new Polestar vehicle. The agreement provides that Polestar Performance AB will pay Volvo Car Corporation a monthly service charge based on the actual hours required to perform the services. The hourly rates take into account the full cost incurred plus an arms length mark-up, and such hourly rates are determined by Volvo Car Corporation annually. The agreement remains in effect until the services are complete. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has additional service cancellation and termination rights under the agreement.
Service Agreement, dated as of January 18, 2021, between Ningbo Geely Automobile Research & Development Co., Ltd. and Polestar Performance AB is a service agreement under which Ningbo Geely Automobile Research & Development Co., Ltd. provides research and development services to Polestar Performance AB for the concept phase of the development of a new Polestar vehicle. The agreement provides that Polestar Performance AB will pay Ningbo Geely Automobile Research & Development Co., Ltd. a fixed price service charge, for which Polestar Performance AB has paid two out of the three total installments. This fixed price is based on an estimate of the hours and resources required to perform the services. The agreement remains in effect until the services are complete. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has additional service cancellation and termination rights under the agreement.
Service Agreement, dated as of January 28, 2020, between Volvo Car Corporation and Polestar Performance AB is a service agreement under which Volvo Car Corporation provides Polestar Performance AB with customer care, consumer and care services. The agreement provides that Polestar Performance AB will pay Volvo Car Corporation a monthly service charge taking into account operations costs, implementation costs, development costs and central administrative costs. The hourly rates used to calculate the service charge are calculated using the full cost incurred plus an arms length markup, and the hourly rates are determined by Volvo Car Corporation on an annual basis. The agreement remains in effect until the services are complete. Either party may terminate the agreement for convenience upon 12 months written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has an immediate termination right with respect to certain breaches by Volvo Car Corporation.
Service Agreement, dated as of September 4, 2020, between Volvo Car Corporation and Polestar Performance AB is a service agreement under which Volvo Car Corporation provides Polestar Performance AB with technical support to dealers or workshops who are repairing, maintaining and/or servicing Polestar vehicles. The agreement provides that Polestar Performance AB will pay Volvo Car Corporation a monthly service charge taking into account a base price (the full cost of the forecasted number of hours multiplied by the hourly rate) and an excess case price (the cost per case over and above the capacity of the number of forecasted hours covered by the base price charge). The hourly rates used to calculate the service charge are calculated using the full cost incurred plus an arms length markup, and the hourly rates are determined by Volvo Car Corporation on an annual basis. The agreement remains in effect until the services are complete. Either party may terminate the
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agreement for convenience upon six months written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has an immediate termination right with respect to certain breaches by Volvo Cars.
Service Agreement, dated as of May 11, 2020, between Volvo Car Corporation and Polestar Performance AB is a service agreement governing Polestar Performance ABs usage of Volvo Car Performance Academy (Volvos learning management system) to manage Polestars technical training in the markets. The agreement provides that Polestar Performance AB will pay Volvo Car Corporation a monthly service charge taking into account the following cost categories: technical support, system hosting, administrative support, system enhancement, global commercial team support and share of historical development costs. The costs charged to Polestar Performance AB are in part based on Polestar Performance ABs market representation share as determined in accordance with the agreement. In addition, hourly rates that are used to calculate the service charges are determined annually by Volvo Car Corporation and take into account the full cost incurred plus an arms length mark-up. The agreement remains in force until December 31, 2022. Either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Volvo Car Corporation may terminate the agreement for convenience upon 90 days written notice. Polestar Performance AB also has an immediate termination right with respect to certain breaches by Volvo Car Corporation and may cancel the services performed for convenience upon 90 days written notice. Further, if the Volvo Cars Performance Academy agreement between Volvo Car Corporation and its supplier of the Volvo Cars Performance Academy terminates, the service agreement is automatically terminated.
Service Agreement, dated as of September 4, 2020, between Polestar Performance AB and Volvo Bil i Göteborg AB is a service agreement under which Volvo Bil i Göteborg AB personnel provides support in operating Polestar Performance ABs Damage Repair European Centre and repairing Polestar 1 vehicles. The agreement provides that Polestar Performance AB will pay Volvo Car Corporation a service charge taking into account an hourly work rate (which varies depending on the type of activity performed) and the amount of time worked. The hourly rates and material cost used to calculate the service charges are determined by Volvo Bil i Göteborg AB on an annual basis. The agreement remains in effect until the services are complete. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has additional service cancellation and termination rights under the agreement.
License Agreement, dated as of December 6, 2020, between Volvo Car Corporation and Polestar Performance AB, as amended by the Amendment Agreement, dated as of June 30, 2021, between Volvo Car Corporation and Polestar Performance AB is a license agreement under which Volvo Car Corporation will develop and license to Polestar Performance AB a digital platform to be used for making vehicle repair and maintenance information available for independent operators (the GOLD Platform). The license fee is determined by Volvo Car Corporation on an annual basis and is based on the activities performed when Volvo Car Corporation develops project results. The license fee should equal 50% of the actual development cost, which take into account the full cost incurred plus an arms length mark-up. The agreement remains in force during the validity of the license period granted to Polestar Performance AB thereunder. Neither party may unilaterally terminate the agreement for convenience, however, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has immediate termination rights with respect to certain not insignificant breaches by Volvo Car Corporation.
Service Agreement, dated as of December 6, 2020, between Volvo Car Corporation and Polestar Performance AB is a service agreement under which Volvo Car Corporation provides Polestar Performance AB with various operation and maintenance services related to the GOLD Platform. The agreement provides that Polestar Performance AB will pay Volvo Car Corporation a monthly service charge based on Polestar Performance ABs share of actual hours required for the services to be performed by Volvo Car Corporation. The hourly rates used to calculate the service charge are calculated using the full cost incurred plus an arms length markup, and the hourly rates are determined by Volvo Car Corporation on an annual basis. The agreement remains in effect until
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the services are complete. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has certain service cancelation rights and has an immediate termination right with respect to certain breaches by Volvo Car Corporation.
Service Agreement, dated as of March 24, 2020, between Volvo Car Corporation and Polestar Performance AB is a service agreement under which Volvo Car Corporation provides Polestar Performance AB with outbound logistics services via the use of Volvo Car Corporations existing vehicle distribution network. The agreement is one of six agreements that the parties have agreed to enter into relating to such outbound logistics services. The agreement provides that Polestar Performance AB will pay Volvo Car Corporation a monthly service charge taking into account the estimated hours and other costs for the services to be performed. The service charges are updated each new calendar year based on changes in required resources, costs and forecasted volumes. The hourly rates used to calculate the service charges are calculated using the full cost incurred plus an arms length markup, and the hourly rates are determined by Volvo Car Corporation on an annual basis. The agreement remains in effect until the services are complete. Either party may terminate the agreement for convenience upon 12 months written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has an immediate termination right with respect to certain breaches by Volvo Car Corporation.
Service Agreement, dated as of January 19, 2020, between Volvo Car UK Limited and Polestar Performance AB is a service agreement under which Volvo Car UK Limited provides Polestar Performance AB with certain services pertaining to customs clearance and duty declarations relating to the import of Polestar vehicles into the United Kingdom. The agreement provides that Polestar Performance AB will pay Volvo Car UK Limited a monthly service charge based on the actual cost for external resources and actual hours worked by Volvo Car UK Limiteds staff required for the services to be carried out. The hourly rates used to calculate the service charge are calculated using the full cost incurred plus an arms length markup, and the hourly rates are determined by Volvo Car UK Limited on an annual basis. Polestar Performance AB is also responsible for the cost for the services provided by the customs broker. The agreement remains in effect until terminated by at least one party in accordance with the agreement. Either party may terminate the agreement for convenience upon 90 days written notice. Further, either party may terminate within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Performance AB also has an immediate termination right with respect to certain breaches by Volvo Car UK Limited.
European CO2 Emission Credit Payment Agreement, dated as of November 27, 2020, between Volvo Car Corporation and Polestar Performance AB is an agreement under which Volvo Car Corporation agreed to pay Polestar Performance AB an amount equal to approximately 33% of the carbon credits attributable to Volvo Cars under an Open Pool Commercial Agreement, dated as of October 29, 2020, between Volvo Car Corporation and Ford Werke GmbH. The payment reflects the proportion of carbon credits attributable to Volvo Cars under the Open Pool Commercial Agreement that are, in turn, attributable to Polestar vehicles and is based on the number of Polestar vehicles registered during the period, the average specific emission and the specific emissions target for those vehicles.
Parts Supply and License Agreement Polestar Aftermarket Parts and Accessories (CHINA), dated as of November 22, 2021, between Polestar Automotive China Distribution Co., Ltd and Volvo Car Distribution (Shanghai) Co., Ltd is a supply and license agreement under which Volvo Car Distribution (Shanghai) Co., Ltd distributes the aftermarket parts and accessories of Polestar Automotive China Distribution Co., Ltd in China. Under this agreement, Polestar Automotive China Distribution Co., Ltd also grants Volvo Car Distribution (Shanghai) Co., Ltd certain licensing rights with respect to Polestar Automotive China Distribution Co., Ltds intellectual property in China. The agreement provides that Volvo Car Distribution (Shanghai) Co., Ltd will pay a monthly license fee to Polestar Automotive China Distribution Co., Ltd, and this license fee will be set at a rate that enables Volvo Car Distribution (Shanghai) Co., Ltd to receive an arms length compensation for its services. If the Parts Profit is less than the Distribution Profit (each as defined in the agreement), Polestar Automotive China Distribution Co., Ltd must pay Volvo Car Distribution (Shanghai) Co., Ltd for the shortfall. The license
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fee is determined in accordance with the provisions of the agreement and is subject to adjustment. The agreement remains in effect until terminated by either party. Either party may terminate the agreement for convenience with 18 months written notice to the other. Further, the agreement may terminate within 30 days of written notice for a material breach or immediately upon the insolvency of the other party.
Service Agreement, effective as of July 1, 2021, between Volvo Car Corporation and Polestar Automotive China Distribution., Ltd. is a service agreement under which Volvo Car Corporation provides maintenance and procurement services related to the Polestar 2 at the Luqiao plant. The agreement provides that Polestar Automotive China Distribution., Ltd. will pay Volvo Car Corporation a monthly service charge based on the actual hours worked charged at an hourly rate. This hourly rate takes into account the full cost incurred plus a mark-up, and it is determined annually by Volvo Car Corporation. The agreement remains in effect until the services are completed. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate the agreement within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Automotive China Distribution., Ltd. may cancel the services performed under the agreement upon 30 days written notice and has additional immediate termination rights with respect to certain breaches by Volvo Car Corporation as described in the agreement.
Service Agreement, dated as of December 7, 2021, between Volvo Cars Technology (Shanghai) Co., Ltd. and Polestar Automotive China Distribution Co., Ltd., is a service agreement under which Volvo Cars Technology (Shanghai) Co., Ltd. provides procurement and management services to Polestar Automotive China Distribution Co., Ltd. related to the Polestar 2 at the Luqiao plant. The agreement provides that Polestar Automotive China Distribution Co., Ltd. will pay Volvo Cars Technology (Shanghai) Co., Ltd. a monthly service charge based on the actual hours worked charged at an hourly rate. This hourly rate takes into account the full cost incurred plus a mark-up, and it is determined annually by Volvo Cars Technology (Shanghai) Co., Ltd. The agreement remains in effect until the services are completed. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate the agreement within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar Automotive China Distribution Co., Ltd. may cancel the services performed under the agreement upon 30 days written notice and has additional immediate termination rights with respect to certain breaches by Volvo Cars Technology (Shanghai) Co., Ltd. as described in the agreement.
Service Agreement, dated as of June 23, 2021, between Volvo Car Corporation and Polestar New Energy Vehicle Co. Ltd. is a service agreement under which Volvo Car Corporation provides commercial purchasing and end-of-production services, amongst other things, to Polestar New Energy Vehicle Co. Ltd. The agreement provides that Polestar New Energy Vehicle Co. Ltd. will pay Volvo Car Corporation a monthly service charge based on the actual hours worked charged at an hourly rate. This hourly rate takes into account the full cost incurred plus a mark-up, and it is determined annually by Volvo Car Corporation. The agreement remains in effect until the services are completed. Either party may terminate the agreement for convenience upon 60 days written notice. Further, either party may terminate the agreement within 30 days of written notice for breach or immediately upon the insolvency of the other party. Polestar New Energy Vehicle Co. Ltd. may cancel the services performed under the agreement upon 30 days written notice and has additional immediate termination rights with respect to certain breaches by Volvo Car Corporation as described in the agreement. The Service Agreement, dated as of December 7, 2021, between Volvo Cars Technology (Shanghai) Co., Ltd. and Polestar Automotive China Distribution Co., Ltd. largely mirrors the Service Agreement, dated as of June 23, 2021, between Volvo Car Corporation and Polestar New Energy Vehicle Co. Ltd. but with Volvo Cars Technology (Shanghai) Co., Ltd. acting as the service provider under the agreement.
Service Agreement, dated as of June 23, 2021, between Volvo Car Corporation and Polestar Automotive China Distribution, Ltd., and the Service Agreement, dated as of December 7, 2021, between Volvo Cars Technology (Shanghai) Co., Ltd. and Polestar Automotive China Distribution Co., Ltd. are agreements governing the procurement of services and the sustainability evaluation for Polestar branded vehicles. For providing such services, the Volvo entities are paid a monthly service charge based on the actual hours worked charged at an hourly rate. These agreements remain in full force and effect until the services are completed. The agreements
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may be terminated by either party within 30 days of written notice for breach that is unable to be remedied or immediately if the other party becomes insolvent or is contemplating or enters into bankruptcy. Additionally, Polestar is entitled to cancel the services performed by Volvo Cars for convenience upon 30 days written notice to Volvo Cars, and both parties to each agreement are entitled to terminate such agreement for convenience upon 60 days written notice to the other party.
Service Agreement, dated as of December 28, 2021, between Ningbo Geely Automobile Research & Development Co., Ltd and Polestar Performance AB is an agreement governing the outsourcing of development services for Polestar vehicles. The agreement remains in full force and effect until the services are completed. Polestar Performance AB pays Ningbo Geely Automobile Research & Development Co., Ltd a fixed service charge for the services provided. The agreement may be terminated by either party within 30 days of written notice for breach that is unable to be remedied or immediately if the other party becomes insolvent or is contemplating or enters into bankruptcy. Additionally, Polestar Performance AB is entitled to cancel the services performed by Ningbo Geely Automobile Research & Development Co., Ltd for convenience upon 30 days written notice to Ningbo Geely Automobile Research & Development Co., Ltd.
Tooling and Equipment Agreement, dated as of December 10, 2021, by and among Polestar Automotive China Distribution Co., Ltd. and Ningbo Hangzhou Bay Geely Automotive Parts Co., Ltd. is an agreement relating to Ningbo Hangzhou Bay Geely Automotive Parts Co., Ltd.s provision to Polestar Automotive China Distribution Co., Ltd. of manufacturing services. The parties also commit to making certain investments under the agreement. The agreement remains in full force until the agreed fees are paid and may be terminated by either party within 30 days of written notice for breach that is unable to be remedied or immediately if the other party becomes insolvent or is contemplating or enters into bankruptcy.
Unique Vendor Tooling Agreement, dated as of December 23, 2021, by and among Polestar Automotive China Distribution Co., Ltd. and Ningbo Geely Automobile Research & Development Co., Ltd. is an agreement governing the purchase and sale of Polestar Unique vendor tooling from Geely for Polestar. Polestar Automotive China Distribution Co., Ltd. pays Ningbo Geely Automobile Research & Development Co., Ltd. for each unique vendor tooling as the actual costs occur. This agreement remains in force and effect until Polestar Automotive China Distribution Co., Ltd. has paid the full price for the purchase of the vendor tooling. The agreement may be terminated within 30 days of written notice for breach that is unable to be remedied or immediately if the other party becomes insolvent or is contemplating or enters into bankruptcy.
Technology License Agreement, dated as of March 4, 2022, between Zhejiang Zeekr Automobile Research and Development Co., Ltd. and Polestar Performance AB, and the Technology License Agreement, effective as of March 4, 2022, between Zhejiang Liankong Technologies Co., Ltd and Polestar Automotive Distribution China Co., Ltd. are agreements governing the license of technology for Polestar branded vehicles. These agreements remain in force and effect during the validity of the licensed intellectual property included in the license granted under the agreement. The agreements may be terminated within 30 days of written notice for breach that is unable to be remedied or immediately if the other party becomes insolvent or is contemplating or enters into bankruptcy.
Technology License Agreement, dated as of December 10, 2021, between Zhejiang Zeekr Automobile Research and Development Co., Ltd and Polestar Automotive China Distribution Co., Ltd. is an agreement governing the license of technology for Polestar branded vehicles. Polestar Automotive China Distribution Co., Ltd pays Zhejiang Zeekr Automobile Research and Development Co., Ltd a licensing fee under the agreement. This agreement remains in force and effect during the validity of the licensed intellectual property included in the license granted under the agreement. The agreement may be terminated within 30 days of written notice for breach that is unable to be remedied or immediately if the other party becomes insolvent or is contemplating or enters into bankruptcy.
Technology License Agreement, dated as of December 30, 2021, between Zhejiang Zeekr Automobile Research and Development Co., Ltd and Polestar Performance AB is an agreement governing the license of technology for Polestar branded vehicles. Polestar Automotive China Distribution Co., Ltd pays Zhejiang Zeekr Automobile
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Research and Development Co., Ltd a licensing fee under the agreement. This agreement remains in force and effect during the validity of the licensed intellectual property included in the license granted under the agreement. The agreement may be terminated within 30 days of written notice for breach that is unable to be remedied or immediately if the other party becomes insolvent or is contemplating or enters into bankruptcy.
Parts Supply and License Agreement Polestar Aftermarket Parts and Accessories (ROW), dated as of January 1, 2020, between Polestar Performance AB and Volvo Car Corporation, is a supply and license agreement under which Volvo Car Corporation distributes the aftermarket parts and accessories of Polestar Performance AB throughout the world, besides in China. Under this agreement, Polestar Performance AB also grants Volvo Car Corporation certain licensing rights with respect to Polestar Performance ABs intellectual property. The agreement provides that Volvo Car Corporation will pay a monthly license fee to Polestar Performance AB, and this license fee will be set at a rate that enables Volvo Car Corporation to receive an arms length compensation for its services. If the Parts Profit for a month is less than the Distribution Profit (each as defined in the agreement), Polestar Performance AB must pay Volvo Car Corporation for the shortfall. The agreement remains in effect until terminated by either party. Either party may terminate the agreement for convenience with 18 months written notice to the other. Further, either party may terminate the agreement within 30 days of written notice for a material breach or immediately upon the insolvency of the other party.
New, Used and Demonstrator Funding Agreement, dated June 14, 2021, by and among Volvo Car Financial Services UK Limited and Polestar Automotive UK Limited, is an agreement under which Volvo Car Financial Services UK Limited has agreed to make a standing offer to sell Floorplan Vehicles to Polestar Automotive UK Limited, and Polestar has agreed to purchase such Floorplan Vehicles. Under the agreement, Polestar may display Floorplan Vehicles for sale via the internet or in its premises or those premises operated by third party entities approved by and acting for or on behalf of Polestar for the purpose of marketing and in return, Polestar has agreed to pay certain charges to Volvo. The agreement may be terminated by either party at any time with written notice to the other party.
Service Agreement, effective as of January 28, 2022, by and between Volvo Cars USA LLC and Polestar Automotive USA Inc. is an agreement governing the outbound logistics through the utilization of Volvo Cars USA LLCs existing vehicle distribution process. Under the agreement, Polestar pays Volvo for the estimated hours of work performed and other costs incurred by Volvo. The agreement remains in full force and effect until the services are completed and may be terminated by either party within 30 days of written notice for breach that is unable to be remedied or immediately if the other party becomes insolvent or is contemplating or enters into bankruptcy.
Finance Cooperation Agreement, dated as of May 28, 2021, by and between Volvo Car Financial Services UK Limited and Polestar Automotive UK Limited Automotive UK LTD. Under this agreement, Volvo Car Financial Services UK Limited (i) provides financing to Polestar Automotive UK LTD to enable Polestar Automotive UK LTD to purchase Polestar vehicles, (ii) markets and sells retail finance arrangements to customers in accordance with the terms of the agreement and (iii) agrees to develop and operate a technical infrastructure to be used to market and sell such financial arrangements. Should Polestar Automotive UK LTD be interested in additional financing services not included in the Services (as defined in the agreement), it promises to use its best endeavors to engage Volvo Car Financial Services UK Limited as their financial partner for such services. The agreement continues in effect until the third anniversary of when the Services commenced. After such initial term, the agreement automatically continues in effect for subsequent terms of 36 months unless one of the parties provides a written termination notice to the other at least six months prior to the expiration of the original term or any subsequent 36 month extension term. In addition, Polestar Automotive UK LTD and Volvo Car Financial Services UK Limited each have certain termination rights as described in the agreement. Further, if certain severe market disruptions occur, Volvo Car Financial Services UK Limited has the right to unilaterally revise any of the commercial terms of the agreement. Volvo Car Financial Services UK Limited also has the right to revise the commercial terms of the agreement once every 12 months should a Trigger Event (as defined in the agreement) occur.
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Corporate Guarantee and Indemnity Relating to Polestar Automotive UK Limited, dated as of June 14, 2021, between Polestar Performance AB and Volvo Car Financial Services UK Limited. Under this deed, Polestar Performance AB (i) guarantees to Volvo Car Financial Services UK Limited timely performance by Polestar Automotive UK Limited of all of the Guaranteed Obligations (as defined in the agreement), (ii) promises to immediately pay any amount due should Polestar Automotive UK Limited not pay any Guaranteed Obligation and (iii) promises to indemnify Volvo Car Financial Services UK Limited in certain circumstances. There is no limit on the amount recoverable by Volvo Car Financial Services UK Limited from Polestar Performance AB under the deed, and the deed is a continuing guarantee. Polestar Performance AB can terminate the deed at any time by giving at least three months written notice specifying the termination date to Volvo Car Financial Services UK Limited, though Polestar Performance AB has certain continuing liabilities under the deed.
Cooperation Agreement, dated as of April 01, 2020, between Polestar Automotive China Distribution Co., Ltd. and Hangzhou Easybao Technology Co., Ltd. is a cooperation agreement under which Hangzhou Easybao Technology Co., Ltd. provides technical support to Polestar Automotive China Distribution Co., Ltd. for Polestar Automotive China Distribution Co., Ltd. to connect with the IT system of the insurance company and improve the processing capacity of Polestar Automotive China Distribution Co., Ltd.s online business. The services Hangzhou Easybao Technology Co., Ltd. provides under this agreement enable Polestar Automotive China Distribution Co., Ltd.s clients to purchase insurance products online through Polestar Automotive China Distribution Co., Ltd.s app. Hangzhou also agrees to operate and maintain the online insurance purchase process under this agreement and to provide necessary training requested by Polestar Automotive China Distribution Co., Ltd. In exchange for Hangzhou Easybao Technology Co., Ltd.s services, Polestar Automotive China Distribution Co., Ltd. facilitates Hangzhou Easybao Technology Co., Ltd.s collection of fees from Polestar Automotive China Distribution Co., Ltd.s cooperative insurance company. The fee is paid per insurance policy at a set rate and excludes traffic compulsory insurance. If the annual total amount collected by Hangzhou Easybao Technology Co., Ltd. is less than the annual total amount specified in the agreement, then Polestar Automotive China Distribution Co., Ltd. must pay that difference to Hangzhou Easybao Technology Co., Ltd. If the cooperative insurance company does not pay the fee, then Hangzhou Easybao Technology Co., Ltd. may suspend this agreement and recover certain costs from Polestar Automotive China Distribution Co., Ltd. Polestar Automotive China Distribution Co., Ltd. has certain rights to terminate or rescind the agreement. The agreement terminates on December 31, 2022, though the parties are obligated to discuss the possible extension of the agreements term.
Finance Cooperation Agreement, dated as of June 01, 2021, between Polestar Automotive China Distribution Co., Ltd and Genius Auto Finance Co., Ltd. is an agreement under which Genius Auto Finance Co., Ltd. provides finance services to Polestar Automotive China Distribution Co., Ltd., including retail finance to end customers in order to assist them with buying vehicles from Polestar, among other things. Genius Auto Finance Co., Ltd. helps to make retail finance credit available to end customers, offers competitive rates and terms for such customers and provides Polestar a service fee as compensation for the services Polestar provides to them, such as explaining the retail finance to customers, assisting with collecting application documents from customers and reviewing such documents. The Finance Cooperation Agreement continues for an initial term of three years, after which it continues unless terminated by either party with at least six months prior written notice.
Declarations of Intent by Snita and PSD
On March 3, 2022, Snita and PSD Investment Limited each executed a Declaration of Intent. These Declarations of Intent are substantially identical and set forth the parties intention to subscribe for their pro rata share of equity or equity linked securities issued by ListCo in the event of any offering of such securities by ListCo until March 31, 2024. The Declarations of Intent also provide that, (i) Polestar will actively seek appropriate debt financing and engage in raising capital from the market, and (ii) to the extent either Snita and/or PSD Investment Limited decide to make such investments, those investments will be made on market terms and conditions substantially identical to, or better than, those offered to third party investors and will be subject to all necessary corporate and/or regulatory approvals of Snita, Volvo Cars and/or PSD Investment Limited, as the case may be.
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The Declaration of Intent also states that any investment made by either Snita or PSD Investment Limited will not result in its direct and indirect aggregated beneficial interest in the issued and outstanding share capital of ListCo or its share of votes in ListCo exceeding 49.5%.
Post-Combination Company Relationships and Related Party Transactions
The agreements identified above under Polestar Relationships and Related Party Transactions will continue to be in effect after Closing, in accordance with their terms.
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DESCRIPTION OF LISTCOS SECURITIES
Description of ListCo Share Capital and Post-Combination Articles
Introduction
Set forth below is a summary of certain information concerning ListCos share capital as well as a description of certain provisions of the Post-Combination Articles and relevant provisions of the U.K. Companies Act 2006 (the Companies Act). The summary below contains only material information concerning ListCos share capital and corporate status and does not purport to be complete and is qualified in its entirety by reference to the Post-Combination Articles to be in effect upon Closing and applicable English law. Further, please note that holders of AD securities to be in effect upon Closing will not be treated as one of ListCos shareholders and will not have any shareholder rights.
On September 15, 2021, ListCo was incorporated under the laws of England and Wales as Polestar Automotive Holding UK Limited, with nominal assets and liabilities for the purpose of becoming the ultimate holding company for Polestar and consummating the Business Combination described herein. ListCo has re-registered as a public limited company under the laws of England and Wales with the name Polestar Automotive Holding UK PLC.
The total number of shares of all classes of shares which the Post-Combination Company is authorized to issue is 6,861,249,349 shares, consisting of (a) 5,000,000,000 Post-Combination Company Class A Shares of nominal value USD 0.01 each, (b) 1,777,366,739 Post-Combination Company Class B Shares of nominal value USD 0.01 each, (c) 16,000,000 Post-Combination Company Class C-1 Shares of nominal value USD 0.10 each, (d) 9,000,000 Post-Combination Company Class C-2 Shares of nominal value USD 0.10 each, (e) 58,882,610 Post-Combination Company Preference Shares of nominal value USD 10.00 each, and (f) 50,000 GBP Redeemable Preferred Shares of nominal value GBP 1.00 each (GBP Redeemable Preferred Shares). In addition, Post-Combination Company Class A Shares and Deferred Shares of nominal value USD 0.01 each (Deferred Shares) may be created upon conversion of Post-Combination Class C-1 Shares, Post-Combination Class C-2 Shares and Post-Combination Company Preference Shares without any requirement for further authorization. Immediately following the Closing, ListCos share capital will be comprised of 419,877,348 Post-Combination Company Class A Shares (assuming no conversion of convertible notes of Parent into Class A ordinary shares), 1,642,233,576 Post-Combination Company Class B Shares, 58,882,610 Post-Combination Company Preference Shares, and 50,000 GBP Redeemable Preferred Shares. In the event the Warrant Amendment Proposal is approved prior to the Effective Time, the share capital of ListCo will also be comprised of 16,000,000 Post-Combination Company Class C-1 Shares and 9,000,000 Post-Combination Company Class C-2 Shares. In the event the Warrant Amendment Proposal is not approved prior to the Effective Time, ListCo will assume 16,000,000 Post-Combination Company Public Warrants and 9,000,000 Post-Combination Company PP Warrants pursuant to the Warrant Amendment Agreement. The Post-Combination Company Class A Shares and the Post-Combination Company Class C Shares or the Post-Combination Company Warrants will be represented by Class A ADSs and Class C ADSs or ADWs, as applicable.
Post-Combination Company Securities
Dividend Rights
Subject to the provisions of English law and any preferences that may apply to shares outstanding at the time, holders of outstanding Post-Combination Company Class A Shares, Post-Combination Company Class B Shares and Post-Combination Company Preference Shares are entitled to receive dividends out of assets legally available at the times and in the amounts as the Post-Combination Company Board may determine from time to time.
Any dividends (or other distribution) paid by ListCo shall be applied among the holders of outstanding Post-Combination Company Class A Shares and Post-Combination Company Class B Shares pro rata to the number of such shares respectively held by them. For the avoidance of doubt, the Post-Combination Company Class C Shares, the GBP Redeemable Preferred Shares and the Deferred Shares shall not entitle their holders to participate in any dividends or other distributions.
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The Post-Combination Company Preference Shares shall not entitle any holder to preferred dividends or accruals except that the holders of Post-Combination Company Preference Shares shall participate in dividends or other distributions on the Post-Combination Company Class A Shares as if such Post-Combination Company Preference Shares had been converted into Post-Combination Company Class A Shares in accordance with the Post-Combination Articles.
The Post-Combination Company Board may deduct from any dividend in respect of a share all such sums as may be due from him or her to the Post-Combination Company on account of calls or otherwise in relation to the shares of the Post-Combination Company. Sums so deducted can be used to pay amounts owing to the Post-Combination Company in respect of the shares. Any dividend unclaimed after a period of 12 years from the date such dividend was declared shall, if the Post-Combination Company Board so resolves, be forfeited and shall revert to the Post-Combination Company. In addition, the payment by the Post-Combination Company Board of any unclaimed dividend, interest or other sum payable on or in respect of shares into a separate account shall not constitute the Post-Combination Company as a trustee in respect thereof. For further information regarding the payment of dividends under English law, see Other English Law ConsiderationsDistributions & Dividends.
Voting Rights
Each outstanding Post-Combination Company Class A Share is entitled to one vote on all matters submitted to a vote of shareholders. Each Post-Combination Company Class B Share is entitled to 10 votes on all matters submitted to a vote of shareholders. Each Post-Combination Company Class C Share is entitled to one vote on all matters submitted to a vote of shareholders. Post-Combination Company Preference Shares, Deferred Shares and GBP Redeemable Preferred Shares carry no voting rights and do not entitle their holders to receive notice of, to attend, to speak or to vote at any general meeting of the Post-Combination Company. Holders of Post-Combination Company Shares shall have no cumulative voting rights. None of the Post-Combination Companys shareholders will be entitled to vote at any general meeting or at any separate class meeting in respect of any share unless all calls or other sums payable in respect of that share have been paid.
Preemptive Rights
There are no rights of preemption under the Post-Combination Articles in respect of transfers of issued shares. In certain circumstances, Post-Combination Company shareholders may have statutory preemption rights under the Companies Act in respect of the allotment of new shares. These statutory preemption rights would require the Post-Combination Company to offer new equity securities (which includes ordinary shares but excludes most forms of preferred shares) for allotment to existing ordinary shareholders (including holders of Post-Combination Company Class A Shares and Post-Combination Company Class B Shares) on a pro rata basis before allotting them to other persons, unless shareholders dis-apply such rights by a special resolution for a period of not more than five years at a shareholders meeting. These preemption rights will be dis-applied in respect of Post-Combination Company Shares and the Post-Combination Company intends to propose equivalent resolutions in the future once the initial period of dis-application has expired. In any circumstances where the preemption rights have not been dis-applied, the procedure for the exercise of such statutory preemption rights would be set out in the documentation by which such equity securities would be offered to Post-Combination Company shareholders.
Conversion or Redemption Rights
The Post-Combination Company Class A Shares and Deferred Shares are neither convertible nor redeemable, provided that the Post-Combination Company Board has the right to issue additional classes of shares in ListCo (including redeemable shares) on such terms and conditions, and with such rights attached, as it may determine.
Each Post-Combination Company Class B Share is convertible into one Post-Combination Company Class A Share at any time at the option of the holder of such Post-Combination Company Class B Share. The right to convert such Post-Combination Company Class B Shares into Post-Combination Company Class A Shares will
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be exercisable by the holder of the Post-Combination Company Class B Share delivering a written notice to ListCo that such holder elects to convert a specified number of Post-Combination Company Class B Shares into Post-Combination Company Class A Shares. In no event shall Post-Combination Company Class A Shares be convertible into Post-Combination Company Class B Shares. Any conversion of a Post-Combination Company Class B Share into Post-Combination Company Class A Share shall be effected by means of the re-designation of each relevant Post-Combination Company Class B Share as a Post-Combination Company Class A Share or by such other method as may be approved by the Post-Combination Company Board.
Immediately following Closing, each Post-Combination Company Preference Share shall convert into one Post-Combination Company Class A Share (credited as fully paid), provided that:
(a) | the maximum number of Post-Combination Company Class A Shares to be issued on conversion shall be the maximum number that can be issued so that Volvo Cars (alone or taken together with all other legal entities that, directly or indirectly, are controlled by Geely (Geely Group)) after such conversion holds, whether directly or indirectly through depositary shares and/or receipts, less than 50% of the aggregate voting rights attaching to the Post-Combination Company Shares; or |
(b) | no conversion of a Post-Combination Company Preference Share shall occur in circumstances which would give rise to an obligation on Volvo or any member of the Geely Group to make a mandatory offer under any applicable law or regulation to acquire all of the Post-Combination Company Class A Shares not already held by Volvo or the Geely Group, save with the prior written consent of Volvo or a member of the Geely Group. |
Subject to the provisions of the Companies Act, ListCo shall be entitled, at any time, to serve notice on all or some of the holders of the GBP Redeemable Preferred Shares that it wishes to redeem all or some of the GBP Redeemable Preferred Shares in issue at that time on the date falling 14 days after service of such notice (or on such other date as may be agreed between ListCo and the holders of the relevant GBP Redeemable Preferred Shares).
In the event that the Warrant Amendment Proposal is approved prior to the Effective Time, pursuant to the Warrant Amendment Agreement, the Post-Combination Company Class C Shares will have substantially similar conversion and redemption features as the Post-Combination Company Warrants described below under Post-Combination Company Warrants.
Liquidation Rights
On a return of assets on liquidation or otherwise, the assets of ListCo remaining after payment of its debts and liabilities and available for distribution to holders of Post-Combination Company Shares, Post-Combination Company Class C Shares, Post-Combination Company Preference Shares, Deferred Shares and GBP Redeemable Preferred Shares will be applied in the following manner and order of priority:
(a) | first, to the holders of the Post-Combination Company Preference Shares (pro rata and pari passu) an amount equal to the initial liquidation preference of $588,826,100 less the aggregate subscription price of any Post-Combination Company Preference Shares that have been converted into Post-Combination Company Class A Shares; |
(b) | second, to the holders of the GBP Redeemable Preferred Shares an amount equal to the nominal value of such shares; |
(c) | third, to the holders of the Post-Combination Company Shares pro rata to the number of Post-Combination Company Shares respectively held by them up to an amount of $1 million per Post-Combination Company Share; |
(d) | fourth, to the holders of Deferred Shares an amount equal to the nominal value of the Deferred Shares; and |
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(e) | fifth: |
| to the holders of the Post-Combination Company Shares pro rata to the number of Post-Combination Company Shares respectively held by them; |
| to the holders of the Post-Combination Company Class C Shares pari passu with Post-Combination Company Shares on an as-converted basis less the conversion price of $11.50 (subject to relevant adjustments in the Post-Combination Articles), provided that if the amount which would be received by the holders of the Post-Combination Company Preference Shares if all such shares had been converted in accordance with the Post-Combination Articles would be greater than pursuant to (a) above, the relevant Post-Combination Company Preference Shares shall be deemed for the purposes of the relevant return of capital to be treated pari passu with the holders of Post-Combination Company Shares on an as-converted basis. |
Variation of Rights
Subject to the Companies Act, the rights attached to any class of shares can be varied or abrogated either with the consent in writing of the holders of not less than three-quarters in nominal value of the issued shares of that class (excluding any shares of that class held as treasury shares) or with the authority of a special resolution passed at a separate meeting of the holders of the relevant class of shares known as a class meeting.
Capital Calls
Subject to the Post-Combination Articles and the terms on which the ListCo shares are allotted, the Post-Combination Company Board has the authority to make calls upon the shareholders in respect of any money unpaid on their shares and each shareholder shall pay to ListCo as required by such notice the amount called on its shares. If a call remains unpaid after it has become due and payable, and the 14 clear days notice provided by the Post-Combination Company Board has not been complied with, any share in respect of which such notice was given may be forfeited by a resolution of the Post-Combination Company Board. All of the Post-Combination Company Shares to be registered pursuant to this proxy statement/prospectus will be credited as fully paid and therefore not subject to a capital call.
Transfer of Shares
Following Closing, ListCos share register will be maintained by its proposed registrar, Computershare Trust Company, N.A. Registration in this share register is determinative of share ownership. A shareholder who holds ListCos shares through The Depository Trust Company (DTC) is not the holder of record of such shares. Instead, the depositary (for example, Cede & Co., as nominee for DTC) or other nominee is the holder of record of such shares. Accordingly, a transfer of shares from a person who holds such shares through DTC to a person who also holds such shares through DTC will not be registered in ListCos official share register, as the depositary or other nominee will remain the record holder of such shares. The Post-Combination Company Board may, in its absolute discretion, decline to register a transfer (or renunciation of a renounceable letter of allotment):
(a) | of a share that is not fully paid; |
(b) | of a share upon which ListCo has a lien; |
(c) | of a share that is not duly stamped (if required) or is duly certified or otherwise shown to the satisfaction of the Post-Combination Company Board to be exempt from stamp duty (if required); |
(d) | if it is not delivered for registration to the registered office of ListCo (or such other place as the Post-Combination Company Board may determine) accompanied by the certificate of the share to |
which it relates or such other evidence reasonably required by the directors to show the right of the transferor to make the transfer; |
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(e) | of a default share where the holder has failed to provide the required details to ListCo under Other English Law ConsiderationsDisclosure of Interest in Shares, subject to certain exceptions; |
(f) | in respect of more than one class of share; or |
(g) | where, in the case of a transfer to joint holders of a share, the number of joint holders to whom the share is to be transferred exceeds four. |
If the Post-Combination Company Board refuses to register a transfer of a share it shall notify the transferee of the refusal and the reasons for it within two months after the date on which the transfer was lodged with ListCo or the instructions to the relevant system received.
Limitations on Ownership
Under English law and the Post-Combination Articles, there are no limitations on the right of non-residents of the U.K. or owners who are not citizens of the U.K. to hold or, other than the holders of Post-Combination Company Preference Shares, Post-Combination Company Class C Shares, Deferred Shares or GBP Redeemable Preferred Shares which do no confer voting rights on the relevant holders, vote the Post-Combination Company Shares.
Post-Combination Articles and English Law Considerations
Directors
Number
The Post-Combination Articles provide that at the time of their adoption, the number of directors of ListCo shall be nine (the Initial Directors), and that otherwise the number of directors shall be as determined by the Post-Combination Company Board from time to time. Directors may be appointed by any ordinary resolution of shareholders or by the Post-Combination Company Board, as described below under Appointment and Retirement of Directors. Each director elected shall hold office until his or her successor is elected or until his or her earlier resignation or removal in accordance with the Post-Combination Articles.
For a period of three years post-Closing a majority of the director shall be independent directors. A director shall be independent when he or she (i) satisfies the requirements to qualify as an independent director under the stock exchange rules of the stock exchange on which the Post-Combination Company Class A Shares are then-currently listed and (ii) is not affiliated (as a director, employee, shareholder or otherwise) with Parent, Volvo or Geely, provided that an individual shall not be precluded from being appointed, or continuing to act, as an independent director solely on the basis of holding, directly or indirectly, up to 0.01% of the share capital of any publically traded affiliate of Parent, Volvo Cars or Geely.
Following Closing, the Initial Directors shall be divided into three classes of directors, designated as Class I, Class II and Class III, respectively (each a Class). The Post-Combination Company Board is authorized to assign members of the Post-Combination Company Board already in office to such Classes at the time the classification becomes effective. The Post-Combination Company Board is also authorized to assign any persons who take office as directors after the date the Post-Combination Articles are adopted to any such Class; provided, however, that the Classes are as close to equal size as possible. In the event of any increase in the number of directors, the additional directorships resulting from such increase shall be apportioned by the Post-Combination Company Board among the Classes of directors so as to maintain such Classes as nearly equal as possible. No decrease in the number of directors shall shorten the term of any incumbent director.
Appointment and Retirement of Directors
Subject to the requirements of the Post-Combination Articles (including director independence requirements), ListCo may by ordinary resolution appoint a person who is willing to act to be a director, either to fill a vacancy or as an addition to the then-existing Post-Combination Company Board but the total number of directors shall
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not exceed fifteen. Subject to the requirements of the Post-Combination Articles (including director independence requirements), the Post-Combination Company Board also has power at any time to appoint any person who is willing to act as a director, either to fill a vacancy or as an addition to the Post-Combination Company Board as then existing, but the total number of directors shall not exceed fifteen.
The term of office of directors serving in Class I will expire at ListCos first annual general meeting. The term of office of directors serving in Class II will expire at ListCos second annual general meeting. The term of office of directors serving in Class III will expire at ListCos third annual general meeting. At each succeeding annual general meeting following the third annual general meeting following Closing, directors shall be elected to serve for a term of three years to succeed the directors of the class whose terms expire at such annual general meeting.
Indemnity of Directors
Under the Post-Combination Articles, and subject to the provisions of the Companies Act, each of ListCos directors is entitled to be indemnified by ListCo out of the assets of ListCo against all costs, charges, losses, expenses and liabilities incurred by such director or officer in the execution and discharge of his or her duties or in relation to those duties. In addition, it is proposed that each member of the Post-Combination Company Board will enter into a separate deed of indemnity with ListCo (which will also be subject to the provisions of the Companies Act). The Companies Act renders void an indemnity for a director against any liability attaching to him or her in connection with any negligence, default, breach of duty or breach of trust in relation to the company of which he or she is a director.
Shareholders Meetings
Each year, ListCo will hold an annual general meeting of shareholders in addition to any other meetings held in that year, and will specify the meeting as such in the notice convening it. The annual general meeting will be held at such time and place as the directors may appoint. No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment of a chairman, which appointment shall not be treated as part of the business of a meeting. The Post-Combination Articles provide that the necessary quorum at any general meeting of shareholders (or adjournment thereof) shall be at least two members that in aggregate hold at least 51% of the issued shares of the ListCo, present in person or by proxy and entitled to attend and to vote on the business to be transacted, at such meeting.
Requisitioning Shareholder Meetings
Subject to certain conditions being satisfied, under the Companies Act shareholders holding at least 5% of the paid-up capital of ListCo carrying voting rights at general meetings can require the directors to call a general meeting and shareholders representing at least 5% of the total voting rights exercisable at an annual general meeting can require ListCo to give notice of a resolution to be proposed at that annual general meeting.
Other English Law Considerations
Mandatory Purchases and Acquisitions
Pursuant to sections 979 to 982 of the Companies Act, where a takeover offer has been made for ListCo and the offeror has, by virtue of acceptances of the offer, acquired or unconditionally contracted to acquire not less than 90% of the voting rights carried by the class of shares to which the offer relates, the offeror may give notice to the holder of any shares of that class to which the offer relates that the offeror has not acquired or unconditionally contracted to acquire that it desires to acquire those shares on the same terms as the takeover offer. The offeror would do so by sending a notice to the outstanding minority shareholders telling them that it will compulsorily acquire their shares.
Such notice must be sent within three months of the last day on which the offer can be accepted in the prescribed manner or if earlier, and the offer is not one to which the Takeover Code applies, within the period of six months
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beginning with the date of the offer. The squeeze out of the minority shareholders can be completed at the end of six weeks from the date the notice has been given, subject to the minority shareholders failing to successfully lodge an application to the court to prevent such squeeze out any time prior to the end of those six weeks following which the offeror can execute a transfer of the outstanding shares in its favor and pay the consideration to ListCo, which would hold the consideration on trust for the outstanding minority shareholders. The consideration offered to the outstanding minority shareholders whose shares are compulsorily acquired under the Companies Act must, in general, be the same as the consideration that was available under the takeover offer.
If a takeover is structured as a scheme of arrangement pursuant to Part 26 of the Companies Act, the scheme, and therefore takeover, would need to be approved by a majority in number representing 75% in value of the shareholders of each class of shareholders voting, whether in person or by proxy. If approved, the scheme, and therefore takeover, would be binding on 100% of the shareholders of the relevant class(es).
Sell Out
The Companies Act also gives minority shareholders a right to be bought out in certain circumstances by an offeror who has made a takeover offer for all of ListCos shares or of any class or classes of ListCos shares. A holder of voting shares to which the offer relates, and who has not otherwise accepted the offer, may require the offeror to acquire his shares if, prior to the expiry of the acceptance period for such offer, (1) the offeror has acquired or unconditionally agreed to acquire not less than 90% in value of all the voting shares in the company (in the case of an offer for all of ListCos shares) or of all the shares of that class and (2) not less than 90% of the voting rights in the company (in the case of an offer for all of ListCos shares) or of the voting rights carried by that class. The offeror may impose a time limit on the rights of minority shareholders to be bought out that is not less than three months after the end of the acceptance period. If a shareholder exercises his rights to be bought out, the offeror is required to acquire those shares on the terms of the takeover offer or on such other terms as may be agreed.
U.K. City Code on Takeovers and Mergers
At Closing, it is expected that a majority of the Post-Combination Company Board will reside outside of the U.K., the Channel Islands and the Isle of Man. Based upon the structure of the Post-Combination Company Board and management structure and ListCos intended plans for directors and management, for the purposes of the Takeover Code, ListCo is considered to have its place of central management and control outside the U.K., the Channel Islands or the Isle of Man. Accordingly, the Takeover Code is not expected to apply to ListCo. It is possible that in the future circumstances, and in particular the Post-Combination Company Board Composition, could change which may cause the Takeover Code to apply to ListCo. The Takeover Code provides a framework within which takeovers of companies subject to it are conducted. In particular, the Takeover Code contains certain rules in respect of mandatory offers. Under Rule 9 of the Takeover Code, if a person:
(a) | acquires an interest in ListCos shares that, when taken together with shares in which persons acting in concert with such person are interested, carries 30% or more of the voting rights of ListCos shares; or |
(b) | who, together with persons acting in concert with such person, is interested in shares that in the aggregate carry not less than 30% and not more than 50% of the voting rights in the company acquires additional interests in shares that increase the percentage of shares carrying voting rights in which that person is interested, the acquirer, and, depending on the circumstances, its concert parties, would be required (except with the consent of the Takeover Panel) to make a cash offer for ListCos outstanding shares at a price not less than the highest price paid for any interests in the shares by the acquirer or its concert parties during the previous 12 months. |
Disclosure of Interest in Shares
Section 793 of the Companies Act gives ListCo the power to require persons whom ListCo knows have, or whom ListCo has reasonable cause to believe have, or within the previous three years have had, any ownership interest in any
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of ListCos shares (the default shares), to disclose prescribed particulars of those shares. For this purpose, default shares includes any of ListCos shares allotted or issued after the date of the Section 793 notice in respect of those shares. Failure to provide the information requested within the prescribed period after the date of sending the notice may result in restrictions being imposed on the default shares under the Post-Combination Articles (including suspension of voting rights and withholding of dividends), depending on the level of the relevant shareholding, and sanctions being imposed against the holder of the default shares as provided within the Companies Act.
Distributions & Dividends
Under English law, dividends and distributions may only be made from distributable profits. Distributable profits generally means accumulated realized profits, so far as not previously utilized by distribution or capitalization, less accumulated realized losses, so far as not previously written off in a reduction or reorganization of capital, duly made. This would include reserves created by way of a court-approved reduction of capital.
It is not sufficient that ListCo, as a public limited company, has distributable profits for the purpose of making a distribution. An additional capital maintenance requirement is imposed on ListCo to ensure that the net worth of ListCo is at least equal to the amount of its capital. A public limited company can only make a distribution:
(a) | if, at the time that the distribution is made, the amount of its net assets (that is, the total excess of assets over liabilities) is not less than the total of its called-up share capital and undistributable reserves; and |
(b) | if, and to the extent that, the distribution itself, at the time that it is made, does not reduce the amount of the net assets to less than that total. |
Purchase of Own Shares
Under English law, a public limited company may purchase its own shares only out of the distributable profits of the company or the proceeds of a new issue of shares made for the purpose of financing the purchase. A limited company may not purchase its own shares if as a result of the purchase there would no longer be any issued shares of the company other than redeemable shares or shares held as treasury shares. Subject to the foregoing, because the Nasdaq is not a recognized investment exchange under the Companies Act, ListCo may purchase its fully paid shares only pursuant to a purchase contract authorized by ordinary resolution of the holders of Post-Combination Company Shares before the purchase takes place. Any authority will not be effective if any shareholder from whom ListCo proposes to purchase shares votes on the resolution and the resolution would not have been passed if such shareholder had not done so. The resolution authorizing the purchase must specify a date, not being later than five years after the passing of the resolution, on which the authority to purchase is to expire.
Post-Combination Company Warrants
In the event that the Warrant Amendment Proposal is not approved prior to the Effective Time, pursuant to the Warrant Amendment Agreement, each GGI Public Warrant will be automatically cancelled and extinguished and converted into the right to receive one Public ADW, duly and validly issued against the deposit of an underlying Post-Combination Company Public Warrant. In addition, each GGI Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one PP ADW, duly and validly issued against the deposit of an underlying Post-Combination Company PP Warrant. In the event that the Warrant Amendment Proposal is approved prior to the Effective Time, pursuant to the Warrant Amendment Agreement, the Post-Combination Class C Shares will have substantially similar terms to the Post-Combination Company Warrants.
Each whole Post-Combination Company Warrant entitles the holder the right to acquire one Class A ADS (or one Post-Combination Company Class A Share if at the time of exercise ListCo no longer uses the ADR Facility) at an exercise price of $11.50 per Class A ADS within 30 days after the completion of the Closing. Pursuant to
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the Existing Warrant Agreement (as amended by the Warrant Amendment Agreement, the Amended Warrant Agreement), a warrant holder may exercise its Post-Combination Company Warrant only for a whole number of Class A ADSs. This means that only a whole Post-Combination Company Warrant may be exercised at any given time by a Post-Combination Company Warrant holder. No fractional Post-Combination Company Warrants will be issued. The Post-Combination Company Warrants will expire five years after the Closing, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
ListCo will not be obligated to deliver any Class A ADSs pursuant to the exercise of a ADW and will have no obligation to settle such ADW exercise unless a registration statement under the Securities Act with respect to the Class A ADSs underlying the ADWs is then effective and a prospectus relating thereto is current, subject to ListCo satisfying its obligations described below with respect to registration. No ADW will be exercisable and ListCo will not be obligated to issue Class A ADSs upon exercise of a ADW unless Class A ADSs issuable upon such ADW exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the ADW. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to an ADW, the holder of such ADW will not be entitled to exercise such ADW and such ADW may have no value and expire worthless. In the event that a registration statement is not effective for the exercised ADWs, the purchaser of an ADW will have paid the full purchase price for the ADW solely for the Class A ADS underlying such unit.
ListCo has agreed that as soon as practicable, but in no event later than 15 business days after the Closing, it will use commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A ADSs issuable upon exercise of the Post-Combination Company Warrants. ListCo will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Post-Combination Company Warrants in accordance with the provisions of the Amended Warrant Agreement. Notwithstanding the above, if Class A ADSs are at the time of any exercise of a Post-Combination Company Warrant not listed on a national securities exchange such that it satisfies the definition of a covered security under Section 18(b)(1) of the Securities Act, ListCo may, at its option, require holders of Post-Combination Company Warrants who exercise their Post-Combination Company Warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event ListCo so elects, ListCo will not be required to file or maintain in effect a registration statement, but ListCo will be required to use its best efforts to register or qualify the Class A ADSs under applicable blue sky laws to the extent an exemption is not available.
Redemption of Post-Combination Company Warrants for cash. Once the Post-Combination Company Warrants become exercisable, ListCo may call the Post-Combination Company Warrants for redemption (except as described herein with respect to Post-Combination Company PP Warrants):
| in whole and not in part; |
| at a price of $0.01 per Post-Combination Company Warrant; |
| upon not less than 30 days prior written notice of redemption (the 30-day redemption period) to each holder of a Post-Combination Company Warrant; and |
| if, and only if, the reported last sale price of the Class A ADS equals or exceeds $18.00 per Class A ADS for any 20 trading days within a 30-trading day period ending three business days before ListCo sends the notice of redemption to the holders of Post-Combination Company Warrants. |
ListCo will not redeem the Post-Combination Company Warrants as described above unless an effective registration statement under the Securities Act covering the issuance of the Class A ADSs issuable upon exercise of the Post-Combination Company Warrants is effective and a current prospectus relating to those Class A ADSs is available throughout the 30 day redemption period, except if the Post-Combination Company Warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the Post-Combination Company Warrants become redeemable by ListCo, ListCo may exercise its
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redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
ListCo has established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the Post-Combination Company Warrant exercise price. If the foregoing conditions are satisfied and ListCo issues a notice of redemption of the Post-Combination Company, each holder of Post-Combination Company Warrants will be entitled to exercise its Post-Combination Company Warrants prior to the scheduled redemption date. However, the price of the Class A ADSs may fall below the $18.00 redemption trigger price as well as the $11.50 (for whole Class A ADSs) Post-Combination Company Warrants exercise price after the redemption notice is issued.
Redemption of Post-Combination Company Warrants for Class A ADSs. Commencing ninety days after the Post-Combination Company Warrants become exercisable, ListCo may redeem the outstanding Post-Combination Company Warrants:
| in whole and not in part; |
| at a price equal to a number of Class A ADSs to be determined by reference to the table below, based on the redemption date and the fair market value of Class A ADSs except as otherwise described below; |
| if, and only if, the Post-Combination Company PP Warrants are also concurrently exchanged at the same price (equal to a number of Class A ADSs) as the outstanding Post-Combination Company Public Warrants, as described above; |
| if, and only if, there is an effective registration statement covering the Class A ADSs issuable upon exercise of the Post-Combination Company Warrants and a current prospectus relating thereto is available throughout the 30-day period after written notice of redemption is given; |
| upon a minimum of 30 days prior written notice of redemption; and |
| if, and only if, the last reported sale price of Class A ADSs equals or exceeds $10.00 per Class A ADS (as adjusted per share splits, stock dividends, reorganizations, reclassifications, recapitalizations and the like) on the trading day prior to the date on which ListCo sends the notice of redemption to the holders of Post-Combination Company Warrants. |
The numbers in the table below represent the redemption prices, or the number of Class A ADSs that a Post-Combination Company Warrant holder will receive upon redemption by ListCo pursuant to this redemption feature, based on the fair market value of Class A ADSs on the corresponding redemption date, determined based on the average of the last reported sales price for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Post-Combination Company Warrants, and the number of months that the corresponding redemption date precedes the expiration date of the Post-Combination Company Warrants, each as set forth in the table below.
The Class A ADS prices set forth in the column headings of the table below will be adjusted as of any date on which the number of Class A ADSs issuable upon exercise of a Post-Combination Company Warrant is adjusted as set forth in the first three paragraphs under the heading Anti-dilution adjustments below. The adjusted Class A ADS prices in the column headings will equal the Class A ADS prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the number of Class A ADSs deliverable upon exercise of a Post-Combination Company Warrant immediately prior to such adjustment and the denominator of which is the number of Class A ADSs deliverable upon exercise of an Post-Combination Company Warrant as so adjusted. The number of Class A ADSs in the table below shall be adjusted in the same manner and at the same time as the number of Class A ADSs issuable upon exercise of an Post-Combination Company Warrant.
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Fair Market Value of Class A ADSs | ||||||||||||||||||||||||||||||||||||
$10.00 | $11.00 | $12.00 | $13.00 | $14.00 | $15.00 | $16.00 | $17.00 | $18.00 | ||||||||||||||||||||||||||||
Redemption Date (period to expiration of warrants) | ||||||||||||||||||||||||||||||||||||
57 months |
0.257 | 0.277 | 0.294 | 0.31 | 0.324 | 0.337 | 0.348 | 0.358 | 0.365 | |||||||||||||||||||||||||||
54 months |
0.252 | 0.272 | 0.291 | 0.307 | 0.322 | 0.335 | 0.347 | 0.357 | 0.365 | |||||||||||||||||||||||||||
51 months |
0.246 | 0.268 | 0.287 | 0.304 | 0.32 | 0.333 | 0.346 | 0.357 | 0.365 | |||||||||||||||||||||||||||
48 months |
0.241 | 0.263 | 0.283 | 0.301 | 0.317 | 0.332 | 0.344 | 0.356 | 0.365 | |||||||||||||||||||||||||||
45 months |
0.235 | 0.258 | 0.279 | 0.298 | 0.315 | 0.33 | 0.343 | 0.356 | 0.365 | |||||||||||||||||||||||||||
42 months |
0.228 | 0.252 | 0.274 | 0.294 | 0.312 | 0.328 | 0.342 | 0.355 | 0.364 | |||||||||||||||||||||||||||
39 months |
0.221 | 0.246 | 0.269 | 0.29 | 0.309 | 0.325 | 0.34 | 0.354 | 0.364 | |||||||||||||||||||||||||||
36 months |
0.213 | 0.239 | 0.263 | 0.285 | 0.305 | 0.323 | 0.339 | 0.353 | 0.364 | |||||||||||||||||||||||||||
33 months |
0.205 | 0.232 | 0.257 | 0.28 | 0.301 | 0.32 | 0.337 | 0.352 | 0.364 | |||||||||||||||||||||||||||
30 months |
0.196 | 0.224 | 0.25 | 0.274 | 0.297 | 0.316 | 0.335 | 0.351 | 0.364 | |||||||||||||||||||||||||||
27 months |
0.185 | 0.214 | 0.242 | 0.268 | 0.291 | 0.313 | 0.332 | 0.35 | 0.364 | |||||||||||||||||||||||||||
24 months |
0.173 | 0.204 | 0.233 | 0.26 | 0.285 | 0.308 | 0.329 | 0.348 | 0.364 | |||||||||||||||||||||||||||
21 months |
0.161 | 0.193 | 0.223 | 0.252 | 0.279 | 0.304 | 0.326 | 0.347 | 0.364 | |||||||||||||||||||||||||||
18 months |
0.146 | 0.179 | 0.211 | 0.242 | 0.271 | 0.298 | 0.322 | 0.345 | 0.363 | |||||||||||||||||||||||||||
15 months |
0.13 | 0.164 | 0.197 | 0.23 | 0.262 | 0.291 | 0.317 | 0.342 | 0.363 | |||||||||||||||||||||||||||
12 months |
0.111 | 0.146 | 0.181 | 0.216 | 0.25 | 0.282 | 0.312 | 0.339 | 0.363 | |||||||||||||||||||||||||||
9 months |
0.09 | 0.125 | 0.162 | 0.199 | 0.237 | 0.272 | 0.305 | 0.336 | 0.362 | |||||||||||||||||||||||||||
6 months |
0.065 | 0.099 | 0.137 | 0.178 | 0.219 | 0.259 | 0.296 | 0.331 | 0.362 | |||||||||||||||||||||||||||
3 months |
0.034 | 0.065 | 0.104 | 0.15 | 0.197 | 0.243 | 0.286 | 0.326 | 0.361 | |||||||||||||||||||||||||||
0 months |
| | 0.042 | 0.115 | 0.179 | 0.233 | 0.281 | 0.323 | 0.361 |
The fair market value of Class A ADSs shall mean the average last reported sale price of Class A ADSs for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Post-Combination Company Warrants.
The exact fair market value and redemption date may not be set forth in the table above, in which case, if the fair market value is between two values in the table or the redemption date is between two redemption dates in the table, the number of Class A ADSs to be issued for each Post-Combination Company Warrant redeemed will be determined by a straight-line interpolation between the number of Class A ADSs set forth for the higher and lower fair market values and the earlier and later redemption dates, as applicable, based on a 365- or 366-day year, as applicable. For example, if the average last reported sale price of Class A ADSs for the 10 trading days ending on the third trading date prior to the date on which the notice of redemption is sent to the holders of the is $11.00 per Class A ADS, and at such time there are 57 months until the expiration of the Post-Combination Company Warrants, ListCo may choose to, pursuant to this redemption feature, redeem the Post-Combination Company Warrants at a redemption price of 0.277 Class A ADSs for each whole Post-Combination Company Warrant. For an example where the exact fair market value and redemption date are not as set forth in the table above, if the average last reported sale price of Class A ADSs for the 10 trading days ending on the third trading date prior to the date on which the notice of redemption is sent to the holders of the Post-Combination Company Warrants is $13.50 per Class A ADS, and at such time there are 38 months until the expiration of the Post-Combination Company Warrants, ListCo may choose to, pursuant to this redemption feature, redeem the Post-Combination Company Warrants at a redemption price of 0.298 Class A ADSs for each whole Post-Combination Company Warrant. Finally, as reflected in the table above, ListCo can redeem the Post-Combination Company Warrants for no consideration in the event that the Post-Combination Company Warrants are out of the money (i.e., the trading price of Class A ADSs is below the exercise price of the Post-Combination Company Warrants) and about to expire.
Any Post-Combination Company Public Warrants held by ListCo officers or directors will be subject to this redemption feature, except that such officers and directors shall only receive fair market value for such Post-Combination Company Warrants so redeemed (fair market value for such Post-Combination Company Public Warrants held by ListCo officers or directors being defined as the last reported sale price of the Post-Combination Company Public Warrants on such redemption date).
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This redemption feature differs from the typical warrant redemption features, which typically only provide for a redemption of warrants for cash (other than private placement warrants) when the trading price for Class A common stock exceeds $18.00 per share for a specified period of time. This redemption feature is structured to allow for all of the outstanding Post-Combination Company Public Warrants to be redeemed when the Class A ADSs are trading at or above $10.00 per Class A ADS, which may be at a time when the trading price of the Class A ADSs is below the exercise price of the Post-Combination Company Public Warrants. ListCo has established this redemption feature to provide the Post-Combination Company Public Warrants with an additional liquidity feature, which provides ListCo with the flexibility to redeem the Post-Combination Company Public Warrants for Class A ADSs, instead of cash, for fair value without the Post-Combination Company Public Warrants having to reach the $18.00 per Class A ADS threshold set forth above under Redemption of Post-Combination Company Warrants for cash. Holders of the Post-Combination Company Public Warrants will, in effect, receive a number of Class A ADSs representing fair value for their Post-Combination Company Public Warrants based on an option pricing model with a fixed volatility input as of the date of this proxy statement/prospectus. This redemption right provides ListCo not only with an additional mechanism by which to redeem all of the outstanding Post-Combination Company Public Warrants, in this case, for Class A ADSs, and therefore have certainty as to (i) ListCos capital structure as the Post-Combination Company Public Warrants would no longer be outstanding and would have been exercised or redeemed and (ii) to the amount of cash provided by the exercise of the Post-Combination Company Public Warrants and available to ListCo, and also provides a ceiling to the theoretical value of the Post-Combination Company Public Warrants as it locks in the redemption prices ListCo would pay to Post-Combination Company Public Warrant holders if ListCo chose to redeem Post-Combination Company Public Warrants in this manner. ListCo will effectively be required to pay fair value to Post-Combination Company Public Warrant holders if ListCo chooses to exercise this redemption right and it will allow ListCo to quickly proceed with a redemption of the Post-Combination Company Public Warrants for Class A ADSs if ListCo determines it is in ListCos best interest to do so. As such, ListCo would redeem the Post-Combination Company Public Warrants in this manner when ListCo believes it is in ListCos best interest to update ListCos capital structure to remove the Post-Combination Company Public Warrants and pay fair value to the Post-Combination Company Public Warrant holders. In particular, it would allow ListCo to quickly redeem the Post-Combination Company Public Warrants for Class A ADSs, without having to negotiate a redemption price with the Post-Combination Company Public Warrant holders. In addition, the Post-Combination Company Public Warrant holders will have the ability to exercise the Post-Combination Company Warrants prior to redemption if they should choose to do so.
As stated above, ListCo can redeem the Post-Combination Company Public Warrants when the Class A ADSs are trading at a price starting at $10.00, which is below the exercise price of $11.50, because it will provide certainty with respect to ListCos capital structure and cash position while providing Post-Combination Company Public Warrant holders with fair value (in the form of Class A ADSs). If ListCo chooses to redeem the Post-Combination Company Public Warrants when the Class A ADSs are trading at a price below the exercise price of the Post-Combination Company Public Warrants, this could result in the Post-Combination Company Public Warrant holders receiving fewer Class A ADSs than they would have received if they had chosen to wait to exercise their Post-Combination Company Public Warrants for Class A ADSs if and when such Class A ADSs were trading at a price higher than the exercise price of $11.50.
No fractional Class A ADSs will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a Class A ADS, ListCo will round down to the nearest whole number of the number of Class A ADSs to be issued to the holder.
Redemption procedures and cashless exercise. If ListCo calls the Post-Combination Company Public Warrants for redemption as described above, ListCo management will have the option to require any holder that wishes to exercise its Post-Combination Company Public Warrant to do so on a cashless basis. In determining whether to require all holders to exercise their Post-Combination Company Public Warrants on a cashless basis, ListCo management will consider, among other factors, ListCos cash position, the number of Post-Combination Company Public Warrants that are outstanding and the dilutive effect on ListCo shareholders of issuing the maximum number of Class A ADSs issuable upon the exercise of Post-Combination Company Public Warrants.
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If ListCo management takes advantage of this option, all holders of Post-Combination Company Public Warrants would pay the exercise price by surrendering their Post-Combination Company Public Warrants for that number of Class A ADSs equal to the quotient obtained by dividing (x) the product of the number of Class A ADSs underlying the Post-Combination Company Public Warrants, multiplied by the difference between the exercise price of the Post-Combination Company Public Warrants and the fair market value (defined below) by (y) the fair market value. The fair market value shall mean the average reported last sale price of the Class A ADSs for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Post-Combination Company Public Warrants. If ListCo management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of ListCo Class A ADSs to be received upon exercise of the Post-Combination Company Public Warrants, including the fair market value in such case. Requiring a cashless exercise in this manner will reduce the number of Class A ADSs to be issued and thereby lessen the dilutive effect of a Post-Combination Company Public Warrant redemption. ListCo believes this feature is an attractive option if ListCo does not need the cash from the exercise of the Post-Combination Company Public Warrants after Closing. If ListCo calls Post-Combination Company Public Warrants for redemption and ListCo management does not take advantage of this option, the GGI Sponsor and its permitted transferees would still be entitled to exercise their Post-Combination Company PP Warrants for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their warrants on a cashless basis, as described in more detail below.
A holder of an Post-Combination Company Public Warrant may notify ListCo in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such Post-Combination Company Public Warrant, to the extent that after giving effect to such exercise, such person (together with such persons affiliates), to the warrant agents actual knowledge, would beneficially own in excess of 9.8% (or such other amount as a holder may specify) of the Class A ADSs outstanding immediately after giving effect to such exercise.
Anti-dilution adjustments. If the number of outstanding Class A ADSs is increased by a stock dividend payable in Class A ADSs, or by a split-up of Class A ADSs or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of Class A ADSs issuable on exercise of each Post-Combination Company Warrant will be increased in proportion to such increase in the outstanding Class A ADSs. A rights offering to holders of Class A ADSs entitling holders to purchase Class A ADSs at a price less than the fair market value will be deemed a stock dividend of a number of Class A ADSs equal to the product of (i) the number of Class A ADSs actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Class A ADSs) multiplied by (ii) one (1) minus the quotient of (x) the price per Class A ADS paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Class A ADSs, in determining the price payable for Class A ADSs, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of Class A ADS as reported during the 10 trading day period ending on the trading day prior to the first date on which the Class A ADSs trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if ListCo, at any time while the Post-Combination Company Warrants are outstanding and unexpired, pays a dividend or make a distribution in cash, securities or other assets to the holders of Class A ADSs on account of such Class A ADSs (or other securities of ListCo capital stock into which the Post-Combination Company Warrants are convertible), other than (a) as described above and (b) certain ordinary cash dividends then the Post-Combination Company Warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each Class A ADS in respect of such event.
If the number of outstanding Class A ADSs is decreased by a consolidation, combination, reverse stock split or reclassification of Class A ADSs or other similar event, then, on the effective date of such consolidation,
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combination, reverse stock split, reclassification or similar event, the number of Class A ADSs issuable on exercise of each Post-Combination Company Warrant will be decreased in proportion to such decrease in outstanding Class A ADSs.
Whenever the number of Class A ADSs purchasable upon the exercise of the Post-Combination Company Warrants is adjusted, as described above, the Post-Combination Company Warrant exercise price will be adjusted by multiplying the Post-Combination Company Warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of Class A ADSs purchasable upon the exercise of the Post-Combination Company Warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of Class A ADSs so purchasable immediately thereafter.
In case of any reclassification or reorganization of the Class A ADSs (other than those described above or that solely affects the par value of Class A ADSs), or in the case of any merger or consolidation of ListCo with or into another corporation (other than a consolidation or merger in which ListCo is the continuing corporation and that does not result in any reclassification or reorganization of Class A ADSs), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of ListCo as an entirety or substantially as an entirety in connection with which ListCo is dissolved, the holders of the Post-Combination Company Warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Post-Combination Company Warrants and in lieu of Class A ADSs immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Post-Combination Company Warrants would have received if such holder had exercised their Post-Combination Company Warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of Class A ADSs in such a transaction is payable in the form of Class A ADSs in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the Post-Combination Company Warrants properly exercises the Post-Combination Company Warrants within 30 days following public disclosure of such transaction, the Post-Combination Company Warrant exercise price will be reduced as specified in the Amended Warrant Agreement based on the Black-Scholes value (as defined in the Amended Warrant Agreement) of the Post-Combination Company Warrant.
The Post-Combination Company Warrants will be issued in registered form under the Amended Warrant Agreement. The Amended Warrant Agreement provides that the terms of the Post-Combination Company Warrants may be amended without the consent of any holder for the purpose of (i) curing any ambiguity or correct any mistake, including to conform the provisions of the Amended Warrant Agreement to the description of the terms of the Post-Combination Company Warrants and the Amended Warrant Agreement set forth in this proxy statement/prospectus, or defective provision, (ii) amending the provisions relating to cash dividends on Class A ADSs as contemplated by and in accordance with the Amended Warrant Agreement or (iii) adding or changing any provisions with respect to matters or questions arising under the Amended Warrant Agreement as the parties to the Amended Warrant Agreement may deem necessary or desirable and that the parties deem to not adversely affect the rights of the registered holders of the Post-Combination Company Warrants; provided that the approval by the holders of at least 50% of the then-outstanding Post-Combination Company Public Warrants is required to make any change that adversely affects the interests of the registered holders of Post-Combination Company Public Warrants. You should review a copy of the Amended Warrant Agreement, which has been filed as an exhibit to the proxy statement/prospectus of which this proxy statement/prospectus is a part, for a complete description of the terms and conditions applicable to the Post-Combination Company Warrants.
The Post-Combination Company Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a
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cashless basis, if applicable), by certified or official bank check payable to ListCo, for the number of Post-Combination Company Warrants being exercised. The Post-Combination Company Warrant holders do not have the rights or privileges of holders of Class A ADSs and any voting rights until they exercise their Post-Combination Company Warrants and receive Class A ADSs. After the issuance of Class A ADSs upon exercise of the Post-Combination Company Warrants, each holder will be entitled to one (1) vote for each Class A ADS held of record on all matters to be voted on by shareholders.
No fractional Class A ADSs will be issued upon exercise of the Post-Combination Company Warrants. If, upon exercise of the Post-Combination Company Warrants, a holder would be entitled to receive a fractional interest in a Class A ADS, ListCo will, upon exercise, round down to the nearest whole number of Class A ADSs to be issued to the Post-Combination Company Warrant holder.
ListCo has agreed that, subject to applicable law, any action, proceeding or claim against ListCo arising out of or relating in any way to the Amended Warrant Agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and ListCo irrevocably submits to such jurisdiction, which jurisdiction will be the exclusive forum for any such action, proceeding or claim. See Risk FactorsIf the Warrant Amendment Proposal is not approved, the Existing Warrant Agreement will be assigned by GGI to ListCo at the Closing. The Existing Warrant Agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of the warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with ListCo in connection with such warrants. This provision applies to claims under the Securities Act but does not apply to claims under the Exchange Act or any claim for which the federal district courts of the United States of America are the sole and exclusive forum. With respect to any complaint asserting a cause of action arising under the Securities Act or the rules and regulations promulgated thereunder, ListCo notes, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Subject to certain exceptions, the Post-Combination Company PP Warrants will not be transferable, assignable or salable until 30 days after Closing and they will not be redeemable by ListCo so long as they are held by the GGI Sponsor or its permitted transferees. Otherwise, the Post-Combination Company PP Warrants have terms and provisions that are identical to those of the other Post-Combination Company Warrants, including as to exercise price, exercisability and exercise period. If the Post-Combination Company PP Warrants are held by holders other than the GGI Sponsor or its permitted transferees, the Post-Combination Company PP Warrants will be redeemable by ListCo and exercisable by the holders on the same basis as the other Post-Combination Company Warrants.
If holders of the Post-Combination Company PP Warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering their warrants for that number of Class A ADSs equal to the quotient obtained by dividing (x) the product of the number of Class A ADSs underlying the warrants, multiplied by the difference between the exercise price of the warrants and the fair market value (defined below) by (y) the fair market value. The fair market value shall mean the average reported last sale price of the Class A ADSs for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent.
Listing
ListCo intends to apply to list the Class A ADSs and the Public ADWs or Class C-1 ADSs on Nasdaq under the symbols PSNY and PSNYW, respectively, upon the Closing. ListCo cannot assure you that the Class A ADSs and the Public ADWs or Class C-1 ADSs will be approved for listing on Nasdaq.
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DESCRIPTION OF THE POST-COMBINATION COMPANYS AMERICAN DEPOSITARY SECURITIES
The below summarizes the terms of the ADSs and ADWs.
ADSs
Citibank, N.A. has agreed to act as the depositary for ListCos American Depositary Shares. Citibanks depositary offices are located at 388 Greenwich Street, New York, New York 10013. American Depositary Shares are frequently referred to as ADSs and represent ownership interests in securities that are on deposit with the depositary. ADSs may be represented by certificates that are commonly known as American Depositary Receipts or ADRs. The depositary typically appoints a custodian to safekeep the securities on deposit. In this case, the custodian is Citibank, N.A. (London).
ListCo will appoint Citibank as depositary pursuant to three separate deposit agreements, one for the Class A ADSs representing Post-Combination Company Class A Shares, one for the Class C-1 ADSs representing Post-Combination Company Class C-1 Shares and one for the Class C-2 ADSs representing Post-Combination Company Class C-2 Shares (as applicable). ListCo may refer to the Post-Combination Company Class A Shares, the Post-Combination Company Class C-1 Shares and the Post-Combination Company Class C-2 Shares as the Shares and any such reference is to the applicable Shares of the Class corresponding to the applicable ADSs. A draft copy of each of the deposit agreements is on file with the SEC under cover of Registration Statements on Form F-6. You may obtain a copy of the deposit agreements from the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and from the SECs website (www.sec.gov). Please refer to Registration Number 333-263479 (for the Class A ADSs), 333-263480 (for the Class C-1 ADSs), and 333-263481 (for the Class C-2 ADSs), respectively, when retrieving such copy.
ListCo is providing you with a summary description of the material terms of the ADSs and of your material rights as an owner of ADSs. Please remember that summaries by their nature lack the precision of the information summarized and that the rights and obligations of an owner of ADSs will be determined by reference to the terms of the applicable deposit agreement and not by this summary. Any reference herein to deposit agreement is to the deposit agreement for the applicable ADSs, that is: the Post-Combination Company Class A Share deposit agreement governs the Class A ADSs representing the Post-Combination Company Class A Shares, the Post-Combination Company Class C-1 Share deposit agreement governs the Class C-1 ADSs representing the Post-Combination Company Class C-1 Shares and the Post-Combination Company Class C-2 Share deposit agreement governs the Class C-2 ADSs representing the Post-Combination Company Class C-2 Shares. As such, holders of ADSs representing one class of Shares have no rights or obligations under the deposit agreement for any other class of Shares. ListCo urges you to review the applicable deposit agreements in their entirety. The portions of this summary description that are italicized describe matters that may be relevant to the ownership of ADSs but that may not be contained in the deposit agreements.
Each ADS represents the right to receive, and to exercise the beneficial ownership interests in, one Post-Combination Company Class A Share (in the case of a Class A ADS), or one Post-Combination Company Class C-1 Share (in the case of a Class C-1 ADS), or one Post-Combination Company Class C-2 Share (in the case of a Class C-2 ADS), on deposit with the depositary and/or custodian. An ADS also represents the right to receive, and to exercise the beneficial interests in, any other property received by the depositary or the custodian on behalf of the owner of the ADS but that has not been distributed to the owners of ADSs because of legal restrictions or practical considerations. ListCo and the depositary may agree to change the ADS-to-Share ratio by amending the applicable deposit agreement. This amendment may give rise to, or change, the depositary fees payable by ADS owners. The custodian, the depositary and their respective nominees will hold all deposited property for the benefit of the holders and beneficial owners of the applicable ADSs. The deposited property does not constitute the proprietary assets of the depositary, the custodian or their nominees. Beneficial ownership in the deposited property will under the terms of the deposit agreement be vested in the beneficial owners of the
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applicable ADSs. The depositary, the custodian and their respective nominees will be the record holders of the deposited property represented by the ADSs for the benefit of the holders and beneficial owners of the corresponding ADSs. A beneficial owner of ADSs may or may not be the holder of ADSs. Beneficial owners of ADSs will be able to receive, and to exercise beneficial ownership interests in, the applicable deposited property only through the registered holders of the ADSs, the registered holders of the ADSs (on behalf of the applicable ADS owners) only through the depositary, and the depositary (on behalf of the owners of the corresponding ADSs) directly, or indirectly, through the custodian or their respective nominees, in each case upon the terms of the deposit agreement.
If you become an owner of ADSs, you will become a party to the applicable deposit agreement and therefore will be bound to its terms and to the terms of any ADR that represents your ADSs. The deposit agreement for your ADSs, and the ADR evidencing your ADSs specify ListCos rights and obligations as well as your rights and obligations as an owner of ADSs and those of the depositary. As an ADS holder you appoint the depositary to act on your behalf in certain circumstances. The deposit agreement and the ADRs are governed by New York law. However, ListCos obligations to the holders of Post-Combination Company Shares will continue to be governed by the laws of England and Wales, which may be different from the laws in the United States.
In addition, applicable laws and regulations may require you to satisfy reporting requirements and obtain regulatory approvals in certain circumstances. You are solely responsible for complying with such reporting requirements and obtaining such approvals. Neither the depositary, the custodian, ListCo or any of its or its respective agents or affiliates shall be required to take any actions whatsoever on your behalf to satisfy such reporting requirements or obtain such regulatory approvals under applicable laws and regulations.
As an owner of ADSs, ListCo will not treat you as one of its shareholders and you will not have direct shareholder rights. The depositary will hold on your behalf the shareholder rights attached to the Post-Combination Company Shares underlying your ADSs. As an owner of ADSs you will be able to exercise the shareholders rights for the Shares represented by your ADSs through the depositary only to the extent contemplated in the deposit agreement. To exercise any shareholder rights not contemplated in the deposit agreement you will, as an ADS owner, need to arrange for the cancellation of your ADSs and become a direct shareholder.
The manner in which you own the ADSs (e.g., in a brokerage account vs. as registered holder, or as holder of certificated vs. uncertificated ADSs) may affect your rights and obligations, and the manner in which, and extent to which, the depositarys services are made available to you. As an owner of ADSs, you may hold your ADSs either by means of an ADR registered in your name, through a brokerage or safekeeping account, or through an account established by the depositary in your name reflecting the registration of uncertificated ADSs directly on the books of the depositary (commonly referred to as the direct registration system or DRS). The direct registration system reflects the uncertificated (book-entry) registration of ownership of ADSs by the depositary. Under the direct registration system, ownership of ADSs is evidenced by periodic statements issued by the depositary to the holders of the ADSs. The direct registration system includes automated transfers between the depositary and The Depository Trust Company (DTC), the central book-entry clearing and settlement system for equity securities in the United States. If you decide to hold your ADSs through your brokerage or safekeeping account, you must rely on the procedures of your broker or bank to assert your rights as ADS owner. Banks and brokers typically hold securities such as the ADSs through clearing and settlement systems such as DTC. The procedures of such clearing and settlement systems may limit your ability to exercise your rights as an owner of ADSs. Please consult with your broker or bank if you have any questions concerning these limitations and procedures. All ADSs held through DTC will be registered in the name of a nominee of DTC, which nominee will be the only holder of such ADSs for purposes of the deposit agreement and any applicable ADR. This summary description assumes you have opted to own the ADSs directly by means of an ADS registered in your name and, as such, this section will refer to you as the holder. The references to you assume the reader owns ADSs and will own ADSs at the relevant time.
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The registration of the Shares in the name of the depositary or the custodian shall, to the maximum extent permitted by applicable law, vest in the depositary or the custodian the record ownership in the applicable Shares with the beneficial ownership rights and interests in such Shares being at all times vested with the beneficial owners of the ADSs representing the applicable Shares. The depositary or the custodian shall at all times be entitled to exercise the beneficial ownership rights in all corresponding deposited property, in each case only on behalf of the holders and beneficial owners of the ADSs representing the deposited property.
Shares, the transfer of which is restricted due to contractual or regulatory limitations and commonly referred to as Restricted Shares, are eligible for deposit under the deposit agreements only in limited circumstances described under Restricted ADSs, below.
Dividends and Distributions
As a holder of ADSs, you generally have the right to receive the distributions ListCo makes on the corresponding securities deposited with the custodian. Your receipt of these distributions may be limited, however, by practical considerations and legal limitations. Holders of ADSs will receive such distributions under the terms of the deposit agreement in proportion to the number of ADSs held as of the specified record date, after deduction of the applicable fees, taxes and expenses.
Distributions of Cash
Whenever ListCo makes a cash distribution for the securities on deposit with the custodian, ListCo will deposit the funds with the custodian. Upon receipt of confirmation of the deposit of the requisite funds, the depositary will arrange for the funds received in a currency other than U.S. dollars to be converted into U.S. dollars and for the distribution of the U.S. dollars to the holders of the applicable ADSs, subject to the laws and regulations of England and Wales.
The conversion into U.S. dollars will take place only if practicable and if the U.S. dollars are transferable to the United States. The depositary will apply the same method for distributing the proceeds of the sale of any property (such as undistributed rights) held by the custodian in respect of securities on deposit.
The distribution of cash will be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. The depositary will hold any cash amounts it is unable to distribute in a non-interest bearing account for the benefit of the applicable holders and beneficial owners of ADSs until the distribution can be effected or the funds that the depositary holds must be escheated as unclaimed property in accordance with the laws of the relevant states of the United States.
Distributions of Shares
Whenever ListCo makes a free distribution of Shares for the securities on deposit with the custodian, ListCo will deposit the applicable number of Shares with the custodian. Upon receipt of confirmation of such deposit, the depositary will either distribute to the applicable holders new ADSs representing the Shares deposited or modify the ADS-to-Share ratio, in which case each ADS you hold will represent rights and interests in the additional Shares so deposited. Only whole new ADSs will be distributed. Fractional entitlements will be sold and the proceeds of such sale will be distributed as in the case of a cash distribution.
The distribution of new ADSs or the modification of the ADS-to-Share ratio upon a distribution of Shares will be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In order to pay such taxes or governmental charges, the depositary may sell all or a portion of the new Shares so distributed.
No such distribution of new ADSs will be made if it would violate a law (e.g., the U.S. securities laws) or if it is not operationally practicable. If the depositary does not distribute new ADSs as described above, it may sell the
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Shares received upon the terms described in the deposit agreement and will distribute the proceeds of the sale as in the case of a distribution of cash.
Distributions of Rights
Whenever ListCo intends to distribute rights to subscribe for additional Shares, ListCo will give prior notice to the depositary and will assist the depositary in determining whether it is lawful and reasonably practicable to distribute rights to subscribe for additional ADSs to the applicable holders.
The depositary will establish procedures to distribute rights to subscribe for additional ADSs to the applicable holders and to enable such holders to exercise such rights if it is lawful and reasonably practicable to make the rights available to the applicable holders of ADSs, and if ListCo provides all of the documentation contemplated in the deposit agreement (such as opinions to address the lawfulness of the transaction). You may have to pay fees, expenses, taxes and other governmental charges to subscribe for the new ADSs upon the exercise of your rights. The depositary is not obligated to establish procedures to facilitate the distribution and exercise by holders of rights to subscribe for new Shares other than in the form of ADSs.
The depositary will not distribute the rights to you if:
| ListCo does not timely request that the rights be distributed to you or ListCo requests that the rights not be distributed to you; |
| ListCo fails to deliver satisfactory documents to the depositary; or |
| It is not reasonably practicable to distribute the rights. |
The depositary will sell the rights that are not exercised or not distributed if such sale is lawful and reasonably practicable. The proceeds of such sale will be distributed to the applicable holders as in the case of a cash distribution. If the depositary is unable to sell the rights, it will allow the rights to lapse.
Elective Distributions
Whenever ListCo intends to distribute a dividend payable at the election of shareholders either in cash or in additional Shares, ListCo will give prior notice thereof to the depositary and will indicate whether ListCo wishes the elective distribution to be made available to you. In such case, ListCo will assist the depositary in determining whether such distribution is lawful and reasonably practicable.
The depositary will make the election available to you only if it is reasonably practicable and if ListCo has provided all of the documentation contemplated in the deposit agreement. In such case, the depositary will establish procedures to enable you to elect to receive either cash or additional ADSs, in each case as described in the deposit agreement.
If the election is not made available to you, you will receive either cash or additional ADSs, depending on what a shareholder in England and Wales would receive upon failing to make an election, as more fully described in the deposit agreement.
Other Distributions
Whenever ListCo intends to distribute property other than cash, Shares or rights to subscribe for additional Shares, ListCo will notify the depositary in advance and will indicate whether it wishes such distribution to be made to you. If so, ListCo will assist the depositary in determining whether such distribution to holders is lawful and reasonably practicable.
If it is reasonably practicable to distribute such property to you and if ListCo provides to the depositary all of the documentation contemplated in the deposit agreement, the depositary will distribute the property to the applicable holders in a manner it deems practicable.
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The distribution will be made net of fees, expenses, taxes and governmental charges payable by holders under the terms of the applicable deposit agreement. In order to pay such taxes and governmental charges, the depositary may sell all or a portion of the property received.
The depositary will not distribute the property to you and will sell the property if:
| ListCo does not request that the property be distributed to you or if ListCo requests that the property not be distributed to you; |
| ListCo does not deliver satisfactory documents to the depositary; or |
| The depositary determines that all or a portion of the distribution to you is not reasonably practicable. |
The proceeds of such a sale will be distributed to holders as in the case of a cash distribution.
Redemption and, with respect to Class C Shares, Mandatory Conversion
Whenever ListCo decides to exercise its right of redemption and/or, with respect to the Class C Shares, mandatory conversion, of any of the securities on deposit with the custodian, ListCo will notify the depositary in advance. If it is practicable and if ListCo provides all of the documentation contemplated in the deposit agreement, the depositary will provide notice of the redemption and/or, with respect to the Class C Shares, mandatory conversion to the applicable holders.
The custodian will be instructed to surrender the deposited securities being redeemed and/or, with respect to the Class C Shares, mandatorily converted against payment of the applicable redemption and/or, with respect to the Class C Shares, mandatory conversion price. The depositary will convert into U.S. dollars upon the terms of the deposit agreement the redemption funds received in a currency other than U.S. dollars and will establish procedures to enable holders to receive the net proceeds from the redemption and/or, with respect to the Class C Shares, mandatory conversion upon surrender of their ADSs to the depositary. You may have to pay fees, expenses, taxes and other governmental charges upon the redemption and/or, with respect to the Class C Shares, mandatory conversion of your ADSs. If less than all ADSs are being redeemed and/or, with respect to the Class C Shares, mandatorily converted, the ADSs to be retired will be selected by lot or on a pro rata basis, as the depositary may determine.
Changes affecting Shares
The Shares held on deposit for your ADSs may change from time to time. For example, there may be a change in nominal or par value, split-up, cancellation, consolidation or any other reclassification of such Shares or a recapitalization, reorganization, merger, consolidation or sale of assets of ListCo.
If any such change were to occur, your ADSs would, to the extent permitted by law and the deposit agreement, represent the right to receive the property received or exchanged in respect of the Shares held on deposit. The depositary may in such circumstances deliver new ADSs to you, amend the applicable deposit agreement, the applicable ADRs and the applicable Registration Statement(s) on Form F-6, call for the exchange of your existing ADSs for new ADSs and take any other actions that are appropriate to reflect as to the ADSs the change affecting the Shares. If the depositary may not lawfully distribute such property to you, the depositary may sell such property and distribute the net proceeds to you as in the case of a cash distribution.
Issuance of ADSs upon Deposit of Shares
Upon completion of the Business Combination, the Shares being offered pursuant to this proxy statement/prospectus will be deposited by ListCo with the custodian. Upon receipt of confirmation of such deposit, the depositary expects to issue ADSs representing the deposited Shares to the order of Computershare Inc., a Delaware corporation and Computershare Trust Company, N.A., a federally chartered trust company, in their capacities as transfer agent and exchange agent for the Business Combination for the distribution to the holders of GGI shares of Common Stock and GGI Warrants entitled thereto.
After the Closing, the depositary may create ADSs on your behalf if you or your broker deposit Shares with the custodian. The depositary will deliver the corresponding ADSs to the person you indicate only after you pay any
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applicable issuance fees and any charges and taxes payable for the transfer of the Shares to the custodian. Your ability to deposit Shares and receive ADSs may be limited by U.S. and English legal considerations applicable at the time of deposit.
The issuance of ADSs may be delayed until the depositary or the custodian receives confirmation that all required approvals have been given and that the Shares have been duly transferred to the custodian. The depositary will only issue ADSs in whole numbers.
When you make a deposit of Shares, you will be responsible for transferring good and valid title to the depositary. As such, you will be deemed to represent and warrant that:
| The Shares are duly authorized, validly issued, fully paid, non-assessable and legally obtained. |
| All preemptive (and similar) rights, if any, with respect to such Shares have been validly waived or exercised. |
| You are duly authorized to deposit the Shares. |
| The Shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, and are not, and the ADSs issuable upon such deposit will not be, restricted securities (except as contemplated below and in the applicable deposit agreement). |
| The Shares presented for deposit have not been stripped of any rights or entitlements. |
If any of the representations or warranties are incorrect in any way, ListCo and the depositary may, at your cost and expense, take any and all actions necessary to correct the consequences of the misrepresentations.
Transfer, Combination, and Split Up of ADRs
As an ADR holder, you will be entitled to transfer, combine or split up your ADRs and the ADSs evidenced thereby. For transfers of ADRs, you will have to surrender the ADRs to be transferred to the depositary and also must:
| ensure that the surrendered ADR is properly endorsed or otherwise in proper form for transfer; |
| provide such proof of identity and genuineness of signatures as the depositary deems appropriate; |
| provide any transfer stamps required by the State of New York or the United States; and |
| pay all applicable fees, charges, expenses, taxes and other government charges payable by ADR holders pursuant to the terms of the deposit agreement, upon the transfer of ADRs. |
To have your ADRs either combined or split up, you must surrender the ADRs in question to the depositary with your request to have them combined or split up, and you must pay all applicable fees, charges and expenses payable by ADR holders, pursuant to the terms of the deposit agreement, upon a combination or split up of ADRs.
Withdrawal of Shares Upon Cancellation of ADSs
As a holder, you will be entitled to present your ADSs to the depositary for cancellation and then receive the corresponding number of underlying Shares at the custodians offices. Your ability to withdraw the Shares held in respect of the ADSs may be limited by U.S. and English legal considerations applicable at the time of withdrawal. In order to withdraw the Shares represented by your ADSs, you will be required to pay to the depositary the fees for cancellation of ADSs and any charges and taxes payable upon the transfer of the Shares. You assume the risk for delivery of all funds and securities upon withdrawal. Once canceled, the ADSs will not have any rights under the deposit agreement.
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If you hold ADSs registered in your name, the depositary may ask you to provide proof of identity and genuineness of any signature and such other documents as the depositary may deem appropriate before it will cancel your ADSs. The withdrawal of the Shares represented by your ADSs may be delayed until the depositary receives satisfactory evidence of compliance with all applicable laws and regulations. Please keep in mind that the depositary will only accept ADSs for cancellation that represent a whole number of securities on deposit.
You will have the right to withdraw the securities represented by your ADSs at any time except for:
| Temporary delays that may arise because (i) the transfer books for the Shares or ADSs are closed, or (ii) the Shares are immobilized on account of a shareholders meeting or a payment of dividends. |
| Obligations to pay fees, taxes and similar charges. |
| Restrictions imposed because of laws or regulations applicable to ADSs or the withdrawal of securities on deposit. |
The deposit agreement may not be modified to impair your right to withdraw the securities represented by your ADSs except to comply with mandatory provisions of law.
Voting Rights
As a holder, you generally have the right under the deposit agreement to instruct the depositary to exercise the voting rights for the Shares represented by your ADSs. The voting rights of holders of Shares are described in the section of this proxy statement/prospectus titled Description of ListCos Securities.
At ListCos request, the depositary will distribute to you any notice of shareholders meeting received from ListCo together with information explaining how to instruct the depositary to exercise the voting rights of the securities represented by ADSs. In lieu of distributing such materials, the depositary may distribute to holders of ADSs instructions on how to retrieve such materials upon request.
If the depositary timely receives voting instructions from a holder of ADSs as of a specified record date, it will endeavor to vote the securities (in person or by proxy) represented by the holders ADSs in accordance with the voting instructions received from the holders of ADSs.
Deposited Securities represented by ADSs for which no timely voting instructions are received by the depositary from the holder shall not be voted (except as otherwise contemplated in the deposit agreement). If the depositary timely receives voting instructions from a holder which fail to specify the manner in which the depositary is to vote the Deposited Securities represented by such holders ADSs, the depositary will deem such holder (unless otherwise specified in the notice distributed to holders) to have instructed the depositary to vote in favor of the items set forth in such voting instructions.
Please note that the ability of the depositary to carry out voting instructions may be limited by practical and legal limitations and the terms of the securities on deposit. ListCo cannot assure you that you will receive voting materials in time to enable you to return voting instructions to the depositary in a timely manner.
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Fees and Charges
As an ADS holder, you will be required to pay the following fees under the terms of the deposit agreement:
Service |
Fees | |||
Other than the initial deposit in connection with the Business Combination, issuance of ADSs (e.g., an issuance of ADS upon a deposit of Shares, upon a change in the ADS(s)-to-Share ratio, upon an exercise of Post-Combination Company Warrants/ADWs or conversion of Post-Combination Company Class C Shares/ Class C ADSs or for any other reason), excluding ADS issuances as a result of distributions of Shares |
Up to US$0.05 per ADS issued | |||
Cancellation of ADSs (e.g., a cancellation of ADSs for delivery of deposited property, upon a change in the ADS(s)-to-Share ratio, or for any other reason) |
Up to US$0.05 per ADS cancelled | |||
Distribution of cash dividends or other cash distributions (e.g., upon a sale of rights and other entitlements) |
Up to US$0.05 per ADS held | |||
Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs |
|
Up to US$0.05 per ADS held | ||
Distribution of securities other than ADSs or rights to purchase additional ADSs (e.g., upon a spin-off) |
Up to US$0.05 per ADS held | |||
ADS Services |
|
Up to US$0.05 per ADS held on the applicable record date(s) established by the depositary | ||
Registration of ADS transfers (e.g., upon a registration of the transfer of registered ownership of ADSs, upon a transfer of ADSs into DTC and vice versa, or for any other reason) |
Up to US$0.05 per ADS (or fraction thereof) transferred | |||
Conversion of ADSs of one series for ADSs of another series (e.g., upon conversion of Partial Entitlement ADSs for Full Entitlement ADSs, upon conversion of Class C ADSs into Class A ADSs, or upon conversion of Restricted ADSs (each as defined in the applicable deposit agreement) into freely transferable ADSs, and vice versa). |
Up to US$0.05 per ADS (or fraction thereof) converted |
As an ADS holder, you will also be responsible to pay certain charges such as:
| taxes (including applicable interest and penalties) and other governmental charges (including any applicable stamp duty or SDRT); |
| the registration fees as may from time to time be in effect for the registration of Shares on the share register and applicable to transfers of Shares to or from the name of the custodian, the depositary or any nominees upon the making of deposits and withdrawals, respectively; |
| certain cable, telex and facsimile transmission and delivery expenses; |
| the fees, expenses, spreads, taxes and other charges of the depositary and/or service providers (which may be a division, branch or affiliate of the depositary) in the conversion of foreign currency; |
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| the reasonable and customary out-of-pocket expenses incurred by the depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Shares, ADSs and ADRs; |
| the fees, charges, costs and expenses incurred by the depositary, the custodian, or any nominee in connection with the ADR program; and |
| the amounts payable to the depositary by any party to the applicable deposit agreement pursuant to any ancillary agreement to the applicable deposit agreement in respect of the ADR program, the ADSs, and the ADRs. |
ADS fees and charges for (i) the issuance of ADSs, and (ii) the cancellation of ADSs are charged to the person for whom the ADSs are issued (in the case of ADS issuances) and to the person for whom ADSs are cancelled (in the case of ADS cancellations). In the case of ADSs issued by the depositary into DTC, the ADS issuance and cancellation fees and charges may be deducted from distributions made through DTC, and may be charged to the DTC participant(s) receiving the ADSs being issued or the DTC participant(s) holding the ADSs being cancelled, as the case may be, on behalf of the beneficial owner(s) and will be charged by the DTC participant(s) to the account of the applicable beneficial owner(s) in accordance with the procedures and practices of the DTC participants as in effect at the time. ADS fees and charges in respect of distributions and the ADS service fee are charged to the holders as of the applicable ADS record date. In the case of distributions of cash, the amount of the applicable ADS fees and charges is deducted from the funds being distributed. In the case of (i) distributions other than cash and (ii) the ADS service fee, holders as of the ADS record date will be invoiced for the amount of the ADS fees and charges and such ADS fees and charges may be deducted from distributions made to holders of ADSs. For ADSs held through DTC, the ADS fees and charges for distributions other than cash and the ADS service fee may be deducted from distributions made through DTC, and may be charged to the DTC participants in accordance with the procedures and practices prescribed by DTC and the DTC participants in turn charge the amount of such ADS fees and charges to the beneficial owners for whom they hold ADSs. In the case of (i) registration of ADS transfers, the ADS transfer fee will be payable by the ADS holder whose ADSs are being transferred or by the person to whom the ADSs are transferred, and (ii) conversion of ADSs of one series for ADSs of another series, the ADS conversion fee will be payable by the holder whose ADSs are converted or by the person to whom the converted ADSs are delivered.
In the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder. Certain depositary fees and charges (such as the ADS services fee) may become payable shortly after the completion of the Business Combination. Note that the fees and charges you may be required to pay may vary over time and may be changed by ListCo and by the depositary. You will receive prior notice of such changes. The depositary may reimburse ListCo for certain expenses incurred by ListCo in respect of the ADR program, by making available a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as ListCo and the depositary agree from time to time.
Amendments and Termination
ListCo may agree with the depositary to modify the deposit agreement at any time without your consent. ListCo undertake to give holders of the applicable ADSs 30 days prior notice of any modifications that would materially prejudice any of their substantial rights under the deposit agreement. ListCo will not consider to be materially prejudicial to your substantial rights any modifications or supplements that are reasonably necessary for the ADSs to be registered under the Securities Act or to be eligible for book-entry settlement, in each case without imposing or increasing the fees and charges you are required to pay. In addition, ListCo may not be able to provide you with prior notice of any modifications or supplements that are required to accommodate compliance with applicable provisions of law.
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You will be bound by the modifications to the deposit agreement for your ADSs if you continue to hold your ADSs after the modifications to the deposit agreement become effective. The deposit agreement cannot be amended to prevent you from withdrawing the Shares represented by your ADSs (except as permitted by law).
ListCo has the right to direct the depositary to terminate the deposit agreement. Similarly, the depositary may in certain circumstances on its own initiative terminate the deposit agreement. In either case, the depositary must give notice to the holders of ADSs issued under that deposit agreement at least 30 days before termination. Until termination, your rights under the deposit agreement will be unaffected.
After termination, the depositary will continue to collect distributions received (but will not distribute any such property until you request the cancellation of your ADSs) and may sell the securities held on deposit under the terminated deposit agreement. After the sale, the depositary will hold the proceeds from such sale and any other funds then held for the applicable holders of ADSs in a non-interest bearing account. At that point, the depositary will have no further obligations to holders other than to account for the funds then held for the applicable holders of ADSs still outstanding (after deduction of applicable fees, taxes and expenses).
In connection with any termination of the deposit agreement, the depositary may make available to owners of ADSs a means to withdraw the Post-Combination Company Shares represented by ADSs and to direct the depositary of such Shares into an unsponsored American depositary share program established by the depositary. The ability to receive unsponsored American depositary shares upon termination of the deposit agreement would be subject to satisfaction of certain U.S. regulatory requirements applicable to the creation of unsponsored American depositary shares and the payment of applicable depositary fees.
Books of Depositary
The depositary will maintain ADS holder records at its depositary office. You may inspect such records at such office during regular business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the ADSs and the deposit agreement.
The depositary will maintain in New York facilities to record and process the issuance, cancellation, combination, split-up and transfer of ADSs. These facilities may be closed from time to time, to the extent not prohibited by law.
Transmission of Notices, Reports and Proxy Soliciting Material
The depositary will make available for your inspection at its office all communications that it receives from ListCo as a holder of deposited securities that ListCo make generally available to holders of deposited securities. Subject to the terms of the deposit agreement, the depositary will send you copies of those communications or otherwise make those communications available to you if ListCo asks it to do so.
Limitations on Obligations and Liabilities
The deposit agreement limits ListCos obligations and the depositarys obligations to you. Please note the following:
| ListCo and the depositary are obligated only to take the actions specifically stated in the deposit agreement without negligence or bad faith. |
| The depositary disclaims any liability for any failure to carry out voting instructions, for any manner in which a vote is cast or for the effect of any vote, provided it acts in good faith and in accordance with the terms of the deposit agreement. |
| The depositary disclaims any liability for any failure to accurately determine the lawfulness or practicality of any action, for the content of any document forwarded to you on ListCos behalf or |
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for the accuracy of any translation of such a document, for the investment risks associated with investing in Shares, for the validity or worth of the Shares, for any tax consequences that result from the ownership of ADSs or other deposited property, for the credit-worthiness of any third party, for allowing any rights to lapse under the terms of the deposit agreement, for the timeliness of any of ListCos notices or for ListCos failure to give notice or for any act or omission of or information provided by DTC or any DTC participant. |
| The depositary shall not be liable for acts or omissions of any successor depositary in connection with any matter arising wholly after the resignation or removal of the depositary. |
| ListCo and the depositary will not be obligated to perform any act that is inconsistent with the terms of the deposit agreement. |
| ListCo and the depositary disclaim any liability if ListCo or the depositary are prevented or forbidden from or subject to any civil or criminal penalty or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of the deposit agreement, by reason of any provision, present or future of any law or regulation, including regulations of any stock exchange or by reason of present or future provision of any provision of ListCos articles of association, or any provision of or governing the securities on deposit, or by reason of any act of God or war or other circumstances beyond ListCos control. |
| ListCo and the depositary disclaim any liability by reason of any exercise of, or failure to exercise, any discretion provided for in the deposit agreement or in ListCos articles of association or in any provisions of or governing the securities on deposit. |
| ListCo and the depositary further disclaim any liability for any action or inaction in reliance on the advice or information received from legal counsel, accountants, any person presenting securities for deposit, any holder of ADSs or authorized representatives thereof, or any other person believed by either of ListCo in good faith to be competent to give such advice or information. |
| ListCo and the depositary also disclaim liability for the inability by a holder or beneficial holder to benefit from any distribution, offering, right or other benefit that is made available to holders of Shares but is not, under the terms of the deposit agreement, made available to you. |
| ListCo and the depositary may rely without any liability upon any written notice, request or other document believed to be genuine and to have been signed or presented by the proper parties. |
| ListCo and the depositary also disclaim liability for any consequential or punitive damages for any breach of the terms of the deposit agreement. |
| ListCo and the depositary disclaim liability arising out of losses, liabilities, taxes, charges or expenses resulting from the manner in which a holder or beneficial owner of ADSs holds ADSs, including resulting from holding ADSs through a brokerage account. |
| No disclaimer of any Securities Act liability is intended by any provision of the deposit agreement. |
| Nothing in the deposit agreement gives rise to a partnership or joint venture, or establishes a fiduciary relationship, among ListCo, the depositary and you as ADS holder. |
| Nothing in the deposit agreement precludes Citibank (or its affiliates) from engaging in transactions in which parties adverse to ListCo or the ADS owners have interests, and nothing in the deposit agreement obligates Citibank to disclose those transactions, or any information obtained in the course of those transactions, to ListCo or to the ADS owners, or to account for any payment received as part of those transactions. |
Taxes
You will be responsible for the taxes and other governmental charges payable on the ADSs and the securities represented by the ADSs. ListCo, the depositary and the custodian may deduct from any distribution the taxes
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and governmental charges payable by holders and may sell any and all property on deposit to pay the taxes and governmental charges payable by holders. You will be liable for any deficiency if the sale proceeds do not cover the taxes that are due.
The depositary may refuse to issue ADSs, to deliver, transfer, split and combine ADRs or to release securities on deposit until all taxes and charges are paid by the applicable holder. The depositary and the custodian may take reasonable administrative actions to obtain tax refunds and reduced tax withholding for any distributions on your behalf. However, you may be required to provide to the depositary and to the custodian proof of taxpayer status and residence and such other information as the depositary and the custodian may require to fulfill legal obligations. You are required to indemnify ListCo, the depositary and the custodian for any claims with respect to taxes based on any tax benefit obtained for you.
Foreign Currency Conversion
The depositary will arrange for the conversion of all foreign currency received into U.S. dollars if such conversion is practical, and it will distribute the U.S. dollars in accordance with the terms of the deposit agreement. You may have to pay fees and expenses incurred in converting foreign currency, such as fees and expenses incurred in complying with currency exchange controls and other governmental requirements.
If the conversion of foreign currency is not practical or lawful, or if any required approvals are denied or not obtainable at a reasonable cost or within a reasonable period, the depositary may take the following actions in its discretion:
| Convert the foreign currency to the extent practical and lawful and distribute the U.S. dollars to the applicable holders for whom the conversion and distribution is lawful and practical. |
| Distribute the foreign currency to the applicable holders for whom the distribution is lawful and practical. |
| Hold the foreign currency (without liability for interest) for the applicable holders. |
Governing Law/Waiver of Jury Trial
The deposit agreement, the ADRs and the ADSs will be interpreted in accordance with the laws of the State of New York. The rights of holders of Shares (including Shares represented by ADSs) are governed by the laws of England and Wales.
As an owner of ADSs, you irrevocably agree that any legal action arising out of the Deposit Agreement, the ADSs or the ADRs, involving ListCo or the depositary, may only be instituted in a state or federal court in the city of New York.
AS A PARTY TO THE DEPOSIT AGREEMENT, YOU IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, YOUR RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF THE DEPOSIT AGREEMENT OR THE ADRs AGAINST LISTCO AND/OR THE DEPOSITARY.
The deposit agreement provides that, to the extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against ListCo or the depositary arising out of or relating to the Post-Combination Company Shares, the ADSs or the deposit agreement, including any claim under U.S. federal securities laws. If ListCo or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable in the facts and circumstances of that case in accordance with applicable case law. However, you will not be deemed, by agreeing to the terms of the deposit agreement, to have waived ListCos or the depositarys compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder.
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Restricted ADSs
In order to enable the deposit of Shares, the transfer of which is restricted due to contractual or regulatory limitations, commonly referred to as Restricted Shares, ListCo and the depositary have agreed, by means of letter agreements, to create restricted series of American Depositary Shares referred to as Restricted ADSs or RADSs, in accordance with the terms of the deposit agreements. The RADS letter agreements supplement the deposit agreements. Forms of the RADS letter agreements are on file with the SEC under cover of the applicable Registration Statements on Form F-6. You may obtain a copy of the RADS letter agreements from the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and from the depositary.
The Restricted ADSs differ from the freely transferable ADSs in certain respects. These differences include the following:
| Listing: The Restricted ADSs are not listed on any securities exchange or trading system in the United States. |
| CUSIP Number: The CUSIP number for the Restricted ADSs is different from the CUSIP number for the freely transferable ADSs |
| Transfer Restrictions: The Restricted ADSs may, after issuance, be sold or otherwise transferred only on the terms described below. |
| Legend: The Restricted ADSs will be subject to a transfer legend substantially in the form of all or some of the following: |
THE RESTRICTED ADSs AND THE RESTRICTED SHARES REPRESENTED THEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY JURISDICTION. THE RESTRICTED ADSs MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED OR DELIVERED EXCEPT (A) TO A PERSON OTHER THAN A U.S. PERSON (WITHIN THE MEANING GIVEN TO SUCH TERM IN REGULATION S UNDER THE SECURITIES ACT (REGULATION S)) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER, (C) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, OR (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT COVERING THE APPLICABLE SALE, PLEDGE, TRANSFER AND DELIVERY, AND, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. LISTCO AND THE DEPOSITARY SHALL BE ENTITLED TO RECEIVE FROM THE HOLDER OF THE RESTRICTED ADSs SEEKING TO SELL, PLEDGE OR OTHERWISE TRANSFER OR DELIVER THE RESTRICTED ADSs EVIDENCE SATISFACTORY TO THE DEPOSITARY AND LISTCO THAT THE TRANSFER RESTRICTIONS APPLICABLE TO THE RESTRICTED ADSs HAVE BEEN OR ARE BEING SATISFIED (WHICH MAY INCLUDE AN OPINION OF QUALIFIED COUNSEL).
THE RESTRICTED ADSs AND THE RESTRICTED SHARES REPRESENTED THEREBY ARE SUBJECT TO RESTRICTIONS PURSUANT TO THE SPONSOR AND SUPPORTING SPONSOR STOCKHOLDERS LOCK-UP AGREEMENT, DATED SEPTEMBER 27, 2021, AMONG POLESTAR AUTOMOTIVE HOLDING UK LIMITED (THE COMPANY), GORES GUGGENHEIM SPONSOR LLC AND THE OTHER PARTIES THERETO (AS AMENDED, THE SPONSOR LOCK UP AGREEMENT), OR THE PARENT LOCK-UP AGREEMENTS, DATED SEPTEMBER 27, 2021, AMONG LISTCO AND THE OTHER PARTIES THERETO (AS AMENDED, THE SPONSOR LOCK UP AGREEMENTS, AND TOGETHER WITH THE SPONSOR LOCK UP AGREEMENT, THE LOCK UP AGREEMENTS), AS APPLICABLE, MAY ONLY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED DURING THE TERM OF THE LOCK-UP PURSUANT TO THE TERMS SET FORTH IN THE LOCK UP AGREEMENTS, AS APPLICABLE.
The ADSs issued upon conversion of convertible RADSs may be issued in the form of RADSs unless the conversion (x) is registered under the Securities Act and the ADSs are held by a person who is not an affiliate of
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ListCo and (y) is exempt from registration under the Securities Act and the ADSs are held by a person who is not an affiliate of ListCo.
| Segregation of Shares: Restricted Shares deposited with the custodian with respect to Restricted ADSs shall be held separate and distinct from the deposited securities held under the applicable deposit agreement. |
| Lack of Fungibility: The Restricted ADSs are not currently fungible with the freely transferable ADSs issued and outstanding under the applicable deposit agreement. The Restricted ADSs will not be fungible with the freely transferable ADSs outstanding under the applicable deposit |
agreement as long as the Restricted ADSs and the Restricted Shares represented thereby are restricted securities under the Securities Act or are otherwise subject to restrictions on transfer. |
| Withdrawal: The holders of Restricted ADSs will be able to request the withdrawal of the Restricted Shares represented by their Restricted ADSs only upon delivery to the depositary of (i) the applicable RADSs, all documentation contemplated in the applicable deposit agreement and the applicable RADS letter agreement and payment of all applicable fees and expenses of the depositary, and (ii) a certification to the effect, inter alia, that either (x) the holder will be the owner of the Restricted Shares being withdrawn and undertakes not to deposit the Restricted Shares under the applicable deposit agreement and to transfer such Restricted Shares only in a transaction meeting the requirements of the legend set forth above or (y) the holder has sold the Restricted Shares in a transaction meeting the requirements of Regulation S under the Securities Act and will make delivery of the Restricted Shares outside the U.S. |
| Book-Entry Settlement: The Restricted ADSs are not expected to be eligible for inclusion in any book-entry settlement system, including, without limitation, the book-entry settlement system maintained by DTC. |
| Conversion of RADSs into ADSs: Once the applicable transfer restrictions expire or if the transaction is covered by an effective resale registration statement, the RADSs may be exchangeable into freely transferable ADSs upon delivery of the RADSs to the depositary for exchange into freely transferable ADSs together with applicable supporting documents, legal opinions and depositary fees and taxes. |
Conversion of Class C ADSs
Holders of Class C ADSs representing Post-Combination Company Class C Shares may convert the Class C ADSs into Class A ADSs representing Post-Combination Company Class A Shares on any New York and UK business day at any time commencing on the later of 30 days after the completion of the Business Combination and March 25, 2022, subject in each case to the terms and conditions of the applicable Post-Combination Company Class C Shares and the deposit agreement. Post-Combination Company Class C Shares will only be accepted for conversion in multiples of one.
Any holder of Class C ADSs wishing to convert the Post-Combination Company Class C Shares represented by their Class C ADSs into Class A ADSs will need to take the following actions:
| deliver the applicable Class C ADSs to the depositary, or one of its agents, together with instructions to cancel such Class C ADSs and to deliver the corresponding Post-Combination Company Class C Shares for conversion into Post-Combination Company Class A Shares in the form of Class A ADSs and pay to the applicable conversion agent the applicable ADS fees; and |
| deliver to Citibank, N.A., as conversion agent and the depositary, a duly completed ADS / Post-Combination Company Class C Share conversion form together with the applicable conversion price (in U.S Dollars) and applicable taxes. |
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Holders of Class C ADSS who duly convert the Post-Combination Company Class C Shares represented by their Class C ADSs will receive Post-Combination Company Class A Shares represented by Class A ADSs, subject in each case to the terms of the Post-Combination Company Class C Shares in the Post-Combination Company Articles and the applicable deposit agreement.
A holder who converts the Post-Combination Company Class C Shares represented by their Class C ADSs will become the owner of Post-Combination Company Class A Shares only upon receipt by the applicable conversion agent, of (i) the requisite Post-Combination Company Class C Shares (upon cancellation of Class C ADSs), (ii) the duly completed conversion form, and (iii) the applicable conversion price and taxes. The form conversion instructions to be delivered to the applicable conversion agent, may be obtained from the depositary.
If ListCo suspends the right to convert Post-Combination Company Class C Shares at any time, ListCo will give notice thereof to the depositary setting forth the term and reason for such suspension. Upon receipt of such notice, the depositary shall give notice thereof to the holders of Class C ADSs and shall refuse during the period of such suspension to accept instructions to cancel Class C ADSs for the purpose of converting Post-Combination Company Class C Shares.
ADWs
In the event that the Warrant Amendment Proposal is not approved, Citibank, N.A. has agreed to act as the depositary for the American Depositary Warrants. Citibanks depositary offices are located at 388 Greenwich Street, New York, New York 10013. American Depositary Warrants are referred to as ADWs and represent ownership interests in securities that are on deposit with the depositary. ADWs may be represented by certificates that are commonly known as American Depositary Warrant Receipts or ADWRs. The depositary typically appoints a custodian to safekeep the securities on deposit. In this case, the custodian is Citibank, N.A. (London).
ListCo will appoint Citibank as depositary for the ADWs pursuant to a deposit agreement. A draft of the deposit agreement for the ADWs is on file with the SEC under cover of a Registration Statement on Form F-6. You may obtain a copy of the deposit agreement from the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and from the SECs website (www.sec.gov). Please refer to Registration Number 333-263497 when retrieving such copy.
ListCo is providing you with a summary description of the material terms of the ADWs and of your material rights as an owner of ADWs. Please remember that summaries by their nature lack the precision of the information summarized and that a holders rights and obligations as an owner of ADWs will be determined by the deposit agreement and not by this summary. ListCo urges you to review the deposit agreement in its entirety as well as the form of ADWR attached to the deposit agreement. The portions of this summary description that are italicized describe matters that may be relevant to the ownership of ADWs but that may not be contained in the deposit agreement.
Each ADW represents one Post-Combination Company Warrant on deposit with the depositary and/or the custodian. An ADW will also represent any other property received by the depositary or the custodian on behalf of the owner of the ADW but that has not been distributed to the owners of ADWs because of legal restrictions or practical considerations. ListCo and the depositary may agree to change the ADW-to-Post-Combination Company Warrant ratio by amending the deposit agreement. This amendment may give rise to, or change, the depositary fees payable by ADW owners. The custodian, the depositary and their respective nominees will hold all deposited property for the benefit of the holders and beneficial owners of ADWs. The deposited property does not constitute the proprietary assets of the depositary, the custodian or their nominees. Beneficial ownership in the deposited property will under the terms of the deposit agreement be vested in the beneficial owners of the ADWs. The depositary, the custodian and their respective nominees will be the record holders of the deposited property represented by the ADWs for the benefit of the holders and beneficial owners of the corresponding ADWs. A beneficial owner of ADWs may or may not be the holder of ADWs. Beneficial owners of ADWs will be able to receive, and to exercise beneficial ownership interests in, the deposited property only through the registered holders of the ADWs, the registered holders of the ADWs (on behalf of the applicable ADW owners) only through the
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depositary, and the depositary (on behalf of the owners of the corresponding ADWs) directly, or indirectly, through the custodian or their respective nominees, in each case upon the terms of the deposit agreement.
If you become an owner of ADWs, you will become a party to the deposit agreement and therefore will be bound to its terms and to the terms of the ADWR that represents your ADWs. The deposit agreement and the ADWR specify ListCos rights and obligations as well as your rights and obligations as an owner of ADWs and those of the depositary. As an ADW holder you appoint the depositary to act on your behalf in certain circumstances. The deposit agreement is governed by New York law. However, ListCos obligations to the holders of Post-Combination Company Warrants will continue to be governed by the laws of England and Wales, which may be different from the laws in the United States.
In addition, applicable laws and regulations may require you to satisfy reporting requirements and obtain regulatory approvals in certain circumstances. You are solely responsible for complying with such reporting requirements and obtaining such approvals. Neither the depositary, the custodian, ListCo or any of its or its respective agents or affiliates shall be required to take any actions whatsoever on your behalf to satisfy such reporting requirements or obtain such regulatory approvals under applicable laws and regulations.
As an owner of ADWs, ListCos will not treat you as one of ListCos warrant holders and you will not have direct warrant holder rights. The depositary will hold on your behalf the warrant holder rights attached to the Post-Combination Company Warrants underlying your ADWs. As an owner of ADWs you will be able to exercise the warrant holders rights for the Post-Combination Company Warrants represented by your ADWs through the depositary only to the extent contemplated in the deposit agreement. To exercise any warrant holder rights not contemplated in the deposit agreement you will, as an ADW owner, need to arrange for the cancellation of your ADWs and become a direct warrant holder.
The manner in which you own the ADWs (e.g., in a brokerage account vs. as registered holder, or as holder of certificated vs. uncertificated ADWs) may affect your rights and obligations, and the manner in which, and extent to which, the depositarys services are made available to you. As an owner of ADWs, you may hold your ADWs either by means of an ADWR registered in your name, through a brokerage or safekeeping account, or through an account established by the depositary in your name reflecting the registration of uncertificated ADWs directly on the books of the depositary (commonly referred to as the direct registration system or DRS). The direct registration system reflects the uncertificated (book-entry) registration of ownership of ADWs by the depositary. Under the direct registration system, ownership of ADWs is evidenced by periodic statements issued by the depositary to the holders of the ADWs. The direct registration system includes automated transfers between the depositary and The Depository Trust Company (DTC), the central book-entry clearing and settlement system for equity securities in the United States. If you decide to hold your ADWs through your brokerage or safekeeping account, you must rely on the procedures of your broker or bank to assert your rights as ADW owner. Banks and brokers typically hold securities such as the ADWs through clearing and settlement systems such as DTC. The procedures of such clearing and settlement systems may limit your ability to exercise your rights as an owner of ADWs. Please consult with your broker or bank if you have any questions concerning these limitations and procedures. All ADWs held through DTC will be registered in the name of a nominee of DTC, which nominee will be the only holder of such ADWs for purposes of the deposit agreement and any applicable ADWR. This summary description assumes you have opted to own the ADWs directly by means of an ADW registered in your name and, as such, this section will refer to you as the holder. The references to you, assumes the reader owns ADWs and will own ADWs at the relevant time.
The registration of the Post-Combination Company Warrants in the name of the depositary or the custodian shall, to the maximum extent permitted by applicable law, vest in the depositary or the custodian the record ownership in the applicable Post-Combination Company Warrants with the beneficial ownership rights and interests in such Post-Combination Company Warrants being at all times vested with the beneficial owners of the ADWs representing the applicable Post-Combination Company Warrants. The depositary or the custodian shall at all times be entitled to exercise the beneficial ownership rights in all deposited property, in each case only on behalf of the holders and beneficial owners of the ADWs representing the deposited property.
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Distributions
As a holder, you generally have the right to receive the distributions ListCo makes on the securities deposited with the custodian bank. Your receipt of these distributions may be limited, however, by practical considerations and legal limitations. Holders will receive such distributions under the terms of the deposit agreement in proportion to the number of ADWs held as of the specified record date, after deduction of the applicable fees, taxes and expenses.
Distributions of Cash
Whenever ListCo makes a cash distribution for the securities on deposit with the custodian, ListCo will notify the depositary. Upon receipt of such notice, the depositary will arrange for the funds to be converted into U.S. dollars and for the distribution of the U.S. dollars to the holders.
The conversion into U.S. dollars will take place only if practicable and if the U.S. dollars are transferable to the United States. The amounts distributed to holders will be net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. The depositary will apply the same method for distributing the proceeds of the sale of any property (such as undistributed rights) held by the custodian in respect of securities on deposit.
Distributions of Warrants
Whenever ListCo makes a free distribution of Post-Combination Company Warrants for the securities on deposit with the custodian, ListCo will notify the depositary. Upon receipt of such notice, the depositary will either distribute to holders new ADWs representing the Post-Combination Company Warrants deposited or modify the ADW to Post-Combination Company Warrants ratio, in which case each ADW you hold will represent rights and interests in the additional Post-Combination Company Warrants so deposited. Only whole new ADWs will be distributed. Fractional entitlements will be sold and the proceeds of such sale will be distributed as in the case of a cash distribution.
The distribution of new ADWs or the modification of the ADW-to-Post-Combination Company Warrant ratio upon a distribution of Post-Combination Company Warrants will be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In order to pay such taxes or governmental charges, the depositary may sell all or a portion of the new Post-Combination Company Warrants so distributed.
No such distribution of new ADWs will be made if it would violate a law (i.e., the U.S. securities laws) or if it is not operationally practicable. If the depositary does not distribute new ADWs as described above, it may sell the Post-Combination Company Warrants received upon the terms described in the deposit agreement and will distribute the proceeds of the sale as in the case of a distribution of cash.
Distributions of Rights
Whenever ListCo intends to distribute rights to purchase additional Post-Combination Company Warrants, ListCo will give prior notice to the depositary and ListCo will assist the depositary in determining whether it is lawful and reasonably practicable to distribute rights to purchase additional ADWs to holders.
The depositary will establish procedures to distribute rights to purchase additional ADWs to holders and to enable such holders to exercise such rights if it is lawful and reasonably practicable to make the rights available to holders of ADWs, and if ListCo provides all of the documentation contemplated in the deposit agreement (such as opinions to address the lawfulness of the transaction). You may have to pay fees, expenses, taxes and other governmental charges to subscribe for the new ADWs upon the exercise of your rights. The depositary is not obligated to establish procedures to facilitate the distribution and exercise by holders of rights to purchase new Post-Combination Company Warrants other than in the form of ADWs.
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The depositary will not distribute the rights to you if:
| ListCo does not request that the rights be distributed to you or ListCo asks that the rights not be distributed to you; or |
| ListCo fails to deliver satisfactory documents to the depositary; or |
| It is not reasonably practicable to distribute the rights. |
The depositary will sell the rights that are not exercised or not distributed if such sale is lawful and reasonably practicable. The proceeds of such sale will be distributed to holders as in the case of a cash distribution. If the depositary is unable to sell the rights, it will allow the rights to lapse.
Elective Distributions
Whenever ListCo intends to make a distribution payable at the election of Post-Combination Company Warrant holders either in cash or in additional Post-Combination Company Warrants, ListCo will give prior notice thereof to the depositary and will indicate whether ListCo wishes the elective distribution to be made available to you. In such case, ListCo will assist the depositary in determining whether such distribution is lawful and reasonably practicable.
The depositary will make the election available to you only if it is reasonably practicable and if ListCo has provided all of the documentation contemplated in the deposit agreement. In such case, the depositary will establish procedures to enable you to elect to receive either cash or additional ADWs, in each case as described in the deposit agreement.
If the election is not made available to you, you will receive either cash or additional ADWs, depending on what a Post-Combination Company warrant holder in England and Wales would receive for failing to make an election, as more fully described in the deposit agreement.
Other Distributions
Whenever ListCo intends to distribute property other than cash, Post-Combination Company Warrants or rights to purchase additional Post-Combination Company Warrants, ListCo will notify the depositary in advance and will indicate whether ListCo wishes such distribution to be made to you. If so, ListCo will assist the depositary in determining whether such distribution to holders is lawful and reasonably practicable.
If it is reasonably practicable to distribute such property to you and if ListCo provides all of the documentation contemplated in the deposit agreement, the depositary will distribute the property to the holders in a manner it deems practicable.
The distribution will be made net of fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In order to pay such taxes and governmental charges, the depositary may sell all or a portion of the property received.
The depositary will not distribute the property to you and will sell the property if:
| ListCo does not request that the property be distributed to you or if ListCo asks that the property not be distributed to you; or |
| ListCo does not deliver satisfactory documents to the depositary; or |
| The depositary determines that all or a portion of the distribution to you is not reasonably practicable. |
The proceeds of such a sale will be distributed to holders as in the case of a cash distribution.
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Redemption and, with respect to Class C Shares, Mandatory Conversion
Whenever ListCo decides to exercise its right of redemption and/or, with respect to the Class C Shares, mandatory conversion, of any of the securities on deposit with the custodian for the holders of ADWs, ListCo will notify the depositary. If it is reasonably practicable and if ListCo provides all of the documentation contemplated in the deposit agreement, the depositary will mail notice of the redemption and/or, with respect to the Class C Shares, mandatory conversion to the holders.
The custodian will be instructed to surrender the Post-Combination Company Warrants being redeemed and/or, with respect to the Class C Shares, mandatorily converted against payment of the applicable redemption and/or, with respect to the Class C Shares, mandatory conversion price. The depositary will convert the redemption funds received into U.S. dollars upon the terms of the deposit agreement and will establish procedures to enable holders to receive the net proceeds from the redemption and/or, with respect to the Class C Shares, mandatory conversion upon surrender of their ADWs to the depositary. You may have to pay fees, expenses, taxes and other governmental charges upon the redemption and/or, with respect to the Class C Shares, mandatory conversion of your ADWs. If less than all ADWs are being redeemed and/or, with respect to the Class C Shares, mandatorily converted, the ADWs to be retired will be selected by lot or on a pro rata basis, as the depositary may determine.
Changes Affecting Post-Combination Company Warrants
In the event that any of the terms of the Post-Combination Company Warrants are modified (i.e., upon the occurrence of a change in the number of Polestar shares to be issued upon exercise of Post-Combination Company Warrants), ListCo will give notice thereof to the depositary with instructions to provide notice thereof to holders of ADWs and will cooperate with the depositary in taking all reasonably necessary actions under the deposit agreement.
Upon any split-up, consolidation, cancellation or reclassification of Post-Combination Company Warrants or in the event of any recapitalization, reorganization, merger or consolidation or sale of assets that affect ListCo or to which ListCo is a party, ListCo will notify the depositary and the depositary will give notice thereof to the holders of ADWs. After the occurrence of such event, the ADWs will, to the maximum extent permitted by law, represent the right to receive the securities received by the custodian in exchange or conversion for the Post-Combination Company Warrants. In any such event, additional ADWs may be issued or existing ADWs may be called for surrender and exchange into new ADWs.
Exercise of Post-Combination Company Warrants
Holders of ADWs may exercise the Post-Combination Company Warrants represented by their ADWs on any New York and UK business day prior to the expiration of the Post-Combination Company Warrants, subject in each case to the terms and conditions of the Post-Combination Company Warrants and the deposit agreement. Post-Combination Company Warrants will only be accepted for exercise in multiples of one.
Any holder of ADWs wishing to exercise the underlying Post-Combination Company Warrants represented by the ADWs will need to take the following actions:
| deliver the applicable ADWs to the depositary or one of its agents, together with instructions to cancel such ADWs and to deliver the corresponding Post-Combination Company Warrants to the Post-Combination Company warrant agent, and pay to the depositary the applicable ADW and ADS fees, and |
| deliver to the Post-Combination Company warrant agent and to the depositary, or one of its agents, a duly completed ADW/Post-Combination Company Warrant exercise instruction form together with the applicable warrant exercise price (in U.S. Dollars) and applicable taxes. |
The depositary will establish procedures with DTC for the exercise of Post-Combination Company Warrants represented by ADWs, and the receipt of ADSs upon exercise of ADWs, in each case substantially upon the terms for exercise of Post-Combination Company Warrants represented by ADWs by holders of ADWs described above, by DTC participants on behalf of beneficial owners of ADWs via DTCs automated warrant exercise procedures upon terms acceptable to the depositary.
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Holders of ADWs who duly exercise the Post-Combination Company Warrants represented by their ADWs will receive Post-Combination Company Class A Shares represented by Class A ADSs, subject in each case to the terms of the Post-Combination Company Warrants represented by ADWs and in the case of the Post-Combination Company Class A Shares represented by Class A ADSs to the terms of the ADS Deposit AgreementClass A ADSs.
A holder who exercises the Post-Combination Company Warrants represented by their ADWs will become the owner of Post-Combination Company Shares only upon receipt by the Post-Combination Company warrant agent of (i) the requisite Post-Combination Company Warrants (upon cancellation of ADWs), (ii) the duly completed ADW/Post-Combination Company Warrant exercise instructions form, and (iii) the applicable exercise price and taxes. The form exercise instructions to be delivered to the depositary and the Post-Combination Company warrant agent may be obtained from the depositary.
If ListCo suspends the right to exercise Post-Combination Company Warrants at any time, ListCo will give notice thereof to the depositary setting forth the term and reason for such suspension. Upon receipt of such notice, the depositary shall give notice thereof to the holders of ADWs and shall refuse during the period of such suspension to accept instructions to cancel ADWs for the purpose of exercising Post-Combination Company Warrants.
Issuance of ADWs upon Deposit of Post-Combination Company Warrants
Upon completion of the Business Combination, the Post-Combination Company Warrants being offered pursuant to this proxy statement/prospectus will be deposited by ListCo with the custodian. Upon receipt of confirmation of such deposit, the depositary expects to issue ADWs representing the deposited Post-Combination Company Warrants to the order of Computershare Inc., a Delaware corporation and Computershare Trust Company, N.A., a federally chartered trust company, in their capacities as transfer agent and exchange agent for the Business Combination for the distribution to the holders of GGI Warrants entitled thereto.
After the Closing, the depositary may create ADWs on your behalf if you or your broker deposit Post-Combination Company Warrants with the custodian. The depositary will deliver these ADWs to the person you indicate only after you pay any applicable issuance fees and any charges and taxes payable for the transfer of the Post-Combination Company Warrants to the custodian. Your ability to deposit Post-Combination Company Warrants and receive ADWs may be limited by U.S. and English legal considerations applicable at the time of deposit.
The issuance of ADWs may be delayed until the depositary or the custodian receives confirmation that all required approvals have been given and that the Post-Combination Company Warrants have been duly transferred to the custodian. The depositary will only issue ADWs in whole numbers.
When you make a deposit of Post-Combination Company Warrants, you will be responsible for transferring good and valid title to the depositary. As such, you will be deemed to represent and warrant that:
| The Post-Combination Company Warrants are duly authorized, validly issued, fully paid, non-assessable and legally obtained. |
| All preemptive (and similar) rights, if any, with respect to such Post-Combination Company Warrants have been validly waived or exercised. |
| You are duly authorized to deposit the Post-Combination Company Warrants. |
| The Post-Combination Company Warrants presented for deposit are free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, and are not, and the ADWs issuable upon such deposit will not be, restricted securities (as defined in the deposit agreement). |
| The Post-Combination Company Warrants presented for deposit have not been stripped of any rights or entitlements. |
If any of the representations or warranties are incorrect in any way, ListCo and the depositary may, at your cost and expense, take any and all actions necessary to correct the consequences of the misrepresentations.
Withdrawal of Warrants Upon Cancellation of ADWs
As a holder, you will be entitled to present your ADWs to the depositary for cancellation and then receive the underlying Post-Combination Company Warrants at the custodians offices. In order to withdraw the Post-
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Combination Company Warrants represented by your ADWs, you will be required to pay to the depositary the fees for cancellation of ADWs and any charges and taxes payable upon the transfer of the Post-Combination Company Warrants being withdrawn. You assume the risk for delivery of all funds and securities upon withdrawal. Once canceled, the ADWs will not have any rights under the deposit agreement.
If you hold an ADWR registered in your name, the depositary may ask you to provide proof of identity and genuineness of any signature and such other documents as the depositary may deem appropriate before it will cancel your ADWs. The withdrawal of the Post-Combination Company Warrants represented by your ADWs may be delayed until the depositary receives satisfactory evidence of compliance with all applicable laws and regulations. Please keep in mind that the depositary will only accept ADWs for cancellation that represent a whole number of securities on deposit.
You will have the right to withdraw the securities represented by your ADWs at any time except for:
| Temporary delays that may arise because (i) the transfer books for the Post-Combination Company Warrants or ADWs are closed, or (ii) Post-Combination Company Warrants are immobilized on account of a shareholders meeting or a payment of dividends. |
| Obligations to pay fees, taxes and similar charges. |
| Restrictions imposed because of laws or regulations applicable to ADWs or the withdrawal of securities on deposit. |
The deposit agreement may not be modified to impair your right to withdraw the securities represented by your ADWs except to comply with mandatory provisions of law.
Voting Rights
In the event ListCo establishes a meeting at which holders of Post-Combination Company Warrants may vote or wishes to seek the consent of holders of Post-Combination Company Warrants, as a holder of ADWs, you generally have the right under the deposit agreement to instruct the depositary to exercise the voting or consent rights for the Post-Combination Company Warrants (if any) represented by your ADWs.
At ListCos request, the depositary will distribute to you any notice of meeting (at which holders of Post-Combination Company Warrants have the right to vote) received from ListCo together with information explaining how to instruct the depositary to exercise the voting or consent rights of the securities represented by ADWs. In lieu of distributing such materials, the depositary may distribute to holders of ADWs instructions on how to retrieve such materials upon request.
If the depositary timely receives voting instructions from a holder of ADWs as of a specified record date, it will endeavor to vote the securities represented by or exercise consent rights attached to (in person or by proxy) the holders ADWs in accordance with the voting instructions received from the holders of ADWs. Deposited Securities represented by ADWs for which no timely voting or consent instructions are received by the depositary from the holder will not be voted nor will any consent be given or withheld.
Please note that the ability of the depositary to carry out voting instructions may be limited by practical and legal limitations and the terms of the securities on deposit. ListCo cannot assure you that you will receive voting materials in time to enable you to return voting instructions to the depositary in a timely manner.
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Fees and Charges
As an ADW holder, you will be required to pay the following service fees to the depositary:
Service |
Fees | |
Other than the initial issuance in connection with the Business Combination, issuance of ADWs (e.g., an issuance of ADW upon a deposit of Post-Combination Company Warrants, upon a change in the ADW(s)-to-Post-Combination Company Warrant(s) ratio, or for any other reason), excluding ADW issuances as a result of distributions of Post-Combination Company Warrants |
Up to U.S. $0.05 per ADW issued | |
Cancellation of ADWs (e.g., a cancellation of ADWs for delivery of deposited property, upon a change in the ADW(s)-to-Post-Combination Company Warrant(s) ratio, or for any other reason) |
Up to U.S. $0.05 per ADW cancelled | |
Cash distributions (e.g., upon a sale of rights and other entitlements) |
Up to U.S. $0.05 per ADW held | |
Distribution of ADWs pursuant to (i) free Post-Combination Company Warrant distributions, or (ii) exercise of rights to purchase additional ADWs |
Up to U.S. $0.05 per ADW held | |
Distribution of securities other than ADWs or rights to purchase additional ADWs (e.g., upon a spin-off) |
Up to U.S. $0.05 per ADW held | |
ADW Services |
Up to U.S. $0.05 per ADW held on the applicable record date(s) established by the depositary | |
Registration of ADW transfers (e.g., upon a registration of the transfer of registered ownership of ADWs, upon a transfer of ADWs into DTC and vice versa, or for any other reason) |
Up to U.S. $0.05 per ADW (or fraction thereof) transferred | |
Conversion of ADWs of one series for ADWs of another series (e.g., upon conversion of Partial Entitlement ADWs for Full Entitlement ADWs, or upon conversion of Restricted ADWs (each as defined in the Deposit Agreement) into freely transferable ADWs, and vice versa). |
Up to U.S. $0.05 per ADW (or fraction thereof) converted | |
Exercise of Post-Combination Company Warrants represented by ADWs. |
Up to U.S. $0.05 per ADW exercised |
As an ADW holder, you will also be responsible to pay certain charges such as:
| taxes (including applicable interest and penalties) and other governmental charges (including any applicable stamp duty or SDRT); |
| the registration fees as may from time to time be in effect for the registration of Post-Combination Company Warrants on the share register and applicable to transfers of Post-Combination Company Warrants to or from the name of the custodian, the depositary or any nominees upon the making of deposits and withdrawals, respectively; |
| certain cable, telex and facsimile transmission and delivery expenses; |
| the fees, expenses, spreads, taxes and other charges of the depositary and/or service providers (which may be a division, branch or affiliate of the depositary) in the conversion of foreign currency; |
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| the reasonable and customary out-of-pocket expenses incurred by the depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to Post-Combination Company Warrants, ADWs and ADWRs; |
| the fees, charges, costs and expenses incurred by the depositary, the custodian, or any nominee in connection with the ADW program; and |
| the amounts payable to the depositary by any party to the applicable deposit agreement pursuant to any ancillary agreement to the applicable deposit agreement in respect of the ADW program, the ADWs, and the ADWRs. |
ADW fees and charges for (i) the issuance of ADWs, and (ii) the cancellation of ADWs are charged to the person for whom the ADWs are issued (in the case of ADW issuances) and to the person for whom ADWs are cancelled (in the case of ADW cancellations). In the case of ADWs issued by the depositary into DTC, the ADW issuance and cancellation fees and charges may be deducted from distributions made through DTC, and may be charged to the DTC participant(s) receiving the ADWs being issued or the DTC participant(s) holding the ADWs being cancelled, as the case may be, on behalf of the beneficial owner(s) and will be charged by the DTC participant(s) to the account of the applicable beneficial owner(s) in accordance with the procedures and practices of the DTC participants as in effect at the time. ADW fees and charges in respect of distributions and the ADW service fee are charged to the holders as of the applicable ADW record date. In the case of distributions of cash, the amount of the applicable ADW fees and charges is deducted from the funds being distributed. In the case of (i) distributions other than cash and (ii) the ADW service fee, holders as of the ADW record date will be invoiced for the amount of the ADW fees and charges and such ADW fees and charges may be deducted from distributions made to holders of ADWs. For ADWs held through DTC, the ADW fees and charges for distributions other than cash and the ADW service fee may be deducted from distributions made through DTC, and may be charged to the DTC participants in accordance with the procedures and practices prescribed by DTC and the DTC participants in turn charge the amount of such ADW fees and charges to the beneficial owners for whom they hold ADWs. In the case of (i) registration of ADW transfers, the ADW transfer fee will be payable by the ADW holder whose ADWs are being transferred or by the person to whom the ADWs are transferred, (ii) conversion of ADWs of one series for ADWs of another series, the ADW conversion fee will be payable by the holder whose ADWs are converted or by the person to whom the converted ADWs are delivered, and (iii) exercises of ADWs, the ADW exercise fee will be payable by the ADW Holder whose ADWs are being exercised.
In the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADW holder. Certain depositary fees and charges (such as the ADW services fee) may become payable shortly after the closing of the ADW offering. Note that the fees and charges you may be required to pay may vary over time and may be changed by ListCo and by the depositary. You will receive prior notice of such changes. The depositary may reimburse ListCo for certain expenses incurred by ListCo in respect of the ADW program, by making available a portion of the ADW fees charged in respect of the ADW program or otherwise, upon such terms and conditions as ListCo and the depositary agree from time to time.
Amendments and Termination
ListCo may agree with the depositary to modify the deposit agreement at any time without your consent. ListCo undertake to give holders 30 days prior notice of any modifications that would materially prejudice any of their substantial rights under the deposit agreement. ListCo will not consider modifications or supplements to be materially prejudicial to your substantial rights if such modifications or supplements are reasonably necessary for the ADWs to be registered under the Securities Act or to be eligible for book-entry settlement, in each case without imposing or increasing the fees and charges you are required to pay. In addition, ListCo may not be able to provide you with prior notice of any modifications or supplements that are required to accommodate compliance with applicable provisions of law.
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You will be bound by the modifications to the deposit agreement if you continue to hold your ADWs after the modifications to the deposit agreement become effective. The deposit agreement cannot be amended to prevent you from withdrawing the Post-Combination Company Warrants represented by your ADWs (except as permitted by law).
The deposit agreement will terminate automatically on the date the Post-Combination Company Warrants expire. In addition, ListCo has the right to direct the depositary to terminate the deposit agreement. Similarly, the depositary may in certain circumstances on its own initiative terminate the deposit agreement. In either case, the depositary must give notice to the holders at least 30 days before termination. Until termination, your rights under the deposit agreement will be unaffected.
After termination, the depositary will continue to collect distributions received (but will not distribute any such property until you request the cancellation of your ADWs) and may sell the securities held on deposit. After the sale, the depositary will hold the proceeds from such sale and any other funds then held for the holders of ADWs in a non-interest bearing account. At that point, the depositary will have no further obligations to holders other than to account for the funds then held for the holders of ADWs still outstanding (after deduction of applicable fees, taxes and expenses).
Books of Depositary
The depositary will maintain ADW holder records at its depositary office. You may inspect such records at such office during regular business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the ADWs and the deposit agreement.
The depositary will maintain in New York facilities to record and process the issuance, cancellation, combination, split-up and transfer of ADWs. These facilities may be closed from time to time, to the extent not prohibited by law.
Transmission of Notices, Reports and Proxy Soliciting Material
The depositary will make available for your inspection at its office all communications that it receives from ListCo as a holder of deposited securities that ListCo makes generally available to holders of deposited securities. Subject to the terms of the deposit agreement, the depositary will send you copies of those communications or otherwise make those communications available to you if ListCo asks it to do so.
Limitations on Obligations and Liabilities
The deposit agreement limits ListCos obligations and the depositarys obligations to you. Please note the following:
| ListCo and the depositary are obligated only to take the actions specifically stated in the deposit agreement without negligence or bad faith. |
| The depositary disclaims any liability for any failure to carry out voting instructions, for any manner in which a vote is cast or for the effect of any vote, provided it acts in good faith and in accordance with the terms of the deposit agreement. |
| The depositary disclaims any liability for any failure to determine the lawfulness or practicality of any action, for the content of any document forwarded to you on ListCos behalf or for the accuracy of any translation of such a document, for the investment risks associated with investing in or exercising Post-Combination Company Warrants, for the validity or worth of the Post-Combination Company Warrants, for any tax consequences that result from the ownership of ADWs, for the credit worthiness of any third party, for allowing any rights to lapse under the |
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terms of the deposit agreement, for the timeliness of any of ListCos notices or for ListCos failure to give notice or for any act or omission of or information provided by DTC or any DTC participant. |
| The depositary shall not be liable for acts or omissions of any successor depositary in connection with any matter arising wholly after the resignation or removal of the depositary. |
| ListCo and the depositary will not be obligated to perform any act that is inconsistent with the terms of the deposit agreement. |
| ListCo and the depositary disclaim any liability if ListCo or the depositary are prevented or forbidden from or subject to any civil or criminal penalty or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of the deposit agreement, by reason of any provision, present or future of any law or regulation, including regulations of any stock exchange or by reason of present or future provision of any provision of ListCos articles of association, or any provision of or governing the securities on deposit, or by reason of any act of God or war or other circumstances beyond ListCos control. |
| ListCo and the depositary disclaim any liability if ListCo is prevented or forbidden from acting on account of any law or regulation, any provision of the Post-Combination Articles, any provision of any securities on deposit or by reason of any act of God or war or other circumstances beyond ListCos control. |
| ListCo and the depositary disclaim any liability by reason of any exercise of, or failure to exercise, any discretion provided for the deposit agreement or in the Post-Combination Articles or in any provisions of the securities on deposit. |
| ListCo and the depositary further disclaim any liability for any action or inaction in reliance on the advice or information received from legal counsel, accountants, any person presenting Post-Combination Company Warrants for deposit, any holder of ADWs or authorized representatives thereof, or any other person believed by either of ListCo in good faith to be competent to give such advice or information. |
| ListCo and the depositary also disclaim liability for the inability by a holder to benefit from any distribution, offering, right or other benefit which is made available to holders of Post-Combination Company Warrants but is not, under the terms of the deposit agreement, made available to you. |
| ListCo and the depositary may rely without any liability upon any written notice, request or other document believed to be genuine and to have been signed or presented by the proper parties. |
| ListCo and the depositary also disclaim liability for any consequential or punitive damages for any breach of the terms of the deposit agreement. |
| ListCo and the depositary disclaim liability arising out of losses, liabilities, taxes, charges or expenses resulting from the manner in which a holder or beneficial owner of ADWs holds ADWs, including resulting from holding ADWs through a brokerage account. |
| No disclaimer of any Securities Act liability is intended by any provision of the deposit agreement. |
| Nothing in the deposit agreement gives rise to a partnership or joint venture, or establishes a fiduciary relationship, among ListCo, the depositary and you as ADW holder. |
| Nothing in the deposit agreement precludes Citibank (or its affiliates) from engaging in transactions in which parties adverse to ListCo or the ADW owners have interests, and nothing in the deposit agreement obligates Citibank to disclose those transactions, or any information obtained in the course of those transactions, to ListCo or to the ADW owners, or to account for any payment received as part of those transactions. |
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Taxes
You will be responsible for the taxes and other governmental charges payable on the ADWs and the securities represented by the ADWs. ListCo, the depositary and the custodian may deduct from any distribution the taxes and governmental charges payable by holders and may sell any and all property on deposit to pay the taxes and governmental charges payable by holders. You will be liable for any deficiency if the sale proceeds do not cover the taxes that are due.
The depositary may refuse to issue ADWs, to deliver, transfer, split and combine ADWRs, to release securities on deposit or to exercise any Post-Combination Company Warrants represented by ADWs until all taxes and charges are paid by the applicable holder. The depositary and the custodian may take reasonable administrative actions to obtain tax refunds and reduced tax withholding for any distributions on your behalf. However, you may be required to provide to the depositary and to the custodian proof of taxpayer status and residence and such other information as the depositary and the custodian may require to fulfill legal obligations. You are required to indemnify ListCo, the depositary and the custodian for any claims with respect to taxes based on any tax benefit obtained for you.
Foreign Currency Conversion
The depositary will arrange for the conversion of all foreign currency received into U.S. dollars if such conversion is practical, and it will distribute the U.S. dollars in accordance with the terms of the deposit agreement. You may have to pay fees and expenses incurred in converting foreign currency, such as fees and expenses incurred in complying with currency exchange controls and other governmental requirements.
If the conversion of foreign currency is not practical or lawful, or if any required approvals are denied or not obtainable at a reasonable cost or within a reasonable period, the depositary may take the following actions in its discretion:
| Convert the foreign currency to the extent practical and lawful and distribute the U.S. dollars to the holders for whom the conversion and distribution is lawful and practical. |
| Distribute the foreign currency to holders for whom the distribution is lawful and practical. |
| Hold the foreign currency (without liability for interest) for the applicable holders. |
Governing Law/Waiver of Jury Trial
The deposit agreement, the ADWRs and the ADWs will be interpreted in accordance with the laws of the State of New York. The rights of holders of Post-Combination Company Warrants (including Post-Combination Company Warrants represented by ADWs) are governed by the laws of England and Wales.
As an owner of ADWs, you irrevocably agree that any legal action arising out of the Deposit Agreement, the ADWs or the ADWRs, involving ListCo or the depositary, may only be instituted in a state or federal court in the city of New York.
AS A PARTY TO THE DEPOSIT AGREEMENT, YOU IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, YOUR RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF THE DEPOSIT AGREEMENT OR THE ADWs AGAINST LISTCO AND/OR THE DEPOSITARY.
The deposit agreement provides that, to the extent permitted by law, ADW holders waive the right to a jury trial of any claim they may have against ListCo or the depositary arising out of or relating to the Post-Combination Company Warrants, the ADWs or the deposit agreement, including any claim under U.S. federal securities laws. If ListCo or the depositary opposed a jury trial demand based on the waiver, the court would determine whether
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the waiver was enforceable in the facts and circumstances of that case in accordance with applicable case law. However, you will not be deemed, by agreeing to the terms of the deposit agreement, to have waived or the depositarys compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder.
Restricted ADWs
In order to enable the deposit of Post-Combination Company Warrants, the transfer of which is restricted due to contractual or regulatory limitations, commonly referred to as Restricted Warrants, ListCo and the depositary have agreed, by means of a letter agreement, to create a restricted series of American Depositary Warrants referred to as Restricted ADWs or RADWs, in accordance with the terms of the ADW deposit agreement. The RADW letter agreement supplements the ADW deposit agreement. You may obtain a copy of the RADW letter agreement from the depositary.
The Restricted ADWs differ from the freely transferable ADWs in certain respects. These differences include the following:
| Listing: The Restricted ADWs are not listed on any securities exchange or trading system in the United States. |
| CUSIP Number: The CUSIP number for the Restricted ADWs is different from the CUSIP number for the freely transferable ADWs. |
| Transfer Restrictions: The Restricted ADWs may, after issuance, be sold or otherwise transferred only on the terms described below. |
| Legend: The Restricted ADWs will be subject to a transfer legend substantially in the form of all or some the following: |
THE RESTRICTED ADWs AND THE RESTRICTED WARRANTS REPRESENTED THEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY JURISDICTION. THE RESTRICTED ADWs MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED OR DELIVERED EXCEPT (A) TO A PERSON OTHER THAN A U.S. PERSON (WITHIN THE MEANING GIVEN TO SUCH TERM IN REGULATION S UNDER THE SECURITIES ACT (REGULATION S)) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER, (C) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, OR (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT COVERING THE APPLICABLE SALE, PLEDGE, TRANSFER AND DELIVERY, AND, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. LISTCO AND THE DEPOSITARY SHALL BE ENTITLED TO RECEIVE FROM THE HOLDER OF THE RESTRICTED ADWs SEEKING TO SELL, PLEDGE OR OTHERWISE TRANSFER OR DELIVER THE RESTRICTED ADWs EVIDENCE SATISFACTORY TO THE DEPOSITARY AND LISTCO THAT THE TRANSFER RESTRICTIONS APPLICABLE TO THE RESTRICTED ADWs HAVE BEEN OR ARE BEING SATISFIED (WHICH MAY INCLUDE AN OPINION OF QUALIFIED COUNSEL).
THE RESTRICTED ADWs AND THE RESTRICTED WARRANTS REPRESENTED THEREBY ARE SUBJECT TO RESTRICTIONS PURSUANT TO THE SPONSOR AND SUPPORTING SPONSOR STOCKHOLDERS LOCK-UP AGREEMENT, DATED SEPTEMBER 27, 2021, AMONG POLESTAR AUTOMOTIVE HOLDING UK LIMITED (THE COMPANY), GORES GUGGENHEIM SPONSOR LLC AND THE OTHER PARTIES THERETO (AS AMENDED, THE SPONSOR LOCK UP AGREEMENT), OR THE PARENT LOCK-UP AGREEMENTS, DATED SEPTEMBER 27, 2021, AMONG LISTCO AND THE OTHER PARTIES THERETO (AS AMENDED, THE SPONSOR LOCK UP AGREEMENTS, AND
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TOGETHER WITH THE SPONSOR LOCK UP AGREEMENT, THE LOCK UP AGREEMENTS), AS APPLICABLE, MAY ONLY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED DURING THE TERM OF THE LOCK-UP PURSUANT TO THE TERMS SET FORTH IN THE LOCK UP AGREEMENTS, AS APPLICABLE.
The ADSs issued upon exercise of RADWs may be issued in the form of RADSs unless the exercise (x) is registered under the Securities Act and the ADSs are held by a person who is not an affiliate of ListCo and (y) is exempt from registration under the Securities Act and the ADSs are held by a person who is not an affiliate of ListCo.
| Segregation of Warrants: Restricted Warrants deposited with the custodian with respect to Restricted ADWs shall be held separate and distinct from the deposited securities held under the ADW deposit agreement. |
| Lack of Fungibility: The Restricted ADWs are not currently fungible with the freely transferable ADWs issued and outstanding under the applicable ADW deposit agreement. The Restricted ADWs will not be fungible with the freely transferable ADWs outstanding under the ADW deposit agreement as long as the Restricted ADWs and the Restricted Warrants represented thereby are restricted securities under the Securities Act or are otherwise subject to restrictions on transfer. |
| Withdrawal: The holders of Restricted ADWs will be able to request the withdrawal of the Restricted Warrants represented by their Restricted ADWs only upon delivery to the depositary of (i) the applicable RADWs, all documentation contemplated in the ADW deposit agreement and the RADW letter agreement and payment of all applicable fees and expenses of the depositary, and (ii) a certification to the effect, inter alia, that either (x) the holder will be the owner of the Restricted Warrants being withdrawn and undertakes not to deposit the Restricted Warrants under the ADW deposit agreement and to transfer such Restricted Warrants only in a transaction meeting the requirements of the legend set forth above or (y) the holder has sold the Restricted Warrants in a transaction meeting the requirements of Regulation S under the Securities Act and will make delivery of the Restricted Warrants outside the U.S. |
| Book-Entry Settlement: The Restricted ADWs are not expected to be eligible for inclusion in any book-entry settlement system, including, without limitation, the book-entry settlement system maintained by DTC. |
| Conversion of RADWs into ADWs: Once the applicable transfer restrictions expire or if the transaction is covered by an effective resale registration statement, the RADWs may be exchangeable into freely transferable ADWs upon delivery of the RADWs to the depositary for exchange into freely transferable ADWs together with applicable supporting documents, legal opinions and depositary fees and taxes. |
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COMPARISON OF STOCKHOLDER RIGHTS
General
GGI is incorporated under the laws of the State of Delaware and the rights of GGI stockholders are governed by the laws of the State of Delaware, including the DGCL, the Current GGI Certificate and GGIs current bylaws. As a result of the Business Combination, GGI stockholders who receive Post-Combination Company Ordinary Shares will each become Post-Combination Company shareholders. The Post-Combination Company will be incorporated under the laws of the England and Wales and the rights of Post-Combination Company shareholders will be governed by the laws of the England and Wales and the Post-Combination Articles. Thus, following the Business Combination, the rights of GGI stockholders who become Post-Combination Company shareholders will be governed by the laws of the England and Wales and will no longer be governed by the Current GGI Certificate or GGIs current bylaws and instead will be governed by the Post-Combination Articles.
The Post-Combination Company Class A Shares and the Post-Combination Company Class C Shares or the Post-Combination Company Warrants will be represented by Class A ADSs and Class C ADSs or ADWs, as applicable. As a holder of Class A ADSs and Class C ADSs or ADWs, your rights will be different than those of a holder directly holding the securities underlying the Class A ADSs and Class C ADSs or ADWs. Please see the section titled Description of the Post-Combination Companys American Depositary Securities for additional information.
Comparison of Stockholder Rights
Set forth below is a summary comparison of material differences between the rights of the rights of GGI stockholders under the Current GGI Certificate and GGIs current bylaws (left column), and the rights of Post-Combination Company shareholders under the form of the Post-Combination Articles (right column), attached to this proxy statement/prospectus as Annex B. The summary set forth below is not intended to be complete or to provide a comprehensive discussion of each companys governing documents and is qualified in its entirety by reference to the full text of those documents, as well as the relevant provisions of applicable law. Furthermore, the identification of some of the differences of these rights as material is not intended to indicate that other differences that may be equally important do not exist.
GGI |
Post-Combination Company | |||
Authorized Capital |
The total number of shares of all classes of capital stock, each with a par value of $0.0001 per share, which GGI is authorized to issue is 441,000,000 shares, consisting of (a) 440,000,000 shares of GGI Common Stock, including (i) 400,000,000 shares of GGI Class A Common Stock, and (ii) 40,000,000 shares of GGI Class F Common Stock, and (b) 1,000,000 shares of GGI Preferred Stock. | The total number of shares of all classes of shares which the Post-Combination Company is authorized to issue is 6,861,249,349 shares, consisting of (a) 5,000,000,000 Post-Combination Company Class A Shares of nominal value USD 0.01 each, (b) 1,777,366,739 Post-Combination Company Class B Shares of nominal value USD 0.01 each, (c) 16,000,000 Post-Combination Company Class C-1 Shares of nominal value USD 0.10 each, (d) 9,000,000 Post-Combination Company Class C-2 Shares of nominal value USD 0.10 each, (e) 58,882,610 Post-Combination Company Preference Shares of nominal value USD 10.00 each, and (f) |
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GGI |
Post-Combination Company | |||
50,000 GBP Redeemable Preferred Shares of nominal value GBP 1.00 each. In addition, Post-Combination Company Class A Shares and Deferred Shares of nominal value USD 0.01 each may be created upon conversion of Post-Combination Class C-1 Shares, Post-Combination Class C-2 Shares and Post-Combination Company Preference Shares without any requirement for further authorization. | ||||
Rights of Preferred Stock |
Subject to certain requirements relating to an initial business combination set forth in the Current GGI Certificate, the GGI Board is expressly authorized to provide out of the unissued shares of the GGI Preferred Stock for one or more series of GGI Preferred Stock and to establish from time to time the number of shares to be included in each such series and to fix the voting rights, if any, designations, powers, preferences and relative, participating, optional, special and other rights, if any, of each such series and any qualifications, limitations and restrictions thereof, as shall be stated in the resolution or resolutions adopted by the GGI Board providing for the issuance of such series and included in a certificate of designation filed pursuant to the DGCL. | The Post-Combination Articles provide that the Post-Combination Company Preference Shares will not entitle any holder to preferred dividends or accruals save that the holders of Post-Combination Company Preference Shares will participate in dividends or other distributions on the Post-Combination Company Class A Shares as if such Post-Combination Company Preference Shares had been converted into Post-Combination Company Class A Shares in accordance with the Post-Combination Articles.
The GBP Redeemable Preferred Shares do not entitle their holders to participate in any dividends or other distributions, nor have conversion rights, but may be redeemed. The Post-Combination Company Preference Shares and GBP Redeemable Preferred Shares carry no voting rights. | ||
Voting Rights |
Except as otherwise required by law or the Current GGI Certificate, the holders of shares of GGI Common Stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders on | The Post-Combination Articles provide that each outstanding Post-Combination Company Class A Share is entitled to one vote on all matters submitted to a vote of shareholders. Each Post-Combination Company |
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GGI |
Post-Combination Company | |||
which the holders of the GGI Common Stock are entitled to vote. | Class B Share is entitled to 10 votes on all matters submitted to a vote of shareholders. Each Post-Combination Company Class C Share is entitled to one vote on all matters submitted to a vote of shareholders. Post-Combination Company Preference Shares, Deferred Shares and GBP Redeemable Preferred Shares will carry no voting rights and shall not entitle their holders to receive notice of, to attend, to speak or to vote at any general meeting of the Post-Combination Company. Subject to any rights or restrictions attached to any shares on a poll every member present in person or by proxy shall have one vote for every share of which he is the holder. None of ListCos shareholders will be entitled to vote at any general meeting or at any separate class meeting in respect of any share unless all calls or other sums payable in respect of that share have been paid. | |||
Cumulative Voting |
Delaware law provides that a corporation may grant stockholders cumulative voting rights for the election of directors in its certificate of incorporation. However, the Current GGI Certificate does not authorize cumulative voting. | Holders of Post-Combination Company Shares will have no cumulative voting rights. | ||
Number of Directors |
GGIs current bylaws provide that the number of directors of the GGI shall be fixed exclusively by resolution of the GGI Board. A director shall hold office until the next annual or special meeting at which directors are being elected, and until his or her successor has been elected and qualified, subject, however, to such directors earlier death, resignation, retirement, disqualification or removal. | The Post-Combination Articles provide that, unless otherwise determined by the Post-Combination Company by ordinary resolution, the number of directors (other than any alternate directors) shall be at least two and not more than 15. The Post-Combination Articles provide that, upon the Closing, the Post-Combination Company shall have nine initial directors, including a majority of |
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GGI |
Post-Combination Company | |||
Independent Directors (as defined in the Post Combination Company Articles). | ||||
Election of Directors |
Subject to the special rights of the holders of any series of GGI Preferred Stock to elect directors, GGIs current bylaws require that the election of directors shall be determined by a plurality of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon. Pursuant to the Current GGI Certificate, prior to the closing of the initial business combination, the holders of GGI Class F Common Stock, voting together as a single class, have the exclusive right to elect any director; provided, that with respect to the election of directors in connection with a meeting of the stockholders of GGI in which a business combination is submitted to the stockholders of GGI for approval, holders of GGI Class A Common Stock and holders of GGI Class F Common Stock, voting together as a single class, shall have the exclusive right to vote for the election of directors. | The Post-Combination Articles provide that, subject to the requirements of the Post-Combination Articles, the Post-Combination Company may by ordinary resolution appoint a person who is willing to act to be a director, either to fill a vacancy or as an addition to the then-existing Post-Combination Company Board but the total number of directors shall not exceed fifteen.
The Post-Combination Company board also has power at any time to appoint any person who is willing to act as a director, either to fill a vacancy or as an addition to the then-existing Post-Combination Company Board, but the total number of directors shall not exceed fifteen. | ||
Manner of Acting by Board |
GGIs current bylaws provide that a majority of the GGI Board shall constitute a quorum for the transaction of business at any meeting of the GGI Board, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the GGI Board, except as may be otherwise specifically provided by applicable law, the Current GGI Certificate or GGIs current bylaws. | The Post-Combination Articles provide that a duly convened meeting of the Post-Combination Company Board at which a quorum is present shall be competent to exercise all or any of the authorities, powers, and discretions for the time being vested in or exercisable by the Post-Combination Company Board. Questions arising at any Post-Combination Company Board meeting shall be determined by a majority of votes. In the case of an equality of votes the chair of that meeting shall have a second or casting vote (unless he or she is |
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GGI |
Post-Combination Company | |||
not entitled to vote on the resolution in question). | ||||
Removal of Directors |
The Current GGI Certificate provides that, subject to the special rights of the holders of any series of GGI Preferred Stock to elect directors, any or all of the directors may be removed from office at any time, with or without cause, by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of GGI Class F Common Stock entitled to vote generally in the election of directors, voting together as a single class. | In addition to any power of removal conferred by the Companies Act, the Post-Combination Articles provide that the Post-Combination Company may by special resolution, or by ordinary resolution of which special notice has been given in accordance with section 312 of the Companies Act, remove a director before the expiry of his or her period of office (without prejudice to a claim for damages for breach of contract or otherwise).
The Post-Combination Articles further provide that in the first three years following Closing, except as required by the Companies Act, the Post-Combination Company Board may only convene a general meeting which proposes a resolution to remove an Independent Director (as defined in the Post-Combination Articles) if the Post-Combination Company Board approves such resolution by simple majority including the affirmative vote of at least two other Independent Directors (or if there are fewer than two Independent Directors then in office excluding the Independent Director proposed to be removed, all of the Independent Directors (other than the Independent Director proposed to be removed), if any). | ||
Vacancies on Board |
The Current GGI Certificate provides that, subject to the special rights of the holders of any series of GGI Preferred Stock to elect directors, if any, newly | The Post-Combination Company Board also has power at any time to appoint any person who is willing to act as a director, either to fill a vacancy |
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GGI |
Post-Combination Company | |||
created directorships resulting from an increase in the number of directors and any vacancies on the GGI Board resulting from death, resignation, retirement, disqualification, removal or other cause may be filled solely and exclusively by a majority vote of the remaining directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders). | or as an addition to the then- existing Post-Combination Company Board, but the total number of directors shall not exceed fifteen. | |||
Business Proposals by Stockholders |
GGIs current bylaws provide that no business may be transacted at an annual meeting of stockholders, other than business that is either (i) specified in the GGIs notice of meeting (or any supplement thereto) given by or at the direction of the GGI Board, (ii) otherwise properly brought before the annual meeting by or at the direction of the GGI Board or (iii) otherwise properly brought before the annual meeting by any stockholder of GGI (a) who is a stockholder of record entitled to vote at such annual meeting and (b) whose notice is timely. To be timely, a stockholders notice to GGI with respect to such business must be received not later than the close of business on the 90th day nor earlier than the close of business on the 120th day before the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting and (y) the |
Subject to certain conditions, the Companies Act entitles shareholders representing at least 5% of the total voting rights exercisable at an annual general meeting to have the Post-Combination Company circulate and give notice of a resolution which may be properly moved, and is intended to be moved, at the Post-Combination Companys next annual general meeting. |
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GGI |
Post-Combination Company | |||
close of business on the 10th day following the day on which public announcement of the date of the annual meeting is first made by the GGI. | ||||
Special Meetings of the Board |
GGIs current bylaws provide that special meetings of the GGI Board (a) may be called by the chairman of the GGI Board or president and (b) shall be called by the chairman of the GGI Board, president or secretary on the written request of at least a majority of directors then in office, or the sole director, as the case may be, and shall be held at such time, date and place (within or without the State of Delaware) as may be determined by the person calling the meeting or, if called upon the request of directors or the sole director, as specified in such written request. | The Post-Combination Articles provide that a Post-Combination Company Board meeting can be called by any director of the Post-Combination Company. The secretary of the Post-Combination Company must call a Post-Combination Company Board meeting if asked to do so by a director of the Post-Combination Company. | ||
Notice of Stockholder Meetings |
GGIs current bylaws provide that written notice of each stockholders meeting stating the place, if any, date, and time of the meeting, and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, shall be given in the permitted manners set forth in GGIs current bylaws to each stockholder entitled to vote thereat as of the record date for determining the stockholders entitled to notice of the meeting, by GGI not less than 10 nor more than 60 days before the date of the meeting unless otherwise required by the DGCL. If said notice is for a stockholders meeting other than an annual meeting, it shall in | The Post-Combination Articles provide that every notice calling a general meeting shall specify the place (including any satellite meeting place or places), date and time of the meeting. There shall appear with reasonable prominence in every such notice a statement that a member entitled to attend and vote is entitled to a proxy or (if he or she has more than one share) proxies to exercise all or any of his or her rights to attend, speak and vote and that a proxy need not be a member of the Post-Combination Company. Such notice shall also include the address of the website on which the information required by the Companies Act is published, state the procedures with which members must comply in order to be able to attend and vote at the meeting (including the date by which they must comply), provide details of any forms to be used for the appointment of a |
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GGI |
Post-Combination Company | |||
addition state the purpose or purposes for which the meeting is called, and the business transacted at such meeting shall be limited to the matters so stated in GGIs notice of meeting (or any supplement thereto). | proxy and state that a member has the right to ask questions at the meeting in accordance with the Companies Act. In the case of an annual general meeting, the notice shall also specify the meeting as such.
The accidental omission to give notice of any meeting or to send an instrument of proxy (where this is intended to be sent out with the notice) to, or the non-receipt of either by, any person entitled to receive the same shall not invalidate the proceedings of that meeting.
The Post-Combination Articles provide that a general meeting shall be called by at least such minimum notice as is required or permitted by the Companies Act. Under the Companies Act, 21 clear days notice must be given for an annual general meeting and any resolutions to be proposed at the meeting, and at least 14 clear days notice is required for any other general meeting. In addition, certain matters, such as the removal of directors or auditors, require special notice, which is 28 clear days notice. | |||
Special Meetings of Stockholders |
GGIs current bylaws provide that, subject to the rights of the holders of any outstanding series of the GGI Preferred Stock and to the requirement of applicable law, special meetings of stockholders, for any purpose or purposes, may be called only by the chairman of the GGI Board, the chief executive officer, or the GGI Board pursuant to a resolution adopted by a majority of the GGI Board, and may not be called by any other person. | Under the Companies Act, subject to certain conditions being satisfied, shareholders holding at least 5% of the paid-up capital of the Post-Combination Company carrying voting rights at general meetings (excluding any paid up capital held as treasury shares) can require the directors to call a general meeting and, if the directors fail to do so within a certain period, may themselves (or any of them representing more than one half of the total voting rights of all of them) convene a general meeting. |
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GGI |
Post-Combination Company | |||
Manner of Acting by Stockholders |
GGIs current bylaws provide that at all meetings of stockholders all matters other than the election of directors presented to the stockholders at a meeting at which a quorum is present shall be determined by the vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon, unless the matter is one upon which, by applicable law, the Current GGI Certificate, GGIs bylaws or applicable stock exchange rules, a different vote is required, in which case such provision shall govern and control the decision of such matter. | The Post-Combination Articles provide that any resolution put to the vote at a general meeting shall be decided on a poll. At general meetings, resolutions shall be put to the vote by the chair of the meeting and there shall be no requirement for the resolution to be proposed or seconded by any person. | ||
Stockholder Action Without Meeting |
The Current GGI Certificate provides that, except as may be otherwise provided for or fixed relating to the rights of the holders of any outstanding series of GGI Preferred Stock or GGI Class F Common Stock, any action required or permitted to be taken by the stockholders of GGI must be effected by a duly called annual or special meeting of such stockholders and may not be effected by written consent of the stockholders. |
Any action required or permitted to be taken by the members of the Post-Combination Company must be effected by a duly called annual or special meeting of such members and may not be effected by written consent of the members. | ||
Quorum |
Board of Directors. A majority of the GGI Board shall constitute a quorum for the transaction of business at any meeting of the GGI Board, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the GGI Board, except as may be otherwise specifically provided by applicable law, the Current GGI Certificate or GGIs current bylaws.
Stockholders. Except as otherwise provided by applicable law, the |
Board of Directors. The Post-Combination Articles provide that the quorum necessary for the transaction of business may be determined by the Post-Combination Company Board and until otherwise determined shall be three persons, each being a director.
Stockholders. The Post-Combination Articles provide that at least two members that in aggregate hold at least 51% of the issued shares of the Post-Combination Company who are |
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GGI |
Post-Combination Company | |||
Current GGI Certificate, or GGIs current bylaws, the presence, in person or by proxy, at a stockholders meeting of the holders of shares of outstanding capital stock of GGI representing a majority of the voting power of all outstanding shares of capital stock of GGI entitled to vote at such meeting shall constitute a quorum for the transaction of business at such meeting, except that when specified business is to be voted on by a class or series of stock voting as a class, the holders of shares representing a majority of the voting power of the outstanding shares of such class or series shall constitute a quorum of such class or series for the transaction of such business. | present in person or by proxy and entitled to attend and to vote on the business to be transacted shall be a quorum for a general meeting for all purposes. | |||
Anti-Takeover Provisions |
The GGI Current Charter limits the ability of stockholders to transact business outside of stockholder meetings. Additionally, section 203 of the DGCL generally prohibits any business combination, including mergers, sales and leases of assets, issuances of securities and similar transactions, by a corporation or any of its direct or indirect majority-owned subsidiaries with an interested stockholder who beneficially owns 15% or more of a corporations voting stock, within three years after the person or entity becomes an interested stockholder, unless: (i) the transaction that will cause the person or entity to become an interested stockholder under Section 203 of the DGCL is approved by the GGI Board; (ii) after the completion of the transaction in which the person or entity becomes an interested stockholder, the interested stockholder holds at least 85% of the voting stock of GGI | The Post-Combination Articles limits the ability of members to transact business outside of a general meeting of members. However, the Post-Combination Articles do not contain provisions which are specifically intended to have the effect of delaying or preventing a change in control. |
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GGI |
Post-Combination Company | |||
outstanding at the time the transaction commenced but not including shares held by persons who are directors and also officers and shares held by specified employee benefit plans; or (iii) after the person or entity becomes an interested stockholder, the business combination is approved by the GGI Board and the holders of at least two-thirds of GGIs outstanding voting stock, excluding shares held by the interested stockholder. | ||||
Exclusive Forum Provisions |
The Current GGI Certificate provides that, unless GGI consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (the Court of Chancery) shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of GGI, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of GGI to GGI or GGIs stockholders, (iii) any action asserting a claim against GGI, its directors, officers or employees arising pursuant to any provision of the DGCL or GGIs current bylaws, or (iv) any action asserting a claim against GGI, its directors, officers or employees governed by the internal affairs doctrine and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholders counsel, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of | The Post-Combination Articles provide that, unless ListCo consents in writing to the selection of an alternative forum, the Courts of England and Wales will be the sole and exclusive forum for:
(a) any derivative action or proceeding brought on behalf of ListCo;
(b) any action, including any action commenced by a member of ListCo in its own name or on behalf of ListCo, asserting a claim of breach of any fiduciary or other duty owed by any director, officer or other employee of ListCo (including but not limited to duties arising under the Companies Act);
(c) any action arising out of or in connection with the Post-Combination Articles or otherwise in any way relating to the constitution or conduct of ListCo; or
(d) any action asserting a claim against ListCo governed by the Internal Affairs Doctrine (as such concept is recognised under the |
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GGI |
Post-Combination Company | |||
Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, for which the Court of Chancery does not have subject matter jurisdiction, or any action arising under the Securities Act as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction.
Although this exclusive forum provision provides that the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction over claims arising under the Securities Act, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Notwithstanding the foregoing, the provisions of the exclusive forum provision in the Current GGI Certificate will not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits |
laws of the United States of America).
The Post-Combination Articles further provide that, unless ListCo consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the United States Securities Act of 1933, as amended or any successor legislation.
Nothing above will apply to any action brought to enforce a duty or liability created by the United States Securities Exchange Act of 1934 Act, as amended, or any successor legislation. |
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GGI |
Post-Combination Company | |||
brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. | ||||
Indemnification of Directors and Officers |
The Current GGI Certificate provides that, to the fullest extent permitted by applicable law, GGI shall indemnify and hold harmless each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he or she is or was a director or officer of GGI or, while a director or officer of GGI, is or was serving at the request of GGI as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses. |
The Post-Combination Articles provide that, subject to the provisions of the Companies Act, each of Post-Combination Company Board is entitled to be indemnified by ListCo out of the assets of the Post-Combination Company against all costs, charges, losses, expenses and liabilities incurred by such director or officer in the execution and discharge of his or her duties or in relation to those duties. The Companies Act renders void an indemnity for a director against any liability attaching to him or her in connection with any negligence, default, breach of duty or breach of trust in relation to the company of which he or she is a director. In addition, it is proposed that the Post-Combination Company Board will enter into separate deed of indemnity with the Post-Combination Company. | ||
Limitation on Liability of Directors |
The Current GGI Certificate provides that a director of GGI shall not be personally liable to GGI or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or may hereafter be amended unless they violated their duty of loyalty to GGI or its stockholders, acted in bad faith, knowingly or intentionally |
The Post-Combination Articles do not contain express limitation of liability provisions for the directors. Under the Companies Act, any provision, whether contained in a companys articles of association or any contract or otherwise, that purports to exempt a director of a company, to any extent, from any liability that would otherwise attach to him in connection with any negligence, default, breach of duty or breach |
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GGI |
Post-Combination Company | |||
violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived improper personal benefit from their actions as directors. | of trust in relation to ListCo is void. | |||
Corporate Opportunity/Conflicts of Interest |
The Current GGI Certificate provides that the doctrine of corporate opportunity, or any other analogous doctrine, shall not apply with respect to GGI or any of its officers or directors or any of their respective affiliates, in circumstances where the application of any such doctrine would conflict with any fiduciary duties or contractual obligations they may have. In addition to the foregoing, the doctrine of corporate opportunity shall not apply to any other corporate opportunity with respect to any of the directors or officers of GGI unless such corporate opportunity is offered to such person solely in his or her capacity as a director or officer of GGI and such opportunity is one GGI is legally and contractually permitted to undertake and would otherwise be reasonable for GGI to pursue. |
The Post-Combination Articles provide that the Post-Combination Company Board may, in accordance with the requirements set out in the Post-Combination Articles, authorize any matter or situation proposed to them by any director which would, if not authorised, involve a director (an Interested Director) breaching his or her duty under the Companies Act to avoid conflicts of interest. A director is not required, by reason of being a director (or because of the fiduciary relationship established by reason of being a director), to account to ListCo for any remuneration, profit or other benefit which he or she derives from or in connection with a relationship involving a conflict of interest which has been authorised by the directors or by ListCo in general meeting (subject in each case to any terms, limits or conditions attaching to that authorization) and no contract shall be liable to be avoided on such grounds. | ||
Amendments to Charter/Articles of Association |
The Current GGI Certificate provides that GGI reserves the right at any time and from time to time to amend, alter, change or repeal any provision of the Current GGI Certificate as authorized by the laws of the State of Delaware. Under the DGCL, an amendment to a corporations certificate of incorporation generally requires the approval of |
There is no express amendment of articles provision in the Post-Combination Articles, however, under the Companies Act 2006, companies may only alter their articles of association by way of passing a special resolution of members in general meeting. |
455
GGI |
Post-Combination Company | |||
the board of directors and a majority of the combined voting power of the then-outstanding shares of voting stock, voting together as a single class, subject to certain higher thresholds for amendments to provisions related to GGIs status as a blank check company. | ||||
Amendments to Bylaws |
The Current GGI Certificate provides that the GGI Board shall have the power to adopt, amend, alter or repeal the bylaws. The affirmative vote of a majority of the GGI Board shall be required to adopt, amend, alter or repeal the bylaws. GGIs current bylaws also may be adopted, amended, altered or repealed by the stockholders; provided, however, that in addition to any vote of the holders of any class or series of capital stock of GGI required by applicable law or the Current GGI Certificate, the affirmative vote of the holders of at least a majority of the voting (except as otherwise provided in relevant sections of GGIs current bylaws) power of all outstanding shares of capital stock of the GGI entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend, alter or repeal the GGIs current bylaws. | N/A | ||
Liquidation |
The Current GGI Certificate provides that, subject to applicable law, the rights, if any, of the holders of any outstanding series of the GGI Preferred Stock and certain provisions of the Current GGI Certificate, in the event of any voluntary or involuntary liquidation, dissolution or winding up of GGI, after payment or provision for payment of the debts and other liabilities of GGI, the holders of shares of GGI Common | The Post-Combination Articles provide that on a return of assets on liquidation or otherwise, the assets of the Post-Combination Company remaining after payment of its debts and liabilities and available for distribution to holders of Post- Combination Company Shares, Post-Combination Company Class C Shares, Post-Combination Company Preference Shares, Deferred |
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GGI |
Post-Combination Company | |||
Stock shall be entitled to receive all the remaining assets of GGI available for distribution to its stockholders, ratably in proportion to the number of shares of GGI Class A Common Stock (on an as-converted basis with respect to the GGI Class F Common Stock) held by them. | Shares and GBP Redeemable Preferred Shares will be applied in the following manner and order of priority:
1. first, to the holders of the Post-Combination Company Preference Shares (pro rata and pari passu) an amount equal to the initial liquidation preference of $588,826,100 less such amount as is equal to the Conversion Subscription Value (as defined in the Post-Combination Articles);
2. second, to the holders of the GBP Redeemable Preferred Shares an amount equal to the nominal value of such shares;
3. third, to the holders of the Post-Combination Company Shares pro rata to the number of Post-Combination Company Shares respectively held by them up to an amount of $1 million per Post-Combination Company Share;
4. fourth, to the holders of Deferred Shares an amount equal to the nominal value of the Deferred Shares; and
5. fifth:
to the holders of the Post-Combination Company Shares pro rata to the number of Post-Combination Company Shares respectively held by them;
to the holders of the Post-Combination Company Class C |
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GGI |
Post-Combination Company | |||
Shares pari passu with Post-Combination Company Shares on an as-converted basis less the conversion price of $11.50 (subject to relevant adjustments in the Post-Combination Articles),
provided that if the amount which would be received by the holders of the Post-Combination Company Preference Shares if all such shares had been converted in accordance with the Post-Combination Articles would be greater than pursuant to (a) above, the relevant Post-Combination Company Preference Shares will be deemed for the purposes of the relevant return of capital to be treated pari passu with the holders of Post-Combination Company Shares on an as-converted basis. | ||||
Redemption Rights |
The Current GGI Certificate provides that, until the earlier to occur of (i) the consummation of the GGIs initial business combination or (ii) the filing of an amendment to or amendment and restatement of the Current GGI Certificate, which (a) amendment or amendment and restatement (1) has been approved by the GGI Board in connection with an initial business combination, and (2) has been adopted by the requisite vote of the GGI stockholders at a meeting of the GGI stockholders held to approve the initial business combination and (b) the initial business combination has been approved by the requisite vote of the GGI stockholders, unless approved by the affirmative vote of the holders of at least 65% of the then outstanding shares of the | The Post-Combination Articles provide that, subject to the provisions of the Companies Act, the Post-Combination Company shall be entitled, at any time, to serve notice on all or some of the holders of the GBP Redeemable Preferred Shares that it wishes to redeem all or some of the GBP Redeemable Preferred Shares in issue at that time on the date falling 14 days after service of such notice (or on such other date as may be agreed between the Post-Combination Company and the holders of the relevant GBP Redeemable Preferred Shares).
The Post-Combination Company Class C Shares will have substantially similar |
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GGI |
Post-Combination Company | |||
GGI Common Stock, GGI shall provide all holders of GGI Public Shares with the opportunity to have their GGI Public Shares redeemed upon the consummation of an initial business combination pursuant to, and subject to certain limitations set forth in, the Current GGI Certificate for cash equal to the applicable redemption price per share; provided, however, that GGI shall not redeem or repurchase GGI Public Shares to the extent that such redemption would result in GGIs failure to have net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) in excess of $5 million or any greater net tangible asset or cash requirement which may be contained in the agreement relating to an initial business combination. | conversion and redemption features as the Post-Combination Company Warrants described below under Description of ListCos SecuritiesPost-Combination Company Warrants. |
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SHARES ELIGIBLE FOR FUTURE SALE
Upon the Closing, 6,861,249,349 Post-Combination Company Shares will be authorized pursuant to the Post-Combination Articles, including 5,000,000,000 Post-Combination Company Class A Shares and 1,777,366,739 Post-Combination Company Class B Shares. Based on the assumptions set out elsewhere in this proxy statement/prospectus and in the no redemption scenario, (i) up to 2,125,300,000 Post-Combination Company Shares will be issued and outstanding and (ii) 2,017,686,131 Post-Combination Company Shares, including (a) Post-Combination Company Class B Shares and Post-Combination Company Class A Shares underlying Class A ADSs held by the Parent Shareholders and (b) Post-Combination Company Class A Shares underlying Class A ADSs held by the GGI Initial Stockholders, will be subject to certain lock-up arrangements pursuant to the Registration Rights Agreement, Sponsor and Supporting Sponsor Stockholder Lock-Up Agreements and the Parent Lock-Up Agreement.
In addition, (i) assuming the Warrant Amendment Proposal is approved, 25,000,000 Class C ADSs will be issued and outstanding and will consist of 16,000,000 Class C-1 ADSs and 9,000,000 Class C-2 ADSs, each exercisable for one Class A ADS at $11.50 per Class A ADS or (ii) assuming the Warrant Amendment Proposal is not approved, 16,000,000 Public ADWs and 9,000,000 PP ADWs will be issued and outstanding, each ADW exercisable for one Class A ADS at $11.50 per Class A ADS.
Sales of substantial amounts of the AD securities (as applicable), in the public market could adversely affect prevailing market prices of the AD securities. Prior to the Business Combination, there has been no public market for AD securities. The Post-Combination Company intends to apply for listing of the Class A ADSs, Class C-1 ADSs and the Public ADWs on Nasdaq, but the Post-Combination Company cannot assure you that a regular trading market will develop in the Class A ADSs, Class C-1 ADSs and the Public ADWs.
Lock-Up Agreements
In connection with the Business Combination, The Post-Combination Company, Parent and the Parent Shareholders entered into the Parent Lock-Up Agreement. Pursuant to the Parent Lock-Up Agreement, each Parent Shareholder has, subject to certain exceptions, among other things, agreed to not transfer any equity security of the Post-Combination Company issued to them pursuant to the Business Combination Agreement or the other Related Agreements during the period commencing the date of Closing and ending 180 days following the date of the Closing.
In connection with the Business Combination, the Post-Combination Company, GGI and the GGI Initial Stockholders entered into the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement. Pursuant to the Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement, the GGI Initial Stockholders have, subject to certain exceptions, agreed to not to transfer any Class A ADSs issued in respect of Founder Shares pursuant to the Business Combination Agreement during the period beginning the date of Closing and ending 180 days following the date of the Closing.
Rule 144
Pursuant to Rule 144 under the Securities Act (Rule 144), a person who has beneficially owned restricted Post-Combination Company Shares, Post-Combination Company Class C Shares or Post-Combination Company Warrants (including, in each case, any AD securities issued against the deposit of any such underlying securities), for at least six months would be entitled to sell their securities; provided that (i) such person is not deemed to have been one of the Post-Combination Companys affiliates at the time of, or at any time during the three months preceding, a sale and (ii) the Post-Combination Company is subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as it was required to file reports) preceding the sale.
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Persons who have beneficially owned restricted Post-Combination Company Shares, Post-Combination Company Class C Shares or Post-Combination Company Warrants (including, in each case, any AD securities issued against the deposit of any such underlying securities) for at least six months but who are Post-Combination Company affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
| 1% of the then outstanding equity shares of the same class; or |
| the average weekly trading volume of the applicable Post-Combination Company AD security of the same class during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC. |
Sales by affiliates of the Post-Combination Company under Rule 144 are also subject to certain requirements relating to manner of sale, notice and the availability of current public information about the Post-Combination Company.
Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies
Rule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met:
| the issuer of the securities that was formerly a shell company has ceased to be a shell company; |
| the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; |
| the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials); and |
| at least one year has elapsed from the time that the issuer filed Form 20-F type information with the SEC, which is expected to be filed promptly after completion of the Business Combination, reflecting its status as an entity that is not a shell company. |
Registration Rights
In connection with the Business Combination, the Post-Combination Company, Parent, the Parent Shareholders, the GGI Sponsor and the Registration Rights Holders entered into the Registration Rights Agreement. Pursuant to the terms of the Registration Rights, the Post-Combination Company will be obligated to file a registration statement to register the resale of certain securities of the Post-Combination Company. In addition, pursuant to the terms of the Registration Rights Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, certain holders may demand at any time or from time to time, that the Post-Combination Company file a registration statement on Form F-1, or any such other form of registration statement as is then available to effect a registration, or, if available, Form F-3, to register the securities of the Post-Combination Company. The Registration Rights Agreement also provides the parties with piggy-back registration rights, subject to certain requirements and customary conditions.
Pursuant to the Subscription Agreements, the Post-Combination Company agreed that, within 30 calendar days after the Closing, it will file with the SEC (at the Post-Combination Companys sole cost and expense) the Resale Registration Statement registering the resale of the PIPE Shares, and the Post-Combination Company will use its commercially reasonable efforts to have the Resale Registration Statement declared effective as soon as practicable after the filing thereof.
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The following table summarizes the market standoff restrictions of certain Post-Combination Company Shareholders and securities held:
Stakeholder |
Market Standoff |
Shares Subject to Market |
Market Standoff Period(1) | |||
GGI Initial Stockholders |
Sponsor and Supporting Sponsor Stockholder Lock-Up Agreement; Letter Agreement | Class A ADSs (issued in respect of Founder Shares) | 180 days after the Closing | |||
Class C-2 ADSs or ADWs, as applicable | 30 days after the Closing | |||||
GGI Public Stockholders or Public Warrant Holders (excluding the GGI Initial Stockholders) |
None | None | None | |||
PIPE Investors (with respect to the PIPE Shares) |
The PIPE Shares are restricted securities. The Post-Combination Company is required to file a registration statement registering the resale of the PIPE Shares within 30 days after the Closing. | |||||
Parent Shareholders |
Parent Lock-Up Agreement | Any equity security of the Post-Combination Company issued pursuant to the Business Combination Agreement or Related Agreements, including the Post-Combination Company Preference Shares | 180 days after the Closing |
(1) | GGI securityholders who become affiliates of the Post-Combination Company for purposes of Rule 144 under the Securities Act would be subject to additional resale restrictions pursuant to Rule 144. |
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PRICE RANGE OF SECURITIES AND DIVIDENDS
ListCo
Price Range of ListCo Securities
Historical market price information regarding shares of ListCo is not provided because there is no public market for shares of ListCo.
Dividend Policy
ListCo has not paid any cash dividends on its capital stock to date and does not intend to pay cash dividends prior to the consummation of the Business Combination.
GGI
Price Range of GGIs Securities
On March 23, 2021, the GGI Public Units, each of which consists of one GGI Public Share and one-fifth of a GGI Public Warrant, began trading on Nasdaq under the symbol GGPIU. On May 11, 2021, GGI announced that holders of the GGI Public Units could elect to separately trade the GGI Public Shares and the GGI Public Warrants included in the GGI Public Units commencing May 13, 2021. On May 17, 2021, the GGI Public Warrants began trading on Nasdaq GGPIW. On May 18, 2021, the GGI Public Shares began trading on Nasdaq under the symbol GGPI. Each GGI Public Warrant entitles the holder to purchase one GGI Public Share at a price of $11.50 per GGI Public Share, subject to adjustment as described in GGIs final prospectus dated March 22, 2021 that was filed with the SEC on March 22, 2021. Only whole GGI Public Warrants will be issued on separation of the GGI Public Units, and only whole GGI Public Warrants may be traded and be exercised for GGI Public Shares. The GGI Public Warrants will become exercisable 30 days after the consummation of the Business Combination. GGI Public Warrants expire five years after the completion of an initial business combination or earlier upon redemption or liquidation. Upon the consummation of the Business Combination, the GGI Public Units will automatically separate into GGI Public Shares and GGI Public Warrants and will be converted into ADSs and/or ADWs pursuant to the applicable provisions of the Business Combination Agreement. As a result, the GGI Public Units, GGI Public Shares and GGI Public Warrants will no longer trade and will be delisted from Nasdaq.
The following table sets forth, for the calendar quarter indicated, the high and low sales prices per GGI Public Unit, GGI Public Share and GGI Public Warrant as reported on Nasdaq for the periods presented:
Public Units (GGPIU)(1) |
Public Shares (GGPI)(2) |
Public Warrants (GGPIW)(3) |
||||||||||||||||||||||
High | Low | High | Low | High | Low | |||||||||||||||||||
Fiscal Year 2021: |
||||||||||||||||||||||||
Quarter ended March 31, 2022 |
$ | 13.37 | $ | 10.66 | $ | 12.46 | $ | 10.11 | $ | 3.30 | $ | 3.12 | ||||||||||||
Quarter ended December 31, 2021 |
$ | 10.90 | $ | 10.71 | $ | 10.37 | $ | 10.11 | $ | 2.78 | $ | 2.60 | ||||||||||||
Quarter ended September 30, 2021 |
$ | 10.92 | $ | 10.00 | $ | 10.45 | $ | 9.73 | $ | 3.04 | $ | 1.25 | ||||||||||||
Quarter ended June 30, 2021 |
$ | 10.04 | $ | 9.93 | $ | 10.00 | $ | 9.70 | $ | 1.37 | $ | 0.66 | ||||||||||||
Quarter ended March 31, 2021 |
$ | 10.00 | $ | 9.89 | N/A | N/A | N/A | N/A | ||||||||||||||||
Fiscal Year 2020: |
||||||||||||||||||||||||
Quarter ended December 31, 2020 |
N/A | N/A | N/A | N/A | N/A | N/A |
(1) | Began trading on March 23, 2021. |
(2) | Began trading on May 18, 2021. |
(3) | Began trading on May 17, 2021. |
On September 24, 2021, the trading date before the public announcement of the Business Combination, the GGI Public Units, GGI Public Shares and GGI Public Warrants closed at $10.31, $9.98 and $1.79, respectively.
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Holders
On April 20, 2022, there was 1 holder of record of the GGI Public Units, 1 holder of record of GGIs separately traded GGI Public Shares, and 1 holder of record of GGIs separately traded GGI Public Warrants.
Dividend Policy
GGI has not paid any cash dividends on the GGI Public Shares to date and does not intend to pay cash dividends prior to the consummation of the Business Combination.
Polestar
Price Range of Polestars Securities
Historical market price information regarding shares of Polestar is not provided because there is no public market for shares of Polestar. In connection with the Business Combination, Polestar will become a wholly owned subsidiary of ListCo in the Pre-Closing Reorganization.
Dividend Policy
Polestar has not paid any cash dividends on its capital stock to date and does not intend to pay cash dividends prior to the consummation of the Pre-Closing Reorganization or the Business Combination.
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STOCKHOLDER PROPOSAL NO. 1 THE BUSINESS COMBINATION PROPOSAL
Overview
GGI is asking GGI stockholders to adopt the Business Combination Agreement and approve the Business Combination. GGI stockholders should read carefully this proxy statement/prospectus in its entirety for more detailed information concerning the Business Combination Agreement, which is attached as Annex A to this proxy statement/prospectus. Please see the sections titled The Business Combination and Related Agreements for additional information and a summary of certain terms of the Business Combination and the Business Combination Agreement. GGI stockholders are urged to read carefully the Business Combination Agreement in its entirety before voting on this proposal.
The Resolution
RESOLVED, that the Business Combination Agreement, dated as of September 27, 2021 (as it may be amended from time to time, the Business Combination Agreement) (in the form attached to the proxy statement/prospectus in respect of the meeting as Annex A) by and among by and among GGI, Polestar Automotive Holding Limited, a Hong Kong incorporated company (Parent), Polestar Automotive (Singapore) Pte. Ltd., a private company limited by shares in Singapore (Polestar Singapore), Polestar Holding AB, a private limited liability company incorporated under the laws of Sweden (Polestar Sweden), Polestar Automotive Holding UK Limited, a limited company incorporated under the laws of England and Wales and a direct wholly owned subsidiary of Parent (ListCo), and PAH UK Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of ListCo (Merger Sub) be adopted, and GGIs entry into the same and the transactions contemplated by the Business Combination Agreement and the other transaction documents contemplated thereby (the Business Combination) be approved in all respects.
Consequences if the Business Combination Proposal is Not Approved
The Business Combination is conditioned on the approval of the Business Combination Proposal. If GGI fails to obtain sufficient votes for the Business Combination Proposal, GGI will not meet GGIs conditions to Closing and GGI will not consummate the Business Combination.
Vote Required for Approval
The Business Combination Proposal (and consequently, the Business Combination Agreement and the Business Combination) will be approved only if the holders of a majority of the outstanding shares of GGI Common Stock entitled to vote thereon at the Stockholder Special Meeting vote FOR the Business Combination Proposal. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Stockholder Special Meeting, abstentions and broker non-votes will have the same effect as a vote AGAINST the Business Combination Proposal.
The GGI Initial Stockholders have agreed to vote their shares of GGI Common Stock in favor of the Business Combination Proposal. As of the record date, the GGI Sponsor and GGIs directors and officers own 20% of the issued and outstanding shares of GGI Common Stock. As a result, holders of approximately 38% of GGI Public Shares will need to vote in favor of the Business Combination Proposal for the Business Combination Proposal to be approved.
Recommendation of the GGI Board
THE GGI BOARD UNANIMOUSLY RECOMMENDS THAT GGI STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE BUSINESS COMBINATION PROPOSAL.
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STOCKHOLDER PROPOSAL NO. 2 THE GOVERNANCE PROPOSALS
Overview
GGI stockholders are being asked to vote on separate proposals with respect to certain governance provisions in the Post-Combination Articles, which are separately being presented in accordance with SEC guidance and which will be voted upon on a non-binding advisory basis. Each of these amendments was negotiated as part of the Business Combination and, in the judgment of the ListCo Board, these provisions are necessary to adequately address the needs of the Post-Combination Company. Accordingly, regardless of the outcome of the non-binding advisory vote on these proposals, ListCo and GGI intend that the Post-Combination Articles set forth on Annex B will take effect in connection with the Business Combination, assuming adoption of the Business Combination Proposal.
Proposal No. 2A: Change in Authorized Shares
Description of Provision in Post-Combination Articles
The Post-Combination Articles provide that the total number of shares of all classes of shares which the Post-Combination Company is authorized to issue is 6,861,249,349 shares, consisting of (a) 5,000,000,000 Post-Combination Company Class A Shares of nominal value USD 0.01 each, (b) 1,777,366,739 Post-Combination Company Class B Shares of nominal value USD 0.01 each, (c) 16,000,000 Post-Combination Company Class C-1 Shares of nominal value USD 0.10 each, (d) 9,000,000 Post-Combination Company Class C-2 Shares of nominal value USD 0.10 each, (e) 58,882,610 Post-Combination Company Preference Shares of nominal value USD 10.00 each, and (f) 50,000 GBP Redeemable Preferred Shares of nominal value GBP 1.00 each. In addition, Post-Combination Company Class A Shares and Deferred Shares of nominal value USD 0.01 each may increase upon conversion of Post-Combination Class C-1 Shares, Post-Combination Class C-2 Shares and Post-Combination Company Preference Shares without any requirement for further authorization.
Reasons for Provision in Post-Combination Articles
The Post-Closing Articles provide for necessary share capital to effectuate the Business Combination, including the issuance of the Class A Share Merger Consideration, and issuances pursuant to the Subscription Investments, the Volvo Cars Preference Subscription Investment, the Equity Plan and the Employee Stock Purchase Plan. The authorization of the Post-Combination Company Class B Shares allows ListCo to effectuate the Business Combination by providing comparable shares to exchange for Class B ordinary shares of Parent.
The increase in the total number of authorized shares provides the Post-Combination Company adequate authorized capital to provide flexibility for future issuances of Post-Combination Company Shares if determined by the Post-Combination Company Board to be in the best interests of the Post-Combination Company, without incurring the risk, delay and potential expense incident to obtaining shareholder approval for a particular issuance. Although there is no present intention to issue any shares beyond those contemplated by the Business Combination, including the Subscription Investments, the Volvo Cars Preference Subscription Investment, the Equity Plan and the Employee Stock Purchase Plan, or otherwise in the ordinary course of business, the additional authorized shares of Post-Combination Company Shares would be issuable for any proper corporate purpose, including, without limitation, stock splits, stock dividends, future acquisitions, investment opportunities, capital raising transactions of equity or convertible debt securities, issuances under current or future equity compensation plans or for other corporate purposes. The Post-Combination Companys authorized but unissued Post-Combination Company securities will be available for future issuances without stockholder approval (except to the extent otherwise required by law or Nasdaq rules) and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans.
Although holders of Post-Combination Company Class A Shares and Post-Combination Company Class B Shares will be entitled to certain preemption rights as described in Description of ListCos Securities, those
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rights do not apply to all issues of shares and will be disapplied as described in Description of ListCos Securities. Accordingly, the Post-Combination Company Board may issue shares, including the additional authorized shares, at any time on a non-preemptive basis without further authorization from Post-Combination Company shareholders, except to the extent otherwise required by law or Nasdaq rules. The terms upon which any such securities may be issued will be determined by the Post-Combination Company Board. If approved, the additional Post-Combinational Company securities will have rights as described in Description of ListCos Securities. Incidental effects of the increase in the outstanding number of shares of the Post-Combination Company may include dilution of ownership and voting power of existing holders of the Post-Combination Company securities. The Post-Combination Company could also use the increased number of Post-Combination Company Shares for potential strategic transactions, including, among other things, acquisitions, strategic partnerships, joint ventures, restructurings, business combinations and investments, although there are no immediate plans to do so. No assurance can be given that any such transactions will (i) be completed on favorable terms or at all, (ii) enhance shareholder value or (iii) not adversely affect the business or trading price of the AD securities.
Proposal No. 2B: Dual-Class Structure
Description of Provision in Post-Combination Articles
The Post-Combination Articles provide for a dual class capital structure pursuant to which holders of Post-Combination Company Class B Shares will be entitled to 10 votes per share, thus having the ability to control the outcome of matters requiring shareholder approval (even if they own significantly less than a majority of the outstanding Post-Combination Company Shares), including the election of directors and significant corporate transactions, such as a merger or other sale of the Post Combination Company or its assets.
Reasons for Provision in Post-Combination Articles
The dual class structure is intended to align the Post-Combination Companys capital structure with that of Polestar, was negotiated for by the Polestar Board in the negotiations with respect to the Business Combination, and enables the Post-Combination Company to undertake a long-term view. Volvo Cars and Geelys controlling interest will enhance the Post-Combination Companys ability to focus on long-term value creation and help insulate the Post-Combination Company from short-term outside influences.
Proposal No. 2C: Classified Board
Description of Provision in Post-Combination Articles
The Post-Combination Articles provide that following the Closing, the Initial Directors will be divided into three classes of Directors, designated as Class I, Class II and Class III, respectively. The Post-Combination Company Board is authorized to assign members of the Board already in office to such classes at the time the classification becomes effective. The Post-Combination Board is also authorized to assign any persons who take office as Directors after the Closing to any such Class; provided, however, that the Classes are as close to equal size as possible.
Reasons for Provision in Post-Combination Articles
The ListCo Board has evaluated the merits of a classified board structure in light of its continuing commitment to accountability and high standards of corporate governance, and determined that the classification of directors is in the best interests of shareholders. This amendment would create three separate classes of directors on the Post-Combination Company Board effective immediately upon the adoption of the Post-Combination Articles and the appointment of the Post-Combination Company Board. As discussed elsewhere in this proxy statement/prospectus, the Post-Combination Company Board is expected to be composed of three directors in Class I (expected to be Thomas Ingenlath, Daniel Li and David Richter), three directors in Class II (expected to be Carla
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De Geyseleer, Karl-Thomas Neumann and Håkan Samuelsson) and three directors in Class III (expected to be Karen Francis, Jim Rowan and David Wei). The term of the initial Class I Directors will expire at the first annual general meeting, the term of the initial Class II Directors will expire at the second annual general meeting, and the term of the initial Class III Directors will expire at the third annual general meeting. At each succeeding annual general meeting following the third annual general meeting following Closing, directors shall be elected to serve for a term of three years to succeed the directors of the class whose terms expire at such annual general meeting.
Proposal No. 2D: Removal of Directors
Description of Provision in Post-Combination Articles
In addition to any power of removal conferred by the Companies Act, the Post-Combination Articles provide that the Post-Combination Company may by special resolution, or by ordinary resolution of which special notice has been given in accordance with section 312 of the Companies Act, remove a director before the expiry of his or her period of office (without prejudice to a claim for damages for breach of contract or otherwise).
The Post-Combination Articles further provide that in the first three years following Closing, save as required by the Companies Act, the Post-Combination Company Board may only convene a general meeting which proposes a resolution to remove an Independent Director (as defined in the Post-Combination Articles) if the Post-Combination Company Board approves such resolution by simple majority including the affirmative vote of at least two other Independent Directors (or if there are fewer than two Independent Directors then in office excluding the Independent Director proposed to be removed, all of the Independent Directors (other than the Independent Director proposed to be removed), if any).
Reasons for Provision in Post-Combination Articles
As a matter of good corporate governance and for the best interest of the Post-Combination Company, the Post-Combination Articles provide the majority shareholders the right to remove a director if that director is underperforming or if he or she is at odds with the strategies which the majority of the Post-Combination Companys management have adopted.
The Parent, the Parent Shareholders and ListCo entered into the Shareholders Acknowledgement Agreement which provides, among other things, that the Parent and the Parent shareholders undertake that for a period of three years following the Closing, Parent and the Parent shareholders will not require the Post-Combination Company to convene a general meeting for the purpose of removing an independent director. The arrangements in relation to the independence of the Post-Combination Company Board was negotiated by the relevant parties in the negotiations with respect to the Business Combination, and enables the Post-Combination Company to maintain long-term board independence.
Proposal No. 2E: Quorum for Shareholder Meetings
Description of Provision in Post-Combination Articles
The Post-Combination Articles provide that at least two members that in aggregate hold at least 51% of the issued shares of the Post-Combination Company who are present in person or by proxy and entitled to attend and to vote on the business to be transacted shall be a quorum for a general meeting for all purposes.
Reasons for Provision in Post-Combination Articles
The purpose of the members quorum requirement in the Post-Combination Articles is to ensure that the members of the Post-Combination Company are adequately represented at a meeting where changes will be made to the Post-Combination Company.
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Proposal No. 2F: Authorization of Directors Conflicts of Interest
Description of Provision in Post-Combination Articles
The Post-Combination Articles provide that the Post-Combination Company Board may, in accordance with the requirements set out in the Post-Combination Articles, authorize any matter or situation proposed to them by any director which would, if not authorised, involve a director (an Interested Director) breaching his or her duty under the Companies Act to avoid conflicts of interest. A director is not required, by reason of being a director (or because of the fiduciary relationship established by reason of being a director), to account to ListCo for any remuneration, profit or other benefit which he or she derives from or in connection with a relationship involving a conflict of interest which has been authorised by the directors or by ListCo in general meeting (subject in each case to any terms, limits or conditions attaching to that authorization) and no contract shall be liable to be avoided on such grounds.
Reasons for Provision in Post-Combination Articles
Under the Companies Act, it is a legal obligation for company directors to avoid conflicts of interest, and to follow specific pre-authorisation procedures for any potential conflicts. Liability for this lies personally with each director, and not with the company. Such pre-authorisation procedures includes the boards authorization of any matter or situation proposed to them by any director which would, if not authorized, result in a breach of the directors duty to avoid conflicts of interest. In deciding whether to approve a conflict situation, the directors must act in accordance with their general duties, including their duty to promote the success of the company. The purpose of this provision is to avoid conflicts of interest with directors.
Proposal No. 2G: Selection of the Courts of England and Wales as Exclusive Forum
Description of Provision in Post-Combination Articles
The Post-Combination Articles provide that, unless ListCo consents in writing to the selection of an alternative forum, the Courts of England and Wales will be the sole and exclusive forum for:
(a) | any derivative action or proceeding brought on behalf of ListCo; |
(b) | any action, including any action commenced by a member of ListCo in its own name or on behalf of ListCo, asserting a claim of breach of any fiduciary or other duty owed by any director, officer or other employee of ListCo (including but not limited to duties arising under the Companies Act); |
(c) | any action arising out of or in connection with the Post-Combination Articles or otherwise in any way relating to the constitution or conduct of ListCo; or |
(d) | any action asserting a claim against ListCo governed by the Internal Affairs Doctrine (as such concept is recognised under the laws of the United States of America). |
The Post-Combination Articles further provide that, unless ListCo consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act or Exchange Act.
Nothing above will apply to any action brought to enforce a duty or liability created by the Securities Act or Exchange Act, or any claim for which the federal district courts of the United States of America are, as a matter of the laws of the United States, the sole and exclusive forum for determination of such a claim.
Reasons for Provision in Post-Combination Articles
Adopting the Courts of England and Wales as the exclusive forum for certain shareholder litigation is intended to assist the Post-Combination Company in avoiding multiple lawsuits in multiple jurisdictions regarding the same
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matter. The ability to require such claims to be brought in a single forum will help to assure consistent consideration of the issues, the application of a relatively known body of case law and level of expertise and should promote efficiency and cost-savings in the resolutions of such claims. Polestar believes that the Courts of England and Wales are best suited to address disputes involving such matters given that ListCo is incorporated in the England and Wales. This provides shareholders and the Post-Combination Company with more predictability regarding the outcome of intra-corporate disputes. Notwithstanding the foregoing, these provisions of the Post-Combination Articles will not apply to suits brought to enforce any liability or duty created by the Exchange Act or the Securities Act, or any other claim for which the federal district courts of the United States of America shall be the sole and exclusive forum.
In addition, this amendment would promote judicial fairness and avoid conflicting results, as well as make the Post-Combination Companys defense of applicable claims less disruptive and more economically feasible, principally by avoiding duplicative discovery.
Adopting U.S. federal district courts as the exclusive forum for resolution of any complaint asserting a cause of action arising under the Securities Act or the Exchange Act is intended to assist the Post-Combination Company in resolving such disputes in a consistent manner with greater uniformity of procedures and precedents. The ability to require such claims to be brought within a single judicial system will help to assure consistent consideration of the issues, encourage consistent application of a relatively known body of case law and perceived level of expertise. Polestar believes that the U.S. federal district courts are best suited to address disputes involving actions arising under the Securities Act or the Exchange Act given that the Securities Act and the Exchange Act are promulgated by the federal government. This provides shareholders and the Post-Combination Company with more predictability regarding the outcome of disputes arising under the Securities Act or the Exchange Act.
The Resolution
RESOLVED, that, on a non-binding advisory basis, the following proposal with respect to the Post-Combination Articles that materially affects stockholder rights be approved and adopted:
Authorized Shares: the Post-Combination Company be authorized to issue 6,861,249,349 shares, consisting of (a) 5,000,000,000 Post-Combination Company Class A Shares of nominal value USD 0.01 each, (b) 1,777,366,739 Post-Combination Company Class B Shares of nominal value USD 0.01 each, (c) 16,000,000 Post-Combination Company Class C-1 Shares of nominal value USD 0.10 each, (d) 9,000,000 Post-Combination Company Class C-2 Shares of nominal value USD 0.10 each, (e) 58,882,610 Post-Combination Company Preference Shares of nominal value USD 10.00 each, and (f) 50,000 GBP Redeemable Preferred Shares of nominal value GBP 1.00 each.
RESOLVED, that, on a non-binding advisory basis, the following proposal with respect to the Post-Combination Articles that materially affects stockholder rights be approved and adopted:
Dual-Class Capital Structure: holders of Post-Combination Company Class B Shares shall be entitled to 10 votes per share.
RESOLVED, that, on a non-binding advisory basis, the following proposal with respect to the Post-Combination Articles that materially affects stockholder rights be approved and adopted:
Classified Board: the Post-Combination Company Board be classified into three classes of directors, as nearly equal as reasonably possible, with each class being elected to a staggered three-year term.
RESOLVED, that, on a non-binding advisory basis, the following proposal with respect to the Post-Combination Articles that materially affects stockholder rights be approved and adopted:
Removal of Directors: the Post-Combination Company may by special resolution, or by ordinary resolution of which special notice has been given in accordance with section 312 of the Companies Act, remove a director
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before the expiry of his or her period of office (without prejudice to a claim for damages for breach of contract or otherwise). Further, in the first three years following Closing, save as required by the Companies Act, the Post-Combination Company Board may only convene a general meeting which proposes a resolution to remove an Independent Director (as defined in the Post-Combination Articles) if the Post-Combination Company Board approves such resolution by simple majority including the affirmative vote of at least two other Independent Directors (or if there are fewer than two Independent Directors then in office excluding the Independent Director proposed to be removed, all of the Independent Directors (other than the Independent Director proposed to be removed), if any).
RESOLVED, that, on a non-binding advisory basis, the following proposal with respect to the Post-Combination Articles that materially affects stockholder rights be approved and adopted:
Quorum for General Meetings: at least two members that in aggregate hold at least 51% of the issued shares of the Post-Combination Company who are present in person or by proxy and entitled to attend and to vote on the business to be transacted shall be a quorum for a general meeting for all purposes.
RESOLVED, that, on a non-binding advisory basis, the following proposal with respect to the Post-Combination Articles that materially affects stockholder rights be approved and adopted:
Authorization of Directors Conflicts of Interest: the Post-Combination Company Board may, in accordance with the requirements set out in the Post-Combination Articles, authorize any matter or situation proposed to them by any director which would, if not authorized, involve a director (an Interested Director) breaching his or her duty under the Companies Act to avoid conflicts of interest. A director is not required, by reason of being a director (or because of the fiduciary relationship established by reason of being a director), to account to ListCo for any remuneration, profit or other benefit which he or she derives from or in connection with a relationship involving a conflict of interest which has been authorized by the directors or by ListCo in general meeting (subject in each case to any terms, limits or conditions attaching to that authorization) and no contract shall be liable to be avoided on such grounds.
RESOLVED, that, on a non-binding advisory basis, the following proposal with respect to the Post-Combination Articles that materially affects stockholder rights be approved and adopted:
Exclusive Forum: unless ListCo consents in writing to the selection of an alternative forum, the Courts of England and Wales will be the sole and exclusive forum for: (a) any derivative action or proceeding brought on behalf of ListCo; (b) any action, including any action commenced by a member of ListCo in its own name or on behalf of ListCo, asserting a claim of breach of any fiduciary or other duty owed by any director, officer or other employee of ListCo (including but not limited to duties arising under the Companies Act); (c) any action arising out of or in connection with the Post-Combination Articles or otherwise in any way relating to the constitution or conduct of ListCo; or (d) any action asserting a claim against ListCo governed by the Internal Affairs Doctrine (as such concept is recognized under the laws of the United States of America); further provide that, unless ListCo consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the United States Securities Act of 1933, as amended or any successor legislation. Nothing above will apply to any action brought to enforce a duty or liability created by the United States Securities Exchange Act of 1934 Act, as amended, or any successor legislation.
Vote Required for Approval
Approval of the Governance Proposals requires the affirmative vote of at least a majority of the votes cast by holders of the outstanding shares of GGI Common Stock represented in person via the virtual meeting platform or by proxy and entitled to vote thereon at the Stockholder Special Meeting. Accordingly, a GGI Stockholders failure to vote by proxy or to vote in person via the virtual meeting platform at the Stockholder Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Governance Proposals will have no
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effect on the Governance Proposals. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Governance Proposals. The GGI Initial Stockholders have agreed to vote the shares of GGI Class F Common Stock they own in favor of the Governance Proposals.
As discussed above, a vote to approve the Governance Proposals is an advisory vote, and therefore, is not binding on GGI, ListCo, the GGI Board or the ListCo Board (including the Post-Combination Company Board). Accordingly, regardless of the outcome of the non-binding advisory vote, ListCo intends that the proposed Post-Combination Articles, set forth on Annex B and containing the provisions noted above, will take effect in connection with the Business Combination, assuming adoption of the Business Combination Proposal.
Recommendation of the GGI Board
THE GGI BOARD UNANIMOUSLY RECOMMENDS THAT GGI STOCKHOLDERS VOTE FOR THE APPROVAL OF THE GOVERNANCE PROPOSALS.
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STOCKHOLDER PROPOSAL NO. 3 THE ADJOURNMENT PROPOSAL
Overview
The Adjournment Proposal, if adopted, will allow the chairman of the Stockholder Special Meeting, at their option, to adjourn the Stockholder Special Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI stockholders to approve the Business Combination Proposal or to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to GGI stockholders. The Adjournment Proposal will only be presented to GGI stockholders in the absence of a quorum, in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal or to ensure a supplement or amendment to this proxy statement/prospectus is timely provided to GGI stockholders.
The Resolution
RESOLVED, that the adjournment of the Stockholder Special Meeting to a later date or dates be confirmed, ratified and approved.
Consequences if the Adjournment Proposal is Not Approved
If the Adjournment Proposal is not approved by GGI stockholders, the GGI Board may not be able to adjourn the Stockholder Special Meeting to a later date in the absence of a quorum, in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal or to ensure a supplement or amendment to this proxy statement/prospectus is timely provided to GGI stockholders.
Vote Required for Approval
The Adjournment Proposal will be approved only if the holders of a majority of the votes cast by holders of the outstanding shares of GGI Common Stock represented in person via the virtual meeting platform or by proxy and entitled to vote thereon at the Stockholder Special Meeting vote FOR the Adjournment Proposal. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Stockholder Special Meeting, abstentions and broker non-votes will have no effect on the vote to approve the Adjournment Proposal. The GGI Initial Stockholders have agreed to vote the shares of GGI Class F Common Stock they own in favor of the Adjournment Proposal.
Recommendation of the GGI Board
THE GGI BOARD UNANIMOUSLY RECOMMENDS THAT GGI STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE ADJOURNMENT PROPOSAL.
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WARRANT HOLDER PROPOSAL NO. 1 THE WARRANT AMENDMENT PROPOSAL
Overview
GGI is asking GGI Public Warrant holders to approve the Warrant Amendment Proposal to amend the Existing Warrant Agreement to permit the conversion of GGI Public Warrants to Post-Combination Company Class C-1 Shares in the form of Class C-1 ADSs and the GGI Private Placement Warrants to Post-Combination Company Class C-2 Shares in the form of Class C-2 ADSs (such amendment, the Class C Warrant Amendment). Pursuant to the Class C Warrant Amendment, at the Effective Time, each GGI Public Warrant will convert into a Class C-1 ADS, exercisable for Class A ADSs and subject to substantially the same terms as were applicable to such GGI Warrant under the Existing Warrant Agreement. A form of the Class C Warrant Amendment is attached hereto as Annex D.
The GGI Board believes it is in the best interests of GGI and GGI Public Warrant holders to permit the conversion of GGI Public Warrants to Post-Combination Company Class C-1 Shares in the form of Class C-1 ADSs and the GGI Private Placement Warrants to Post-Combination Company Class C-1 Shares in the form of Class C-2 ADSs. In the event that the GGI Public Warrant holders fail to approve the Warrant Amendment Proposal, the Post-Combination Company may be subject to additional expenses, as set out below.
Consequences if the Warrant Amendment Proposal is Not Approved
In the event the Warrant Amendment Proposal is not approved but the Business Combination Proposal is approved, the Existing Warrant Agreement will be amended by the Warrant Amendment Agreement, pursuant to which, among other things, each GGI Warrant will convert into an ADW, which will be exercisable for Class A ADSs and subject to substantially the same terms as were applicable to the GGI Warrants under the Existing Warrant Agreement. The issue of Post-Combination Company Warrants underlying such ADWs may be regarded as a taxable disposal of an asset by ListCo for UK corporation tax purposes. There is a risk that the value of the consideration received (or deemed to be received) by ListCo in respect of the issue of the Post-Combination Company Warrants for these purposes may be treated as equal to either (i) the value of the GGI Public Warrants and the GGI Private Placement Warrants at the Effective Time, or (ii) the market value of the Post-Combination Company Warrants as at the time that they are issued. Neither GGI nor ListCo can predict the ultimate value of the GGI Public Warrants, the GGI Private Placement Warrants or any Post-Combination Company Warrants at or following the Effective Time, but based on a price per GGI Public Warrant of $[●] on [●], 2022, the most recent practicable date prior to the date of this proxy statement/prospectus, the 16,000,000 outstanding GGI Public Warrants and the 9,000,000 outstanding GGI Private Placement Warrants would have an aggregate value of approximately $[●]. If such amount was taken as the chargeable consideration received (or deemed to be received) by ListCo in respect of the issue of the Post-Combination Company Warrants, then, based on current UK corporation tax rates (currently 19%), a UK corporation tax charge of approximately $[●] would be expected. If the value of the GGI Public Warrants and the GGI Private Placement Warrants (or the corresponding Post-Combination Company Warrants) increases between the date of this proxy statement/prospectus and the Effective Time, then this UK corporation tax charge may be significantly greater. If any of the Post-Combination Company Warrants are subsequently exercised according to their terms in exchange for the issue of Post-Combination Company Class A Shares, the grant and exercise of the Polestar Warrants are treated as a single transaction and it is expected that a proportion of such UK corporation tax charge (corresponding to the proportion that the number of the Post-Combination Company Warrants that are so exercised bears to the total number of such Post-Combination Company Warrants issued) should be set-off or refunded to ListCo.
The Resolution
RESOLVED, that the Class C Warrant Amendment be approved, ratified and confirmed in all respects.
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Vote Required for Approval
The Warrant Amendment Proposal will be approved only if the holders of at least 50% of outstanding GGI Public Warrants vote FOR the Warrant Amendment Proposal. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Warrant Holder Meeting, abstentions and broker non-votes will have the same effect as a vote AGAINST the Warrant Amendment Proposal.
Recommendation of the GGI Board
THE GGI BOARD UNANIMOUSLY RECOMMENDS THAT GGI PUBLIC WARRANT HOLDERS VOTE FOR THE APPROVAL OF THE WARRANT AMENDMENT PROPOSAL.
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WARRANT HOLDER PROPOSAL NO. 2 THE WARRANT HOLDER ADJOURNMENT PROPOSAL
Overview
The Warrant Holder Adjournment Proposal, if adopted, would allow the chairman of the Warrant Holder Meeting to adjourn the Warrant Holder Meeting to a later date or dates, if necessary, for the absence of a quorum, to solicit additional proxies from GGI warrant holders to approve the Warrant Amendment Proposal or to ensure that any supplement or amendment to this proxy statement/prospectus is timely provided to GGI warrant holders. The Warrant Holder Adjournment Proposal will only be presented to GGI Public Warrant holders in the absence of a quorum, in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Warrant Amendment Proposal or to ensure a supplement or amendment to this proxy statement/prospectus is timely provided to GGI warrant holders.
The Resolution
RESOLVED, that the adjournment of the Warrant Holder Meeting to a later date or dates be confirmed, ratified and approved.
Consequences if the Adjournment Proposal is Not Approved
If the Warrant Holder Adjournment Proposal is not approved by GGI Public Warrant holders, the GGI Board may not be able to adjourn the Warrant Holder Meeting to a later date in the absence of a quorum, in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Warrant Amendment Proposal or to ensure a supplement or amendment to this proxy statement/prospectus is timely provided to GGI warrant holders.
Vote Required for Approval
The Warrant Holder Adjournment Proposal will be approved only if the holders of a majority of the votes cast by holders of GGI Public Warrant present or represented by proxy and entitled to vote at the Warrant Holder Meeting vote FOR the Warrant Holder Adjournment Proposal. Failure to vote by proxy or to vote in person via the virtual meeting platform at the Warrant Holder Meeting, abstentions and broker non-votes will have no effect on the vote to approve the Warrant Holder Adjournment Proposal.
Recommendation of the GGI Board
THE GGI BOARD UNANIMOUSLY RECOMMENDS THAT GGI PUBLIC WARRANT HOLDERS VOTE FOR THE APPROVAL OF THE WARRANT HOLDER ADJOURNMENT PROPOSAL.
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Legal Matters
The validity of the Post-Combination Company Class A Shares, the Post-Combination Company Class A Shares issuable upon exercise or conversion of Post-Combination Company Class C Shares or Post-Combination Company Warrants, the Post-Combination Company Class C Shares, as applicable, and certain matters related to the assumption of the GGI Warrants by ListCo has been passed by Kirkland & Ellis International LLP, as English law counsel of ListCo.
The validity of the Post-Combination Company Warrants under New York law will be passed on by Kirkland & Ellis LLP, as counsel to ListCo with respect to certain legal matters as to United States federal securities and New York State law.
Weil, Gotshal & Manges LLP, as tax counsel for GGI, will pass upon certain U.S. federal income tax consequences of the Business Combination for GGI.
Experts
The financial statements of Gores Guggenheim, Inc. as of December 31, 2020 and for the period from December 21, 2020 (inception) through December 31, 2020, have been included herein and in the proxy statement/prospectus in reliance upon the report of KPMG LLP, GGIs former independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
The financial statements of Gores Guggenheim, Inc. as of December 31, 2021, have been included herein and in the proxy statement/prospectus in reliance upon the report of WithumSmith+Brown, PC, GGIs independent registered accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
The financial statements of Polestar Automotive Holding Limited as of December 31, 2021 and 2020, and for each of the three years in the period ended December 31, 2021, included in this proxy statement/prospectus have been audited by Deloitte AB, independent registered public accounting firm. Such financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The financial statements of Polestar Automotive Holding UK PLC (formerly known as Polestar Automotive Holding UK Limited) as of September 15, 2021 and December 31, 2021 and for the period September 15, 2021 to December 31, 2021 included in this proxy statement/prospectus have been audited by Deloitte AB, independent registered public accounting firm. Such financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
Change in GGIs Auditor
On November 1, 2021, the audit committee of the GGI Board approved the engagement of WithumSmith+Brown, PC (Withum) as GGIs independent registered public accounting firm to audit GGIs financial statements for the year ended December 31, 2021. Accordingly, KPMG LLP (KPMG), GGIs prior independent registered public accounting firm, was informed on November 3, 2021 that it was dismissed as GGIs independent registered public accounting firm.
KPMGs audit report on the financial statements of GGI as of February 10, 2021 and December 31, 2020 and for each of the periods from January 1, 2021 through February 10, 2021 and December 21, 2020 (inception) through December 31, 2020, did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.
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During the period from December 21, 2020 (inception) through February 10, 2021, and the subsequent interim period through November 1, 2021, neither GGI nor anyone on GGIs behalf consulted with Withum regarding (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on GGIs financial statements, and no written report or oral advice was provided to GGI by Withum that Withum concluded was an important factor considered by GGI in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is described in Item 304(a)(1)(iv) of Regulation S-K, or a reportable event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
During the period from December 21, 2020 (inception) through February 10, 2021, and the subsequent interim period through November 1, 2021, there were: (i) no disagreements within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions between GGI and KPMG on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to KPMGs satisfaction, would have caused KPMG to make reference thereto in their reports; and (ii) no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K, except that KPMG advised GGI of the following material weakness: internal control over financial reporting did not result in sufficient risk assessment of the underlying accounting for certain financial instruments.
GGI provided KPMG with a copy of the foregoing disclosures and has requested that KPMG furnish GGI with a letter addressed to the SEC stating whether it agrees with the statements made by GGI set forth above and GGI is in receipt of such letter from KPMG.
Other Considerations
Deloitte AB has complied with local independence standards under the International Ethics Standards Board for Accountants Code of Ethics as adopted in Sweden for the years ended December 31, 2021, December 31, 2020 and December 31, 2019. During 2019, but prior to the engagement of Deloitte AB as Polestar Automotive Holding Limiteds independent registered public accounting firm under the standards of the PCAOB, Deloitte AB provided a tax senior manager to Polestar Group under a loaned staff arrangement and ACNE Advertising AB (ACNE), which is an associated entity part of the Deloitte Touche Tohmatsu Limited firm in the United Kingdom (Deloitte UK) network, provided various creative and marketing advisory services (together, the services) related to the Polestar brand concept and branding campaign. The services under the loaned staff arrangement were provided from December 2019 until March 2020 for total fees of approximately $35,000, and the creative and marketing services were provided from September 2019 to May 2021 for total fees of approximately $4.5 million. These services were considered an impermissible management function under the auditor independence rules of the SEC and the PCAOB and the services also resulted in a mutuality of interest with the Polestar Group under the general standard of independence in Regulation S-X.
The services did not impact the Polestar Automotive Holding Limiteds accounting records or result in the preparation or origination of source data underlying the financial statements, were not used as part of the Polestar Automotive Holding Limiteds internal control over financial reporting and were not subject to Deloitte ABs audit of the Polestar Automotive Holding Limiteds financial statements; the individuals involved in providing the services were not members of the audit team, and; management of the Polestar Automotive Holding Limited directed, oversaw and provided ultimate approval of these services. Furthermore, when providing the creative and marketing services, ACNE did not endorse the Polestar Automotive Holding Limited or its products, engage in any co-branding with the Polestar Automotive Holding Limited, or receive any fees based on the performance of the campaign. The fees were immaterial to the Polestar Automotive Holding Limited, Deloitte AB and Deloitte UK, as applicable.
After careful consideration of the facts and circumstances and the applicable independence rules, Deloitte AB has concluded that (i) the aforementioned matters do not impair Deloitte ABs ability to exercise objective and impartial judgment in connection with its audits of the financial statements of the Polestar Automotive Holding Limited, and (ii) a reasonable investor with knowledge of all relevant facts and circumstances would conclude that Deloitte AB has been and is capable of exercising objective and impartial judgment on all issues encompassed within its audits
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of the financial statements of the Polestar Automotive Holding Limited. After considering all the relevant facts and circumstances, the Polestar Automotive Holding Limiteds Audit Committee concurred with Deloitte ABs conclusions.
Submission of Future Stockholder Proposals
The GGI Board is not aware of any other matter that may be brought before the Stockholder Special Meeting. Under Delaware law, only business that is specified in the notice of special meeting to stockholders may be transacted at the Stockholder Special Meeting.
GGI does not expect to hold a 2022 annual meeting of stockholders because it will not be a separate public company if the Business Combination is completed. In accordance with Nasdaq corporate governance requirements, GGI is not required to hold an annual meeting until no later than one year after the first fiscal year end following GGI listing on Nasdaq. Under Section 211(b) of the DGCL, GGI is, however, required to hold an annual meeting of stockholders for the purposes of electing directors in accordance with GGIs current bylaws, unless such election is made by written consent in lieu of such a meeting. GGI may not hold an annual meeting of stockholders to elect new directors prior to the consummation of an initial business combination. If GGI does not consummate another initial business combination by March 25, 2023, GGI is required to begin the dissolution process provided for in the Current GGI Certificate, unless GGI amends the Current GGI Certificate and certain other agreements into which it has entered to extend the life of GGI. GGI will liquidate as soon as practicable following such dissolution and will conduct no annual meetings thereafter.
Householding
Unless GGI has received contrary instructions, GGI may send a single copy of this proxy statement/prospectus to any household at which two or more stockholders reside if GGI believes the stockholders are members of the same family. This process, known as householding, reduces the volume of duplicate information received at any one household and helps to reduce GGIs expenses. However, if stockholders prefer to receive multiple sets of GGIs disclosure documents at the same address this year or in future years, the stockholders should follow the instructions described below. Similarly, if an address is shared with another stockholder and together both of the stockholders would like to receive only a single set of GGIs disclosure documents, the stockholders should follow these instructions:
| If the shares are registered in the name of the stockholder, the stockholder should contact GGI at GGIs offices at Gores Guggenheim Inc., Inc., 6260 Lookout Road, Boulder, CO 80301 or by telephone at (303) 531-3100, to inform GGI of his or her request; or |
| If a bank, broker or other nominee holds the shares, the stockholder should contact the bank, broker or other nominee directly. |
Transfer Agent; Warrant Agent and Registrar
The registrar and transfer agent for GGI Common Stock and the warrant agent for GGIs warrants is Computershare Trust Company, N.A. GGI has agreed to indemnify Computershare Trust Company, N.A. in its roles as transfer agent and warrant agent against all liabilities, including judgments, costs and reasonable counsel fees that may arise out of acts performed or omitted for its activities in that capacity, except as a result of Computershares gross negligence, willful misconduct or bad faith.
Appraisal Rights
Appraisal rights are not available to holders of shares of GGI Common Stock in connection with the Business Combination.
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Where You Can Find Additional Information
GGI files annual, quarterly and current reports, proxy statement and other information with the SEC required by the Exchange Act. GGIs public filings are available to the public from the SECs website at www.sec.gov. You may request a copy of GGIs filings with the SEC (excluding exhibits) at no cost by contacting GGI at the address and/or telephone number below.
If you would like additional copies of this proxy statement/prospectus or GGIs other filings with the SEC (excluding exhibits) or if you have questions about the Business Combination or the proposals to be presented at the Stockholder Special Meeting or Warrant Holder Meeting, you should contact GGI at the following address and telephone number:
Gores Guggenheim, Inc.
6260 Lookout Road
Boulder, CO 80301
(303) 531-3100
Email: jchou@gores.com
You may also obtain additional copies of this proxy statement/prospectus by requesting them in writing or by telephone from GGIs proxy solicitation agent at the following address and telephone number:
Morrow Sodali LLC
333 Ludlow Street
5th Floor, South Tower
Stamford, Connecticut 06902
Individuals, please call toll-free: (800) 662-5200
Banks and brokerage, please call: (203) 658-9400
Email: GMII.info@investor.morrowsodali.com
You will not be charged for any of the documents you request. If your GGI Common Stock or GGI Warrants are held in a stock brokerage account or by a bank or other nominee, you should contact your broker, bank or other nominee for additional information.
If you are a GGI stockholder or GGI Public Warrant holder and would like to request documents, please do so by [●], 2022, or five business days prior to the Stockholder Special Meeting and the Warrant Holder Meeting, in order to receive them before the Stockholder Special Meeting and the Warrant Holder Meeting. If you request any documents from GGI, such documents will be mailed to you by first class mail, or another equally prompt means.
This proxy statement/prospectus is part of a registration statement and constitutes a prospectus of ListCo in addition to being a proxy statement of GGI for the Stockholder Special Meeting and Warrant Holder Meeting. As allowed by SEC rules, this proxy statement/prospectus does not contain all of the information you can find in the registration statement or the exhibits to the registration statement. Information and statements contained in this proxy statement/prospectus are qualified in all respects by reference to the copy of the relevant contract or other document included as an Annex to this proxy statement/prospectus.
All information contained in this proxy statement/prospectus relating to GGI has been supplied by GGI, and all such information relating to ListCo has been supplied by ListCo. Information provided by either GGI or ListCo does not constitute any representation, estimate or projection of any other party. This document is a proxy statement of GGI for the Stockholder Special Meeting and the Warrant Holder Meeting. GGI and ListCo not authorized anyone to give any information or make any representation about the Business Combination or the parties thereto, including GGI, which is different from, or in addition to, that contained in this proxy statement/prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it. The information contained in this proxy statement/prospectus speaks only as of the date of this proxy statement/prospectus, unless the information specifically indicates that another date applies.
480
481
INDEX OF FINANCIAL STATEMENTS
Audited Financial StatementsFor the Period from December 21, 2020 (inception) through December 31, 2020 and for the year ended December 31, 2021
Page | ||||
F-2 | ||||
Balance Sheets as of December 31, 2020 and December 31, 2021 |
F-4 | |||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 |
Polestar Automotive Holding Limited
Consolidated Financial StatementsFor the years ended December 31, 2021, 2020 and 2019
Polestar Automotive Holding UK PLC (formerly known as Polestar Automotive Holding UK Limited)
Consolidated Financial StatementsFor the period September 15, 2021 to December 31, 2021
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Gores Guggenheim, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Gores Guggenheim, Inc. (the Company) as of December 31, 2021, the related statements of operations, changes in stockholders equity and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ WithumSmith+Brown, PC
PCAOB ID #100
We have served as the Companys auditor since 2021.
New York, New York
February 24, 2022
PCAOB ID #100
F-2
Report of Independent Registered Public Accounting Firm
To the Stockholder and the Board of Directors of
Gores Guggenheim, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Gores Guggenheim, Inc. (the Company) as of December 31, 2020, the related statements of operations, changes in stockholders equity, and cash flows for the period from December 21, 2020 (inception) through December 31, 2020 and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the period from December 21, 2020 (inception) through December 31, 2020, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Companys auditor since 2021.
Denver, Colorado
February 19, 2021
F-3
GORES GUGGENHEIM, INC.
December 31, 2021 | December 31, 2020 | |||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | 302,504 | $ | | ||||
Prepaid assets |
1,477,280 | | ||||||
|
|
|
|
|||||
Total current assets |
1,779,784 | | ||||||
Investments held in Trust Account |
800,056,447 | | ||||||
|
|
|
|
|||||
Total assets |
$ | 801,836,231 | $ | | ||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS DEFICIT |
||||||||
Current liabilities: |
||||||||
Accrued expenses, formation and offering costs |
$ | 6,729,383 | $ | 1,332 | ||||
State franchise tax accrual |
200,000 | 450 | ||||||
Public warrants derivative liability |
61,440,000 | | ||||||
Private warrants derivative liability |
34,560,000 | | ||||||
Notes and advances payablerelated party |
2,000,000 | | ||||||
|
|
|
|
|||||
Total current liabilities |
104,929,383 | 1,782 | ||||||
Deferred underwriting compensation |
28,000,000 | | ||||||
|
|
|
|
|||||
Total liabilities |
$ | 132,929,383 | $ | 1,782 | ||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Class A subject to possible redemption, 80,000,000 and -0- shares at December 31, 2021 and December 31, 2020, respectively (at redemption value of $10 per share) |
800,000,000 | | ||||||
Stockholders deficit: |
||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized, none issued or outstanding at December 31, 2021 and December 31, 2020, respectively |
| | ||||||
Common stock |
||||||||
Class A Common Stock, $0.0001 par value; 400,000,000 shares authorized |
| | ||||||
Class F Common Stock, $0.0001 par value; 40,000,000 shares authorized, 20,000,000 and -0- shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively |
2,000 | | ||||||
Additional paid-in-capital |
| | ||||||
Accumulated deficit |
(131,095,152 | ) | (1,782 | ) | ||||
|
|
|
|
|||||
Total stockholders deficit |
(131,093,152 | ) | (1,782 | ) | ||||
|
|
|
|
|||||
Total liabilities and stockholders deficit |
$ | 801,836,231 | $ | | ||||
|
|
|
|
See accompanying notes to financial statements.
F-4
GORES GUGGENHEIM, INC.
Year Ended December 31, 2021 |
For the period from December 21, 2020 (inception) through December 31, 2020 |
|||||||
Revenues |
$ | | $ | | ||||
Professional fees and other expenses |
(8,214,978 | ) | (1,332 | ) | ||||
State franchise taxes, other than income tax |
(200,000 | ) | (450 | ) | ||||
Loss from change in fair value of warrant liability |
(72,750,000 | ) | | |||||
Allocated expense for warrant issuance cost |
(832,496 | ) | | |||||
|
|
|
|
|||||
Net loss from operations |
(81,997,474 | ) | (1,782 | ) | ||||
Other income - interest income |
56,447 | | ||||||
|
|
|
|
|||||
Net loss before income taxes |
$ | (81,941,027 | ) | $ | (1,782 | ) | ||
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|
|
|
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Provision for income tax |
| | ||||||
|
|
|
|
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Net loss attributable to common shares |
$ | (81,941,027 | ) | $ | (1,782 | ) | ||
|
|
|
|
|||||
Net loss per common share: |
||||||||
Class A Common Stock - basic and diluted |
$ | (1.73 | ) | $ | | |||
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|
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|
|||||
Class F Common Stock - basic and diluted |
$ | (1.73 | ) | $ | | |||
|
|
|
|
See accompanying notes to financial statements.
F-5
GORES GUGGENHEIM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIT
For the Period from December 21, 2020 (inception) through December 31, 2020 | ||||||||||||||||||||||||||||
Class A Common Stock |
Class F Common Stock | Additional Paid- In Capital |
Accumulated Deficit |
Stockholders Deficit |
||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance at December 21, 2020 (inception) |
| $ | | | $ | | $ | | $ | | $ | | ||||||||||||||||
Net loss |
| | | | | (1,782 | ) | (1,782 | ) | |||||||||||||||||||
|
|
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|
|
|
|
|
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|
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|
|
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Balance at December 31, 2020 |
| $ | | | $ | | $ | | $ | (1,782 | ) | $ | (1,782 | ) | ||||||||||||||
|
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|
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Year Ended December 31, 2021 | ||||||||||||||||||||||||||||
Class A Common Stock |
Class F Common Stock | Additional Paid- In Capital |
Accumulated Deficit |
Stockholders Deficit |
||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance at January 1, 2021 |
| $ | | | $ | | $ | | $ | (1,782 | ) | $ | (1,782 | ) | ||||||||||||||
Sale of Class F Common Stock to Sponsor on February 10, 2021 at $0.0001 par value |
| | 21,562,500 | 2,156 | 22,844 | | 25,000 | |||||||||||||||||||||
Forfeited Class F Common Stock by Sponsor |
| | (1,562,500 | ) | (156 | ) | 156 | | ||||||||||||||||||||
Excess of fair value paid by founders for warrants |
| | | | 9,630,000 | | 9,630,000 | |||||||||||||||||||||
Subsequent measurement of Class A Common Stock subject to redemption against additional paid-in capital |
| | | | (9,653,000 | ) | | (9,653,000 | ) | |||||||||||||||||||
Subsequent measurement of Class A Common Stock subject to redemption against accumulated deficit |
| | | | | (49,152,343 | ) | (49,152,343 | ) | |||||||||||||||||||
Net loss |
| | | | | (81,941,027 | ) | (81,941,027 | ) | |||||||||||||||||||
|
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|
|
|
|
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|
|||||||||||||||
Balance at December 31, 2021 |
| $ | | 20,000,000 | $ | 2,000 | $ | | $ | (131,095,152 | ) | $ | (131,093,152 | ) | ||||||||||||||
|
|
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|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
F-6
GORES GUGGENHEIM, INC.
Year Ended December 31, 2021 |
For the period from December 21, 2020 (inception) through December 31, 2020 |
|||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (81,941,027 | ) | $ | (1,782 | ) | ||
Adjustments to reconcile net income to net cash used in operating activities: |
||||||||
Issuance costs related to warrant liability |
832,496 | | ||||||
Changes in fair value warrants derivative liability |
72,750,000 | | ||||||
Changes in operating assets and liabilities: |
||||||||
Changes in state franchise tax accrual |
199,550 | 450 | ||||||
Changes in prepaid assets |
(1,477,280 | ) | | |||||
Changes in accrued expenses, formation and offering costs |
6,728,051 | 1,332 | ||||||
|
|
|
|
|||||
Net cash used in operating activities |
(2,908,210 | ) | | |||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Cash deposited in Trust Account |
(800,000,000 | ) | | |||||
Interest reinvested in the Trust Account |
(56,447 | ) | | |||||
|
|
|
|
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Net cash used in investing activities |
(800,056,447 | ) | | |||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Proceeds from sale of Units in initial public offering |
800,000,000 | | ||||||
Proceeds from sale of Private Placement Warrants to Sponsor |
18,000,000 | | ||||||
Proceeds from sale of Class F Common Stock to Sponsor |
25,000 | | ||||||
Proceeds from notes and advances payable related party |
2,300,000 | | ||||||
Repayment of notes and advances payable related party |
(300,000 | ) | | |||||
Payment of underwriters discounts and commissions |
(16,000,000 | ) | | |||||
Payment of accrued offering costs |
(757,839 | ) | | |||||
|
|
|
|
|||||
Net cash provided by financing activities |
803,267,161 | | ||||||
|
|
|
|
|||||
Increase in cash |
302,504 | | ||||||
Cash at beginning of period |
| | ||||||
|
|
|
|
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Cash at end of period |
$ | 302,504 | $ | | ||||
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|
|
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Supplemental disclosure of non-cash financing activities: |
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Deferred underwriting compensation |
$ | 28,000,000 | $ | | ||||
Supplemental disclosure of income and franchise taxes paid: |
||||||||
Cash paid for income and state franchise taxes |
$ | 450 | $ | |
See accompanying notes to financial statements.
F-7
GORES GUGGENHEIM, INC.
1. | Organization and Business Operations |
Organization and General
Gores Guggenheim, Inc. (the Company) was incorporated in Delaware on December 21, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more businesses (the Business Combination). The Company has neither engaged in any operations nor generated any revenue to date. The Companys management has broad discretion with respect to the Business Combination. The Companys Sponsor is Gores Guggenheim Sponsor, LLC, a Delaware limited liability company (the Sponsor). The Company has selected December 31st as its fiscal year-end.
At December 31, 2021, the Company had not commenced any operations. All activity for the period from December 21, 2020 (inception) through December 31, 2021 relates to the Companys formation and initial public offering (Public Offering) described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company completed the Public Offering on March 25, 2021 (the IPO Closing Date). The Company will not generate any operating revenues until after the completion of its Business Combination, at the earliest. Subsequent to the Public Offering, the Company will generate non-operating income in the form of interest income from the proceeds derived from the Public Offering and the sale of the Private Placement Warrants (as defined below) held in the Trust Account (as defined below).
Proposed Business Combination
On September 27, 2021, Gores Guggenheim, Inc. (the Company) entered into a Business Combination Agreement (the Business Combination Agreement), by and among the Company, Polestar Automotive Holding Limited, a Hong Kong incorporated company (Parent), Polestar Automotive (Singapore) Pte. Ltd., a private company limited by shares in Singapore (Polestar Singapore), Polestar Holding AB, a private limited liability company incorporated under the laws of Sweden (Polestar Sweden), Polestar Automotive Holding UK Limited, a limited company incorporated under the laws of England and Wales and a direct wholly owned subsidiary of Parent (ListCo), and PAH UK Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of ListCo (Merger Sub).
The transactions contemplated by the Business Combination Agreement, including the Merger (as defined below), and the other transactions contemplated by the other transaction documents contemplated by the Business Combination Agreement (collectively, the Transactions) will constitute a Business Combination as contemplated by the Companys Amended and Restated Certificate of Incorporation. The Business Combination and the transactions contemplated thereby were unanimously approved by the board of directors of the Company on September 25, 2021.
The Business Combination Agreement
Pre-Closing Reorganization
In connection with the Merger, prior to the closing of the Transactions (the Closing), Parent will, and will cause ListCo, Polestar Singapore, Polestar Sweden and their respective subsidiaries to, complete a reorganization, pursuant to which, among other things, Polestar Singapore, Polestar Sweden and their respective subsidiaries will become, directly or indirectly, wholly owned subsidiaries of ListCo (the Pre-Closing Reorganization). As consideration for the Pre-Closing Reorganization, ListCo will issue to Parent a number of class A ordinary shares in the share capital of ListCo which class A ordinary shares shall entitle the holder to one vote per share
F-8
(ListCo Class A Shares) and class B ordinary shares in the share capital of ListCo, which class B ordinary shares shall entitle the holder to ten votes per share (ListCo Class B Shares, and, together with the ListCo Class A Shares, the ListCo Shares), such that, following the Pre-Closing Reorganization, Parent will hold an aggregate number of ListCo Shares equal to approximately (a) $20,003,000,000 divided by $10.00, less (b) (i) the aggregate principal amount due in respect of certain convertible notes of Parent outstanding as of immediately prior to the Closing, divided by (ii) the applicable conversion price of such notes, less (c) 49,803,900, which represents the aggregate number of ListCo Preference Shares (as defined below) issued pursuant to the Volvo Cars Preference Subscription Agreement (as defined below).
As additional consideration for Parents contribution to ListCo of all the issued and outstanding equity securities of Polestar Sweden, Parent will be entitled to receive, subject to the terms provided in the Business Combination Agreement, earn out shares from ListCo, issuable in ListCo Class A Shares and ListCo Class B Shares up to an aggregate number equal to approximately (a) 0.075 multiplied by (b) the number of issued and outstanding ListCo Shares as of immediately after the Closing (including ListCo Shares issued pursuant to the Subscription Agreements (as defined below)).
The Merger
Following the Pre-Closing Reorganization and pursuant to the Business Combination Agreement, at the Closing, Merger Sub will merge with and into the Company (the Merger), pursuant to which the separate corporate existence of Merger Sub will cease, with the Company being the surviving corporation and becoming a wholly owned subsidiary of ListCo.
Each share of Class A Common Stock of the Company, par value $0.0001 per share (GG Class A Shares) issued and outstanding immediately prior to the effective time of the Merger (the Effective Time), other than those held in treasury, will be exchanged for one newly issued American depository share of ListCo (ListCo Class A ADS) duly and validly issued against the deposit of an underlying ListCo Class A Share deposited with a bank (Depositary Bank) in which ListCo has established and sponsored American depository receipt facilities (each, an ADR Facility). Each share of Class F Common Stock of the Company, par value $0.0001 per share (GG Class F Shares, and together with the GG Class A Shares, the GG Shares) issued and outstanding immediately prior to the effective time of the Merger, other than those held in treasury, will be exchanged for one newly issued ListCo Class A ADS. All GG Shares held in treasury will be canceled and extinguished without consideration.
Any units of the Company that are outstanding immediately prior to the Effective Time held by Company stockholders will be automatically separated and the holder thereof will be deemed to hold one GG Class A Share and one-fifth (1/5) of a public warrant of the Company (Public Warrant), which underlying securities will be converted as described below.
In the event the Requisite GG Warrantholder Approval (as defined below) is obtained prior to the Effective Time, each Public Warrant shall be automatically cancelled and extinguished and converted into the right to receive one American depository share of ListCo (ListCo Class C-1 ADS) duly and validly issued against the deposit of an underlying class C-1 preferred share in the share capital of ListCo (ListCo Class C-1 Share) deposited with the Depositary Bank. Each ListCo Class C-1 Share will be exercisable to acquire a ListCo Class A Share at an exercise price of $11.50 per share. In addition, each private placement warrant of the Company (Private Placement Warrant) will be automatically cancelled and extinguished and converted into the right to receive one American depository share of ListCo (ListCo Class C-2 ADS) duly and validly issued against the deposit of an underlying class C-2 preferred share in the share capital of ListCo (ListCo Class C-2 Share) deposited with the Depositary Bank. Each ListCo Class C-2 Share will be exercisable to acquire a ListCo Class A Share at an exercise price of $11.50 per share.
In the event that the Requisite GG Warrantholder Approval is not obtained prior to the Effective Time, each Public Warrant shall be automatically cancelled and extinguished and converted into the right to receive one
F-9
American depository warrant of ListCo (ListCo AD Warrant) duly and validly issued against the deposit of an underlying warrant of ListCo representing the right to acquire one ListCo Class A Share deposited with the Depositary Bank and representing the right to acquire one ListCo Class A ADS (or one ListCo Class A Share if at the time of exercise ListCo no longer uses the ADR Facility) at an exercise price of $11.50 per ListCo Class A ADS. In addition, each Private Placement Warrant will be automatically cancelled and extinguished and converted into the right to receive one ListCo AD Warrant.
Registration Statement/Proxy Statement; Warrantholder Solicitation
In connection with the Transactions, the Company, ListCo, Polestar Singapore, Polestar Sweden and Parent will prepare, and ListCo will file with the SEC, a registration statement on Form F-4 (the Registration Statement/Proxy Statement), which will include a prospectus of ListCo and a proxy statement for the Companys stockholder meeting to solicit the vote of the Company stockholders to, among other things, adopt the Business Combination Agreement and approve the Transactions.
In addition, as promptly as reasonably practicable following the date of the Business Combination Agreement, the Company, ListCo, Polestar Singapore, Polestar Sweden and Parent will solicit the vote or consent of registered holders of at least 50% of the outstanding Public Warrants to amend the Warrant Agreement to permit the conversion or exchange of Public Warrants for ListCo Class C-1 ADSs and the Private Placement Warrants for ListCo Class C-2 ADSs (the Requisite GG Warantholder Approval).
Representations, Warranties and Covenants
The parties to the Business Combination Agreement have made representations, warranties and covenants that are customary for transactions of this nature. The representations and warranties of the respective parties to the Business Combination Agreement will not survive the Closing. The covenants of the respective parties to the Business Combination Agreement will also not survive the Closing, except for those covenants that by their terms expressly apply in whole or in part after the Closing.
Conditions to Closing
The obligations of the parties to the Business Combination Agreement to consummate the Transactions is conditioned upon (a) the expiration or termination of the applicable waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, (b) the absence of any law or other legal restraint or prohibition issued by any court of competent jurisdiction or other governmental authority preventing the consummation of the Transactions, (c) the effectiveness under the Securities Act of 1933, as amended (the Securities Act), of the Registration Statement/Proxy Statement and that no stop order will have been issued by the SEC and remain in effect with respect to the Registration Statement/Proxy Statement, (d) obtaining, at the meeting of Company stockholders where a quorum is present, the vote of the holders of a majority of the outstanding GG Shares entitled to vote thereon to adopt and approve the Business Combination Agreement, other Transaction Documents (as defined in the Business Combination Agreement) to which the Company will be a party and the Transactions, (e) obtaining the requisite vote of the shareholders of Parent to approve the Business Combination Agreement and the other transaction documents to which Parent is party and the Transactions, (f) the Company having at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) following the completion of the redemptions in respect of GG Shares in connection with the Transactions (the Stockholder Redemptions), (g) the approval of ListCo Class A ADSs for listing on the Nasdaq Stock Market, (h) the approval of the ListCo AD Warrants or the ListCo Class C-1 ADSs, as applicable, for listing on the Nasdaq Stock Market and (i) the board of directors of ListCo shall have a number and composition of directors determined in accordance with the Business Combination Agreement (and shall include one director reasonably determined by Sponsor (as defined below) and consented to by Parent (such consent not to be unreasonably withheld, conditioned or delayed), with the remaining initial directors being reasonably determined by Parent) as of the Closing.
F-10
In addition, the obligations of Parent, Polestar Singapore, Polestar Sweden, ListCo and Merger Sub to consummate the Transactions is subject to, among other things, the aggregate amount of cash held in the Companys trust account (after giving effect to the Stockholder Redemptions, the Sponsor Investment Amount, the PIPE Investment Amount and the Volvo Cars PIPE Investment Amount (as defined below)) being no less than $950,000,000, prior to the payment of any unpaid or contingent liabilities and fees and expenses of the Company (including, as applicable, any Company Transaction Expenses (as defined in the Business Combination Agreement)) as of the Closing.
The obligation of the Company to consummate the Transactions is also subject to the fulfillment of additional closing conditions, including, among other things, the completion of the Pre-Closing Reorganization.
Termination
The Business Combination Agreement may be terminated at any time prior to the Closing by mutual written consent of the Company and Parent and in certain other circumstances, including if the Closing has not occurred on or prior to May 27, 2022 and the primary cause of the failure for the Closing to have occurred on or prior to such date is not due to a breach of the Business Combination Agreement by the party seeking to terminate.
Subscription Agreements
PIPE Subscription Agreements
Concurrently with the execution and delivery of the Business Combination Agreement, the Company and ListCo entered into subscription agreements (the PIPE Subscription Agreements) with certain investors (the PIPE Investors), pursuant to which the PIPE Investors have agreed to purchase, substantially concurrently with the Closing, an aggregate of 7.43 million ListCo Class A ADSs (the PIPE Shares) for a purchase price of $9.09 per share in a private placement, for an aggregate amount of $67,500,000 (the PIPE Investment Amount).
The issuance of the PIPE Shares pursuant to the PIPE Subscription Agreements is contingent upon, among other customary closing conditions, the substantially concurrent consummation of the Business Combination. Pursuant to the PIPE Subscription Agreements, ListCo agreed to file with the U.S. Securities and Exchange Commission (the SEC) (at ListCos sole cost and expense), within 30 calendar days after the date of Closing, a registration statement registering the resale of the PIPE Shares, and to use its commercially reasonable efforts to have the registration statement declared effective as soon as practicable after the filing thereof.
New PIPE Subscription Agreements
In connection with the PIPE Assignment, on December 17, 2021, the Company and ListCo entered into subscription agreements (the New PIPE Subscription Agreements) with the New PIPE Investors, which include certain affiliates and employees of Sponsor. Pursuant to the New PIPE Subscription Agreements, the New PIPE Investors have agreed to collectively subscribe for approximately 14.3 million ListCo Class A ADSs (the New PIPE Shares) for an average price of approximately $9.54 per ListCo Class A ADS, reflecting an aggregate investment amount of approximately $136.0 million. The New PIPE Subscription Agreements are substantially similar to the PIPE Subscription Agreements. The aggregate amount of the PIPE investment and number of ListCo Class A ADSs to be purchased pursuant thereto remains unchanged.
Sponsor Subscription Agreement
Concurrently with the execution and delivery of the Business Combination Agreement, the Company and ListCo entered into a subscription agreement (the Sponsor Subscription Agreement) with Gores Guggenheim Sponsor LLC (the Sponsor). Pursuant to the Sponsor Subscription Agreement, the Sponsor agreed to subscribe
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for an additional 9.08 million ListCo Class A ADSs for a purchase price of $9.09 per share on the date of Closing, for an aggregate investment of $82,500,000 (the Sponsor Investment Amount). The Sponsor Subscription Agreement is substantially similar to the PIPE Subscription Agreement, except that the Sponsor has the right to syndicate its commitment to acquire the ListCo Class A ADSs to be purchased under the Sponsor Subscription Agreement in advance of the closing of the Business Combination.
Amendment of Sponsor Subscription Agreement
On December 17, 2021, (i) the Sponsor assigned a portion of its commitment to purchase ListCo Class A ADSs, in an aggregate investment amount equaling approximately $63.0 million (the Sponsor Assignment), to certain investors and (ii) the Company, ListCo and Sponsor amended the Sponsor Subscription Agreement to reflect the Sponsor Assignment. As a result, pursuant to the Sponsor Subscription Agreement, as amended, Sponsor has agreed to subscribe for approximately 2.15 million ListCo Class A ADSs for a purchase price of $9.09 per ListCo Class A ADS on the date of Closing, for an aggregate investment of approximately $19.5 million. The Sponsor Subscription Agreement, as amended, is substantially similar to the PIPE Subscription Agreements (as defined below), except with regards to purchase price and that the Sponsor has the right to assign its commitment to purchase the ListCo Class A ADSs under the Sponsor Subscription Agreement in advance of the closing of the Business Combination.
Volvo Cars Subscription Agreement
Concurrently with the execution and delivery of the Business Combination Agreement, the Company and ListCo entered into a subscription agreement (the Volvo Cars Subscription Agreement, and, together with the PIPE Subscription Agreements and the Sponsor Subscription Agreement, the Subscription Agreements) with Snita Holding B.V., a corporation organized under the laws of Netherlands (Snita) and a wholly owned indirect subsidiary of Volvo Car AB (publ) (Volvo Cars). Pursuant to the Volvo Cars Subscription Agreement, Snita agreed to subscribe for an additional 10 million ListCo Class A ADSs for a purchase price of $10.00 per share on the date of Closing. The Volvo Cars Subscription Agreement is substantially similar to the PIPE Subscription Agreements, except with regards to purchase price. Snita may, in accordance with the terms of the Volvo Cars Subscription Agreement, syndicate its commitment to acquire the ListCo Class A ADSs to be purchased under the Volvo Cars Subscription Agreement in advance of the closing of the Business Combination.
Amendment of Volvo Cars Preference Subscription Agreement
On December 17, 2021 (i) Snita assigned a portion of its commitment to purchase ListCo Class A ADSs, in an aggregate investment amount equaling approximately $73.0 million (the Volvo Assignment, and together with the Sponsor Assignment, the PIPE Assignment) to purchase the ListCo Class A ADSs to certain investors (the investors who were assigned commitments pursuant to the PIPE Assignment, collectively, the New PIPE Investors) and (ii) the Company, ListCo and Snita amended the Volvo Car Subscription Agreement to reflect the Volvo Assignment. As a result, pursuant to the Volvo Cars Subscription Agreement, as amended, Snita has agreed to subscribe for approximately 2.70 million ListCo Class A ADSs for a purchase price of $10.00 per ListCo Class A ADS on the date of Closing, for an aggregate investment of approximately $27.0 million. The Volvo Cars Subscription Agreement, as amended, is substantially similar to the PIPE Subscription Agreements, except with regards to purchase price and that Snita may, in accordance with the terms of the Volvo Cars Subscription Agreement, assign its commitment to purchase the ListCo Class A ADSs under the Volvo Cars Subscription Agreement in advance of the closing of the Business Combination.
Volvo Cars Preference Subscription Agreement
Concurrently with the execution and delivery of the Business Combination Agreement, ListCo entered into a subscription agreement (the Volvo Cars Preference Subscription Agreement) with Snita (the Volvo Cars Preference Subscriber). Pursuant to the Volvo Cars Preference Subscription Agreement, the Volvo Cars
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Preference Subscriber agreed to subscribe for mandatory convertible preference shares of ListCo (the ListCo Preference Shares) for an aggregate subscription price of $10.00 per share, for an aggregate investment amount equal to approximately $500,000,000 (the Volvo Cars PIPE Investment Amount). The proceeds of such subscription will be used to satisfy certain accounts payable that are or will be due and payable by certain subsidiaries of Parent to Volvo Cars. As of the date hereof, it is currently anticipated that all of the ListCo Preference Shares will convert into ListCo Class A Shares at Closing, in accordance with, and subject to, the terms of the ListCo Preference Shares.
Parent Lock-Up Agreement
Concurrently with the execution and delivery of the Business Combination Agreement, Parent, ListCo and the other Parent shareholders party thereto (the Parent Shareholders), have entered into that Parent Lock-Up Agreement (the Parent Lock-Up Agreement). Pursuant to the Parent Lock-Up Agreement, each Parent Shareholder has, subject to certain exceptions, among other things, agreed to not transfer any equity security of ListCo issued to them pursuant to the Business Combination Agreement or other transaction documents contemplated by the Business Combination Agreement during the period commencing the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein.
Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement
Concurrently with the execution and delivery of the Business Combination Agreement, Sponsor, the Company, Parent, ListCo and certain of the Companys directors, executive officers and affiliates (such individuals, the Supporting Sponsor Stockholders) have entered into a Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement (the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement).
Pursuant to the Sponsor and Supporting Stockholders Lock-Up Agreement, the Sponsor and each Supporting Sponsor Stockholders has, among other things, agreed to (i) support and vote in favor of all proposals included in the Registration Statement/Proxy Statement; (ii) waive all adjustments to the conversion ratio set forth in the Companys amended and restated certificate of incorporation with respect to the GG Class F Shares; (iii) be bound by certain transfer restrictions with respect to their GG Shares, Public Warrants and Private Placement Warrants; and (iv) not to transfer any ListCo Class A ADSs issued pursuant to the Business Combination Agreement during the period beginning the date of Closing and ending 180 days following the date of the Closing, in each case subject to the terms and conditions set forth therein. In addition, the Sponsor has agreed to the forfeiture of up to 1,501,651 GG Class F Shares.
Amendment to the Sponsor and Supporting Stockholders Lock-Up Agreement
On December 17, 2021, the parties to the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement entered into Amendment No. 1 to the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement (the Lock-Up Agreement Amendment). The Lock-Up Agreement Amendment provides for amendments to the Sponsor and Supporting Sponsor Stockholders Lock-Up Agreement to increase the amount of the Companys Class F Common Stock (Company Class F Common Stock) that will be cancelled by the Company in connection with the Closing from 1,501,651 shares of Company Class F Common Stock to 1,533,873 shares of Company Class F Common Stock.
The foregoing description of the Lock-Up Agreement Amendment does not purport to be complete and is qualified in its entirety by the terms and conditions of the Lock-Up Agreement Amendment, a copy of which is attached hereto as Exhibit 10.3 and is incorporated herein by reference.
Registration Rights Agreement
Concurrently with the execution and delivery of the Business Combination Agreement, ListCo, Parent, the Parent Shareholders, Sponsor and the independent directors of the Company (such persons, together with
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Sponsor and the Parent Holders, the Holders), have entered into a registration rights agreement (the Registration Rights Agreement) which provides customary demand and piggyback registration rights. Pursuant to the Registration Rights Agreement, ListCo agreed that, as soon as practicable, and in any event within 30 days after the Closing, ListCo will file with the SEC a shelf registration statement. In addition, ListCo will use its reasonable best efforts to have the registration statement declared effective as soon as practicable after the filing thereof, but no later than the 60th day (or the 90th day if the registration statement is reviewed by, and received comments from, the SEC) following the filing deadline, in each case subject to the terms and conditions set forth therein.
Amendment to the Registration Rights Agreement
On December 17, 2021, the parties to the Registration Rights Agreement entered into Amendment No. 1 to the Registration Rights Agreement (the Registration Rights Agreement Amendment), to provide for certain administrative changes to reflect the BCA Amendment and the New PIPE Subscription Agreements. The foregoing description of the Registration Rights Agreement Amendment does not purport to be complete and is qualified in its entirety by the terms and conditions of the Registration Rights Agreement Amendment, a copy of which is attached hereto as Exhibit 10.2 and is incorporated herein by reference.
Warrant Assumption Agreement
In the event that the Requisite GG Warrantholder Approval is not obtained prior to the Effective Time, the Company, ListCo and Computershare Trust Company, N.A. (the Warrant Agent) will enter into a Warrant Assignment, Assumption and Amendment Agreement (the Warrant Assumption Agreement) prior to the Closing. The Warrant Assumption Agreement will amend the Warrant Agreement, dated March 22, 2021, by and among the Company and the Warrant Agent (the Warrant Agreement) to provide that at the Effective Time, each Public Warrant and Private Placement Warrant will be assumed by ListCo and be converted into the right to receive a ListCo AD Warrant, subject to the terms and conditions set forth therein. In addition, under the Warrant Assumption Agreement, the Company will assign to ListCo all of its rights, interests, and obligations in and under the Warrant Agreement as of the effective time of the Merger, subject to the terms and conditions set forth therein.
Financing
Upon close of the Public Offering and the sale of the Private Placement Warrants, an aggregate of $800,000,000 was placed in a Trust Account with Computershare (the Trust Account) acting as Trustee.
The Company intends to finance a Business Combination with the net proceeds from its $800,000,000 Public Offering and its sale of $18,000,000 of Private Placement Warrants.
Trust Account
Funds held in the Trust Account can be invested only in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act that invest only in direct U.S. government obligations. As of December 31, 2021, the Trust Account consisted of money market funds.
The Companys amended and restated certificate of incorporation provides that, other than the withdrawal of interest to fund regulatory compliance requirements and other costs related thereto (a Regulatory Withdrawal) for a maximum 24 months and/or additional amounts necessary to pay franchise and income taxes, if any, none of the funds held in trust will be released until the earliest of: (i) the completion of the Business Combination; or (ii) the redemption of any public shares of common stock properly tendered in connection with a stockholder vote to amend the Companys amended and restated certificate of incorporation to modify the
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substance or timing of the Companys obligation to redeem 100% of such public shares of common stock if the Company does not complete the Business Combination by March 25, 2023; or (iii) the redemption of 100% of the public shares of common stock if the Company is unable to complete a Business Combination by March 25, 2023, subject to the requirements of law and stock exchange rules.
Business Combination
The Companys management has broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business Combination. The Business Combination must be with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (less any deferred underwriting commissions and taxes payable on interest income earned) at the time of the Company signing a definitive agreement in connection with the Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination.
The Company, after signing a definitive agreement for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest income but less taxes payable, or (ii) provide stockholders with the opportunity to sell their shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest income but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval, unless a vote is required by law or under Nasdaq rules. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Business Combination. Currently, the Company will not redeem its public shares of common stock in an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would not proceed with the redemption of its public shares of common stock and the related Business Combination, and instead may search for an alternate Business Combination.
As a result of the foregoing redemption provisions, the public shares of common stock will be recorded at redemption amount and classified as temporary equity, in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 480, Distinguishing Liabilities from Equity (ASC 480) in subsequent periods.
The Company will have until March 25, 2023 to complete its Business Combination. If the Company does not complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of common stock for a per share pro rata portion of the Trust Account, including interest income, but less taxes payable (less up to $100,000 of such net interest income to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Companys net assets to its remaining stockholders, as part of its plan of dissolution and liquidation. The Sponsor and the Companys officers and directors have entered into a letter agreement with the Company, pursuant to which they waived their rights to participate in any redemption with respect to their Founder Shares (as defined below); however, if the Sponsor or any of the Companys officers, directors or affiliates acquire public shares of common stock, they will be entitled to a pro rata share of the Trust Account in the event the Company does not complete a Business Combination within the required time period.
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In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per Unit in the Public Offering.
Emerging Growth Company
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the Exchange Act)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
2. | Significant Accounting Policies |
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (SEC), and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of December 31, 2021 and December 31, 2020 and the results of operations and cash flows for the periods presented.
Net Loss Per Common Share
The Company has two classes of shares, which are referred to as Class A Common Stock and Class F Common Stock (the Founder Shares). Earnings and losses are shared pro rata between the two classes of shares. Private and Public warrants to purchase 25,000,000 shares of Common Stock at $11.50 per share were issued on March 25, 2021. At December 31, 2021, no warrants have been exercised. The 25,000,000 potential common shares for outstanding warrants to purchase the Companys stock were excluded from diluted earnings per share for the three months and year ended December 31, 2021 because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net loss per common share is the same as basic net loss per common share for the period. The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net loss per share for each class of common stock:
For the Year Ended December 31, 2021 |
For the period from December 21, 2020 (inception) through December 31, 2020 |
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Class A | Class F | Class A | Class F | |||||||||||||
Basic and diluted net loss per share: |
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Numerator: |
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Allocation of net loss including accretion of temporary equity |
$ | (106,532,707 | ) | $ | (34,213,663 | ) | $ | | $ | (1,782 | ) | |||||
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Denominator: |
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Weighted-average shares outstanding |
61,424,658 | 19,726,923 | | 21,562,500 | ||||||||||||
Basic and diluted net loss per share |
$ | (1.73 | ) | $ | (1.73 | ) | $ | | $ | (0.00 | ) |
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Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution as well as the Trust Account, which at times, may exceed the Federal Depository Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on these accounts.
Financial Instruments
The fair value of the Companys assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, Fair Value Measurements and Disclosures, approximates the carrying amounts represented in the balance sheet.
Fair Value Measurement
ASC 820 establishes a fair value hierarchy that prioritizes and ranks the level of observability of inputs used to measure investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment, characteristics specific to the investment, market conditions and other factors. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurements) and the lowest priority to unobservable inputs (Level III measurements).
Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets will typically have a higher degree of input observability and a lesser degree of judgment applied in determining fair value.
The three levels of the fair value hierarchy under ASC 820 are as follows:
Level IQuoted prices (unadjusted) in active markets for identical investments at the measurement date are used.
Level IIPricing inputs are other than quoted prices included within Level I that are observable for the investment, either directly or indirectly. Level II pricing inputs include quoted prices for similar investments in active markets, quoted prices for identical or similar investments in markets that are not active, inputs other than quoted prices that are observable for the investment, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level IIIPricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. The inputs used in determination of fair value require significant judgment and estimation.
In some cases, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the investment is categorized in its entirety is determined based on the lowest level input that is significant to the investment. Assessing the significance of a particular input to the valuation of an investment in its entirety requires judgment and considers factors specific to the investment. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the perceived risk of that investment.
Derivative Liabilities
The Company evaluated the Warrants (as defined below in Note 3 Public Offering) and Private Placement Warrants (as defined below in Note 4 Related Party Transactions) (collectively, Warrant Securities), and the all forward purchase agreements in accordance with ASC 815-40, Derivatives and Hedging Contracts in
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Entitys Own Equity, and concluded that the Warrant Securities and forward purchase agreements could not be accounted for as components of equity. As the Warrant Securities and forward purchase agreements meet the definition of a derivative in accordance with ASC 815, the Warrant Securities and forward purchase agreements are recorded as derivative liabilities on the Balance Sheet and measured at fair value at inception (the Close Date) and remeasured at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the Statement of Operations in the period of change.
Offering Costs
The Company complies with the requirements of FASB ASC Topic 340-10-S99-1, Other Assets and Deferred Costs SEC Materials (ASC 340-10-S99) and SEC Staff Accounting Bulletin Topic 5A, Expenses of Offering. Offering costs were $44,757,840 (including $44,000,000 in underwriters fees) consisting principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering and are charged to stockholders temporary equity upon the completion of the Public Offering. Since the Company is required to classify the warrants as derivative liabilities, offering costs totaling $832,496 are reflected as an expense in the statements of operations.
Redeemable Common Stock
As discussed in Note 3, all of the 80,000,000 Class A Common Stock sold as part of the Units in the Public Offering contain a redemption feature which allows for the redemption of such public shares in connection with the Companys liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Companys amended and restated certificate of incorporation. In accordance with SEC and its staffs guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore, all Class A Common Stock has been classified outside of permanent equity.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Companys management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, Income Taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
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For those liabilities or benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax liabilities as income tax expense. No amounts were accrued for the payment of interest and penalties at December 31, 2021 and December 31, 2020.
The Company may be subject to potential examination by U.S. federal, states or foreign jurisdiction authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income amounts in various tax jurisdictions and compliance with U.S. federal, states or foreign tax laws.
The Company is incorporated in the State of Delaware and is required to pay franchise taxes to the State of Delaware on an annual basis.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.
Cash Equivalents Held in Trust Account
The Companys portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. The Companys investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in income from investments held in Trust Account in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. At December 31, 2021, the Company had $800,056,447 in the Trust Account which may be utilized for Business Combinations. At December 31, 2021, the Trust Account consisted of money market funds.
Warrant Liability
The Company accounts for warrants for shares of the Companys common stock that are not indexed to its own stock as liabilities at fair value on the balance sheet. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized in the Companys statements of operations. For issued or modified warrants that meet all of the criteria for equity classifications, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
Recently Issued Accounting Pronouncements Not Yet Adopted
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Companys financial statements based on current operations of the Company. The impact of any recently issued accounting standards will be re-evaluated on a regular basis or if a business combination is completed where the impact could be material.
Going Concern Consideration
If the Company does not complete its Business Combination by March 25, 2023, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten
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business days thereafter, redeem 100% of the common stock sold as part of the units in the Public Offering, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of franchise and income taxes payable and less up to $100,000 of such net interest which may be distributed to the Company to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Companys remaining stockholders and the Companys Board of Directors, dissolve and liquidate, subject in each case to the Companys obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the Public Offering. In addition, if the Company fails to complete its Business Combination by March 25, 2023, there will be no redemption rights or liquidating distributions with respect to the warrants, which will expire worthless.
In addition, at December 31, 2021 and December 31, 2020, the Company had current liabilities of $104,929,383 and $1,782 and working capital of ($103,149,599) and ($1,782), respectively, the balances of which are primarily related to warrants we have recorded as liabilities as described in Notes 2 and 3. Other amounts are related to accrued expenses owed to professionals, consultants, advisors and others who are working on seeking a Business Combination as described in Note 1. Such work is continuing after December 31, 2021 and amounts are continuing to accrue. Additionally, the warrant liability will not impact the Companys liquidity until a Business Combination has been consummated, as they do not require cash settlement until such event has occurred.
3. | Public Offering |
Public Units
On March 25, 2021, the Company sold 75,000,000 units at a price of $10.00 per unit (the Units), generating gross proceeds of $750,000,000. Subsequently, the underwriters partially exercised their over-allotment option to purchase 5,000,000 newly issued units, and the closing of the sale of the additional Units pursuant to such exercise occurred on April 22, 2021. The issuance by the Company of 5,000,000 Over-Allotment Option Units at a price of $10.00 per unit resulted in gross proceeds of $50,000,000. The remainder of the over-allotment option expired on May 9, 2021. Each Unit consists of one share of the Companys Class A Common Stock (the public shares), and one-fifth of one redeemable common stock purchase warrant (the Warrants). Each whole Warrant entitles the holder to purchase one share of Class A Common Stock. Each Warrant will become exercisable on the later of 30 days after the completion of the Companys Business Combination or 12 months from the closing of the Public Offering and will expire five years after the completion of the Companys Business Combination or earlier upon redemption or liquidation. However, if the Company does not complete its Business Combination on or prior to the 24-month period allotted to complete the Business Combination, the Warrants will expire at the end of such period.
Under the terms of the warrant agreement, the Company has agreed to use its best efforts to file a registration statement under the Securities Act following the completion of the Business Combination covering the shares of Class A Common Stock issuable upon exercise of the Warrants. The Company has granted the underwriters a 45-day option to purchase additional Units to cover any over-allotment, at the initial public offering price less the underwriting discounts and commissions. At the time of the IPO, the underwriters were granted an option to purchase up to an additional 11,250,000 Units to cover overallotments, if any. Subsequently, the underwriters partially exercised their over-allotment option to purchase 5,000,000 newly issued units, and the closing of the sale of the additional Units pursuant to such Over-Allotment Option Units exercise occurred on
F-20
April 22, 2021. The issuance by the Company of 5,000,000 Over-Allotment Option Units at a price of $10.00 per unit resulted in gross proceeds of $50,000,000. The remainder of the over-allotment option expired on May 9, 2021.
The Company paid an upfront underwriting discount of 2.00% ($15,000,000) of the per Unit offering price to the underwriters at the closing of the Public Offering, with an additional fee (the Deferred Discount) of 3.50% ($26,250,000) of the gross offering proceeds payable upon the Companys completion of a Business Combination. As a result of the purchase of the Over-Allotment Option Units by the underwriters on April 22, 2021, the upfront and Deferred Discount increased to $16,000,000 and $28,000,000, respectively. The Deferred Discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its Business Combination. The underwriters are not entitled to any interest accrued on the Deferred Discount.
The public warrants issued as part of the Units are accounted for as liabilities as there are terms and features do not qualify for equity classification in FASB ASC Topic 815-40 Derivatives and Hedging Contracts in Entitys Own Equity. The fair value of the public warrants at March 23, 2021 was a liability of $13,950,000. At December 31, 2021, the fair value has increased to $61,440,000. After consideration of the warrant value included in the Over-Allotment Option Units, the change in fair value of $46,560,000 is reflected as an expense in the statements of operations.
All of the 80,000,000 Class A Common Stock sold as part of the Units in the Public Offering contain a redemption feature which allows for the redemption of such public shares in connection with the Companys liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Companys amended and restated certificate of incorporation. In accordance with SEC and its staffs guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Given that the Class A Common Stock was issued with other freestanding instruments (i.e., public warrants), the initial carrying value of Class A Common Stock classified as temporary equity is the allocated proceeds based on the guidance in FASB ASC Topic 470-20, Debt Debt with Conversion and Other Options.
Our Class A Common Stock is subject to SEC and its staffs guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital).
F-21
As of December 31, 2021, the Class A Common Stock reflected on the balance sheet are reconciled in the following table. The accretion of carrying value to redemption value was fully recognized by June 30, 2021. There has been no additional accretion since:
As of December 31, 2021 |
||||
Gross proceeds |
$ | 800,000,000 | ||
Less: |
||||
Proceeds allocated to public warrants |
(14,880,000 | ) | ||
Class A shares issuance costs |
(43,925,343 | ) | ||
|
|
|||
Plus: |
||||
Accretion of carrying value to redemption value |
58,805,343 | |||
|
|
|||
Contingently redeemable Class A Common Stock |
$ | 800,000,000 | ||
|
|
4. | Related Party Transactions |
Founder Shares
On February 10, 2021, the Sponsor purchased 21,562,500 Founder Shares for $25,000, or approximately $0.001 per share. On March 22, 2021, the Sponsor transferred 25,000 Founder Shares to each of the Companys three independent directors at their original purchase price. On May 9, 2021, the Sponsor forfeited 1,562,500 Founder Shares following the expiration of the unexercised portion of underwriters over-allotment option, so that the Founder Shares held by the Initial Stockholders would represent 20.0% of the outstanding shares of common stock following completion of the Public Offering. The Founder Shares are identical to the common stock included in the Units sold in the Public Offering except that the Founder Shares will automatically convert into shares of Class A Common Stock at the time of the Business Combination on a one-for-one basis, subject to adjustment as described in the Companys amended and restated certificate of incorporation.
The sale of the Founders Shares is in the scope of FASB ASC Topic 718, Compensation-Stock Compensation (ASC 718). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The Founders Shares were granted subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the Founders Shares is recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance. As of December 31, 2021, the Company determined that a Business Combination is not considered probable, and, therefore, no stock-based compensation expense has been recognized. Stock-based compensation would be recognized at the date a Business Combination is considered probable (i.e., upon consummation of a Business Combination) in an amount equal to the number of Founders Shares that ultimately vest multiplied times the grant date fair value per share (unless subsequently modified) less the amount initially received for the purchase of the Founders Shares.
Private Placement Warrants
The Sponsor has purchased from the Company an aggregate of 8,500,000 whole warrants at a price of $2.00 per warrant (a purchase price of approximately $17,000,000) in a private placement that occurred simultaneously with the completion of the Public Offering (the Private Placement Warrants). On April 22, 2021, substantially concurrently with the sale of the Over-allotment Option Units, the Company completed a private placement with the Sponsor for an additional 500,000 warrants at a price of $2.00 per warrant (the Additional Private Placement Warrants), generating gross proceeds of $1,000,000. Each Private Placement Warrant entitles the holder to purchase one share of Class A Common Stock at $11.50 per share. A portion of the purchase price of the Private Placement Warrants was added to the proceeds from the Public Offering to be held in the Trust Account pending completion of the Business Combination.
F-22
The Private Placement Warrants have terms and provisions that are identical to those of the Warrants being sold as part of the Units in the Public Offering, except that the Private Placement Warrants may be physical (cash) or net share (cashless) settled and are not redeemable so long as they are held by our Sponsor or its permitted transferees.
If the Company does not complete a Business Combination, then the Private Placement Warrants proceeds will be part of the liquidation distribution to the public stockholders and the Private Placement Warrants will expire worthless. Consistent with the public warrants, the private warrants are accounted for as liabilities under ASC Topic 814-40, due to their terms.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants issued upon conversion of working capital loans, if any, have registration rights (in the case of the Founder Shares, only after conversion of such shares to common shares) pursuant to a registration rights agreement entered into by the Company, the Sponsor and the other security holders named therein on March 25, 2021. These holders will also have certain demand and piggy back registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Sponsor Loan
Prior to the completion of the Public Offering, the Sponsor loaned the Company an aggregate of $300,000 by the issuance of an unsecured promissory note (the Note) issued by the Company in favor of the Sponsor to cover organization expenses and expenses related to the Public Offering. The Note was non-interest bearing and payable on the earlier of February 28, 2022 or the completion of the Public Offering. The Note was repaid upon completion of the Public Offering.
On April 20, 2021, the Sponsor made available to the Company a loan of up to $4,000,000 pursuant to a promissory note issued by the Company to the Sponsor. The proceeds from the note will be used for on-going operational expenses and certain other expenses in connection with the Business Combination. The note is unsecured, non-interest bearing and matures on the earlier of: (i) March 11, 2023 or (ii) the date on which the Company consummates the Business Combination. As of December 31, 2021, the net amount advanced by Sponsor to the Company was $2,000,000.
Administrative Services Agreement
The Company entered into an administrative services agreement pursuant to which it agreed to pay to an affiliate of the Sponsor $20,000 a month for office space, utilities and secretarial support. Services commenced on March 23, 2021 (the date the securities were first listed on the Nasdaq Capital Market) and will terminate upon the earlier of the consummation by the Company of a Business Combination or the liquidation of the Company.
For the period commencing March 25, 2021 through December 31, 2021 the Company has accrued and paid the affiliate $185,806.
5. | Deferred Underwriting Compensation |
The Company is committed to pay a deferred underwriting discount totaling $28,000,000 or 3.50% of the gross offering proceeds of the Public Offering, to the underwriters upon the Companys consummation of a Business Combination. The underwriters are not entitled to any interest accrued on the Deferred Discount, and no Deferred Discount is payable to the underwriters if there is no Business Combination.
F-23
6. | Income Taxes |
Effective Tax Rate Reconciliation
A reconciliation of the statutory federal income tax expense to the income tax expense from continuing operations provided at December 31, 2021 as follows:
Year Ended | ||||
December 31, 2021 |
||||
Income tax expense/(benefit) at the federal statutory rate |
$ | (17,207,616 | ) | |
Capitalized Transaction Expenses |
1,336,614 | |||
Warrant Liability |
15,452,324 | |||
State income taxesnet of federal income tax benefits |
(73,692 | ) | ||
Change in valuation allowance |
492,370 | |||
|
|
|||
Total income tax expense (benefit) |
$ | | ||
|
|
Current/Deferred Taxes
Year Ended | ||||
December 31, 2021 |
||||
Current income tax expense/(benefit) |
||||
Federal |
$ | | ||
State |
| |||
|
|
|||
Total current income tax expense/(benefit) |
$ | | ||
|
|
|||
Deferred income tax expense/(benefit) |
||||
Federal |
$ | | ||
State |
| |||
|
|
|||
Total deferred income tax expense/(benefit) |
$ | | ||
|
|
|||
Provision for income taxes |
$ | | ||
|
|
F-24
Deferred Tax Assets and Liabilities
Significant components of the Companys deferred tax assets and liabilities as of December 31, 2021:
December 31, 2021 |
||||
Deferred tax assets |
||||
Accrued Expenses |
$ | 162,153 | ||
Net operating losses |
332,129 | |||
|
|
|||
Total deferred tax assets |
494,282 | |||
Valuation allowance |
(492,808 | ) | ||
|
|
|||
Net deferred tax assets |
1,474 | |||
|
|
|||
Deferred tax liabilities |
||||
Prepaids |
(513 | ) | ||
Accrued Income |
(961 | ) | ||
|
|
|||
Total deferred tax liabilities |
(1,474 | ) | ||
|
|
|||
Net Deferred Tax Asset (Liability) |
$ | | ||
|
|
7. | Fair Value Measurement |
The Company complies with FASB ASC 820, Fair Value Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. ASC 820 determines fair value to be the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.
Warrants
The Company has determined that warrants issued in connection with its initial public offering in March 2021 are subject to treatment as a liability. The Company utilized a Monte Carlo simulation methodology to value the warrants for periods prior to public warrant trading and observable transactions for subsequent periods, with changes in fair value recognized in the statements of operations. The estimated fair value of the warrant liability is determined using Level 1 and Level 2 inputs. The key assumptions in the option pricing model utilized are assumptions related to expected share-price volatility, expected term, risk-free interest rate and dividend yield. The expected volatility as of the IPO Closing Date was derived from observable public warrant pricing on comparable blank-check companies that recently went public in 2020 and 2021. Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of Public Warrants was transferred from a Level 3 measurement to a Level 1 measurement, when the Public Warrants were separately listed and traded in an active market in Month 2021. The estimated fair value of the Private Warrants was transferred from a Level 3 measurement to a Level 2 fair value measurement as of Month 2021, as the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. No assets or liabilities are measured at fair value as of December 31, 2020. At December 31, 2021, there were observable transactions in the Companys public warrants. At December 31, 2021, the Public Warrants had adequate trading volume to provide a reliable indication of value. The Public Warrants were valued at $3.84 at December 31, 2021. The fair value of the Private Placement Warrants was deemed to be equal to the fair value of the Public Warrants because the Private Placement Warrants have similar terms and are subject to substantially the same redemption features as the Public Warrants.
F-25
The Warrants are measured at fair value on a recurring basis. The subsequent measurement of the Public and Private Warrants as of December 31, 2021, is classified as Level 1 and Level 2, respectively, due to the use of both observable inputs in an active market as well as quoted prices in active markets for similar assets and liabilities.
As of December 31, 2021, the aggregate values of the Private Placement Warrants and Public Warrants were $34.6 million and $61.4 million, respectively, based on the closing price of GGPIW on that date of $3.84.
As of March 23, 2021, the aggregate values of the Private Placement Warrants and Public Warrants were $8.4 million and $14.9 million, respectively, based on the closing price of GGPIU on that date of $10.00.
The following table presents information about the Companys assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2021 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability:
Significant | Significant | |||||||||||||||
Other | Other | |||||||||||||||
Quoted Prices in | Observable | Unobservable | ||||||||||||||
Active Markets | Inputs | Inputs | ||||||||||||||
Description |
December 31, 2021 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash, Cash Equivalents and Other Investments Held in Trust Account |
$ | 800,056,447 | $ | 800,056,447 | $ | | $ | | ||||||||
Derivative warrant liabilities: |
||||||||||||||||
Public warrants |
(61,440,000 | ) | (61,440,000 | ) | | | ||||||||||
Private placement warrants |
(34,560,000 | ) | | (34,560,000 | ) | |
8. | Stockholders Deficit |
Common Stock
The Company is authorized to issue 440,000,000 shares of common stock, consisting of 400,000,000 shares of Class A Common Stock, par value $0.0001 per share and 40,000,000 shares of Class F Common Stock, par value $0.0001 per share. Holders of the Companys common stock are entitled to one vote for each share of common stock and vote together as a single class. At December 31, 2021 and December 31, 2020, there were 80,000,000 and -0- shares of Class A Common Stock and 20,000,000 and -0- shares of Class F Common Stock issued and outstanding, respectively.
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. At December 31, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
9. | Risk and Uncertainties |
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Companys financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
F-26
10. | Subsequent Events |
On February 18, 2022, the Sponsor extended the maturity date of promissory note issued by the Company to the Sponsor. The note remains unsecured, non-interest bearing and matures on the earlier of: (i) March 11, 2023 or (ii) the date on which the Company consummates a Business Combination. There are no other items which require adjustment or disclosure other than those set forth in the preceding notes to the financial statements.
F-27
The Polestar Group
Consolidated Financial Statements for the Years Ended December 31, 2021, 2020 and 2019
F-28
Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors of Polestar Automotive Holding Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated financial position of Polestar Automotive Holding Limited (the Company) as of December 31, 2021 and 2020, the related consolidated statements of loss and comprehensive loss, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
Going Concern
The accompanying financial statements for the years ended December 31, 2021, 2020 and 2019, have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Companys recurring losses from operations raise substantial doubt about its ability to continue as a going concern. Managements plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-29
Revenue Refer to Notes 1 and 4 to the financial statements
Critical Audit Matter Description
The Companys revenue primarily consists of revenue from the sales of vehicles, which are sold to individuals (end customers), fleet customers, financial service providers, and dealers based on contractual agreements. The Company recognizes revenue at the point in time when the customer obtains control of the vehicle, and thus has the ability to direct the use of, and obtain the benefits from, the vehicle. During the year ended December 31, 2021, the Company recognized approximately $1,290 million of revenue related to sales of vehicles.
We identified revenue recognition related to the sales of vehicles as a critical audit matter because of the nature of the various agreements and the complexity of certain terms in these contracts, such as the existence of repurchase commitments. This required both extensive audit effort due to the variation in terms between, and complexity of some of the contracts, as well as a high degree of auditor judgment in determining the audit procedures as well as the nature and extent of audit evidence required to determine that revenue recognition was appropriate.
As disclosed by management, the Company identified a material weakness in its internal controls over revenue recognition, which impacted this matter.
How the Critical Audit Matter Was Addressed in the Audit
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures also included evaluating the nature and extent of audit procedures performed. Our audit procedures related to revenue recognized for the sale of vehicles included, but were not limited to:
| We obtained an understanding of managements process for identifying and reviewing contracts with customers and determining the revenue recognition treatment in accordance with IFRS 15, Revenue from Contracts with Customers. |
| For a selection of agreements with customers, we obtained the contract and reviewed the contract for those terms that could impact the appropriateness of revenue recognition. For those contracts identified with complex terms, we evaluated whether the Company appropriately accounted for those contracts in accordance with IFRS 15. |
| We performed detail transaction testing for a sample of revenue, by obtaining and inspecting sales orders or contracts with the customer and other related source documents, including delivery documents, invoices and cash receipts, as applicable, to determine that control has transferred to the customer |
| We also considered audit evidence obtained throughout our audit as to whether there is any wider information relevant to the point in time at which the Company recognizes revenue. |
/s/ Deloitte AB
Gothenburg, Sweden
April 21, 2022
We have served as the Companys auditor since 2021.
F-30
Polestar Automotive Holding Limited
Consolidated Statement of Loss
(in thousands of U.S. dollars except per share data and unless otherwise stated)
|
For the year ended December 31, | |||||||||||||||
Note | 2021 | 2020 | 2019 | |||||||||||||
Revenue |
4 | 1,337,181 | 610,245 | 92,415 | ||||||||||||
Cost of sales |
5 | (1,336,321 | ) | (553,724 | ) | (39,790 | ) | |||||||||
|
|
|
|
|
|
|||||||||||
Gross profit |
860 | 56,521 | 52,625 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Selling, general and administrative expenses |
5 | (714,724 | ) | (314,926 | ) | (210,572 | ) | |||||||||
Research and development expenses |
5 | (232,922 | ) | (183,849 | ) | (34,386 | ) | |||||||||
Other operating income and expenses, net |
7 | (48,053 | ) | 1,766 | 1,339 | |||||||||||
|
|
|
|
|
|
|||||||||||
Operating loss |
(994,839 | ) | (440,488 | ) | (190,994 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Finance income |
8 | 32,970 | 3,199 | 16,226 | ||||||||||||
Finance expenses |
8 | (45,249 | ) | (34,034 | ) | (21,192 | ) | |||||||||
|
|
|
|
|
|
|||||||||||
Loss before income taxes |
(1,007,118 | ) | (471,323 | ) | (195,960 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Income tax expense |
10 | (336 | ) | (13,535 | ) | (2,015 | ) | |||||||||
|
|
|
|
|
|
|||||||||||
Net loss |
(1,007,454 | ) | (484,858 | ) | (197,975 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Net loss per share (in U.S. dollars) |
11 | |||||||||||||||
Basic |
(4.39 | ) | (2.40 | ) | (0.99 | ) | ||||||||||
Diluted |
(4.39 | ) | (2.40 | ) | (0.99 | ) |
The accompanying notes are an integral part of the Consolidated Financial Statements.
F-31
Polestar Automotive Holding Limited
Consolidated Statement of Comprehensive Loss
(in thousands of U.S. dollars unless otherwise stated)
For the year ended December 31, | ||||||||||||||||
Note | 2021 | 2020 | 2019 | |||||||||||||
Net loss |
(1,007,454 | ) | (484,858 | ) | (197,975 | ) | ||||||||||
Other comprehensive (loss) income: |
||||||||||||||||
Items that may be subsequently reclassified to the Consolidated Statement of Loss: |
||||||||||||||||
Exchange rate differences from translation of foreign operations |
(33,149 | ) | 30,266 | (3,244 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||
Total other comprehensive (loss) income: |
(33,149 | ) | 30,266 | (3,244 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||
Total comprehensive loss |
(1,040,603 | ) | (454,592 | ) | (201,219 | ) | ||||||||||
|
|
|
|
|
|
The accompanying notes are an integral part of the Consolidated Financial Statements.
F-32
Polestar Automotive Holding Limited
Consolidated Statement of Financial Position
(in thousands of U.S. dollars unless otherwise stated)
As of the year ended December 31, | ||||||||||||
Note | 2021 | 2020 | ||||||||||
Assets |
||||||||||||
Non-current assets |
||||||||||||
Intangible assets and goodwill |
12 | 1,368,356 | 1,171,337 | |||||||||
Property, plant and equipment |
9, 13 | 208,193 | 201,671 | |||||||||
Vehicles under operating leases |
9 | 120,626 | | |||||||||
Other non-current assets |
1,682 | 1,442 | ||||||||||
Deferred tax asset |
10 | 3,850 | 2,157 | |||||||||
|
|
|
|
|||||||||
Total non-current assets |
1,702,707 | 1,376,607 | ||||||||||
|
|
|
|
|||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
14 | 756,677 | 316,424 | |||||||||
Marketable securities |
14 | 1,258 | | |||||||||
Restricted cash |
| 50,206 | ||||||||||
Trade receivables |
15 | 157,753 | 99,250 | |||||||||
Trade receivables - related parties |
15, 23 | 14,688 | 208,444 | |||||||||
Accrued income - related parties |
23 | 5,103 | | |||||||||
Inventories |
16 | 545,743 | 432,531 | |||||||||
Current tax assets |
5,562 | 4,771 | ||||||||||
Other current assets |
17 | 120,202 | 60,331 | |||||||||
Total current assets |
1,606,986 | 1,171,957 | ||||||||||
|
|
|
|
|||||||||
Total assets |
3,309,693 | 2,548,564 | ||||||||||
|
|
|
|
|||||||||
Equity |
||||||||||||
Share capital |
(1,865,909 | ) | (1,318,752 | ) | ||||||||
Other contributed capital |
(35,231 | ) | | |||||||||
Foreign currency translation reserve |
16,784 | (16,365 | ) | |||||||||
Accumulated deficit |
1,761,860 | 754,406 | ||||||||||
|
|
|
|
|||||||||
Total equity |
18 | (122,496 | ) | (580,711 | ) | |||||||
|
|
|
|
|||||||||
Liabilities |
||||||||||||
Non-current liabilities |
||||||||||||
Contract liabilities |
4 | (28,922 | ) | (12,424 | ) | |||||||
Deferred tax liabilities |
10 | (509 | ) | (6,548 | ) | |||||||
Other non-current provisions |
19 | (38,711 | ) | (18,537 | ) | |||||||
Other non-current liabilities |
14 | (11,764 | ) | (312 | ) | |||||||
Other non-current interest-bearing liabilities |
9 | (66,575 | ) | (61,840 | ) | |||||||
|
|
|
|
|||||||||
Total non-current liabilities |
(146,481 | ) | (99,661 | ) | ||||||||
|
|
|
|
|||||||||
Current liabilities |
||||||||||||
Trade payables |
14 | (114,296 | ) | (67,985 | ) | |||||||
Trade payables - related parties |
23 | (1,427,678 | ) | (1,077,423 | ) | |||||||
Accrued expenses - related parties |
(315,756 | ) | (104,997 | ) | ||||||||
Advance payments from customers |
(36,415 | ) | (25,586 | ) | ||||||||
Current provisions |
19 | (44,042 | ) | (35,579 | ) | |||||||
Liabilities to credit institutions |
21 | (642,338 | ) | (363,490 | ) | |||||||
Current tax liabilities |
(13,089 | ) | (9,671 | ) | ||||||||
Interest-bearing current liabilities |
9, 23 | (10,283 | ) | (11,187 | ) | |||||||
Interest-bearing current liabilities - related parties |
21, 23 | (13,789 | ) | | ||||||||
Contract liabilities |
4 | (58,368 | ) | (4,648 | ) | |||||||
Other current liabilities |
20 | (364,662 | ) | (167,626 | ) | |||||||
|
|
|
|
|||||||||
Total current liabilities |
(3,040,716 | ) | (1,868,192 | ) | ||||||||
|
|
|
|
|||||||||
Total liabilities |
(3,187,197 | ) | (1,967,853 | ) | ||||||||
|
|
|
|
|||||||||
Total equity and liabilities |
(3,309,693 | ) | (2,548,564 | ) | ||||||||
|
|
|
|
The accompanying notes are an integral part of the Consolidated Financial Statements.
F-33
Polestar Automotive Holding Limited
Consolidated Statement of Cash Flows
(in thousands of U.S. dollars unless otherwise stated)
For the year ended December 31, | ||||||||||||||||
Note | 2021 | 2020 | 2019 | |||||||||||||
Cash flows from operating activities |
||||||||||||||||
Net loss |
(1,007,454 | ) | (484,858 | ) | (197,975 | ) | ||||||||||
Adjustments to reconcile net loss to net cash flows |
||||||||||||||||
Depreciation and amortisation |
239,164 | 216,077 | 32,552 | |||||||||||||
Additions (reversals) for warranties |
63,114 | 58,651 | 2 | |||||||||||||
Inventory impairment |
31,984 | 35,984 | | |||||||||||||
Finance income |
(32,969 | ) | (3,199 | ) | (16,226 | ) | ||||||||||
Finance expense |
45,249 | 34,034 | 21,192 | |||||||||||||
Income tax expense |
336 | 13,535 | 2,015 | |||||||||||||
Losses (gains) on disposals of assets |
| 16 | | |||||||||||||
Other non-cash expense and income |
11,560 | 14,048 | 1,876 | |||||||||||||
Change in operating assets and liabilities |
||||||||||||||||
Inventories |
(169,816 | ) | (428,067 | ) | (20,801 | ) | ||||||||||
Vehicles under operating leases |
(120,626 | ) | | | ||||||||||||
Contract liabilities |
70,220 | 17,071 | | |||||||||||||
Trade receivables, prepaid expenses and other assets |
48,574 | (268,004 | ) | (62,316 | ) | |||||||||||
Trade payables, accrued expenses and other liabilities |
519,676 | 764,661 | 46,471 | |||||||||||||
Interest received |
1,396 | 3,199 | 13,286 | |||||||||||||
Interest paid |
(12,564 | ) | (30,198 | ) | (10,135 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Cash used for operating activities |
(312,156 | ) | (57,050 | ) | (190,059 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Cash flows from investing activities |
||||||||||||||||
Additions to property, plant and equipment |
22 | (24,701 | ) | (49,599 | ) | (71,784 | ) | |||||||||
Additions to intangible assets |
22 | (104,971 | ) | (194,108 | ) | (213,664 | ) | |||||||||
|
|
|
|
|
|
|||||||||||
Cash used for investing activities |
(129,672 | ) | (243,707 | ) | (285,448 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Cash flows from financing activities |
||||||||||||||||
Change in restricted deposits |
48,830 | 134,681 | 205,681 | |||||||||||||
Proceeds from short-term borrowings |
698,882 | 569,087 | 388,625 | |||||||||||||
Principal repayments of short-term borrowings |
(411,950 | ) | (780,167 | ) | (365,840 | ) | ||||||||||
Principal repayments of lease liabilities |
(8,578 | ) | (2,298 | ) | (939 | ) | ||||||||||
Proceeds from the issuance of share capital and other contributed capital |
582,388 | 438,340 | 247,880 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Cash provided by financing activities |
909,572 | 359,643 | 475,407 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Effect of foreign exchange rate changes on cash and cash equivalents |
(27,491 | ) | 21,340 | (18,760 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||
Net increase (decrease) in cash and cash equivalents |
440,253 | 80,226 | (18,860 | ) | ||||||||||||
|
|
|
|
|
|
|||||||||||
Cash and cash equivalents at the beginning of the period |
316,424 | 236,198 | 255,058 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Cash and cash equivalents at the end of the period |
756,677 | 316,424 | 236,198 |
The accompanying notes are an integral part of the Consolidated Financial Statements.
F-34
Polestar Automotive Holding Limited
Consolidated Statement of Changes in Equity
(in thousands of U.S. dollars unless otherwise stated)
Note | Share capital |
Other contributed capital |
Currency translation reserve |
Accumulated deficit |
Total | |||||||||||||||||||
Balance as of January 1, 2019 |
18 | | 631,352 | (10,657 | ) | (76,194 | ) | 544,501 | ||||||||||||||||
Net loss |
| | | (197,975 | ) | (197,975 | ) | |||||||||||||||||
Other comprehensive loss |
| | (3,244 | ) | | (3,244 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive loss |
| | (3,244 | ) | (197,975 | ) | (201,219 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Shareholders contributions |
247,880 | 247,880 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2019 |
| 879,232 | (13,901 | ) | (274,169 | ) | 591,162 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net loss |
| | | (484,858 | ) | (484,858 | ) | |||||||||||||||||
Other comprehensive income |
| | 30,266 | | 30,266 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive loss |
| | 30,266 | (484,858 | ) | (454,592 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Changes in the consolidated group |
3 | 880,412 | (879,232 | ) | | 4,621 | 5,801 | |||||||||||||||||
Issuance of new shares |
438,340 | | | | 438,340 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2020 |
1,318,752 | | 16,365 | (754,406 | ) | 580,711 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net loss |
| | | (1,007,454 | ) | (1,007,454 | ) | |||||||||||||||||
Other comprehensive loss |
| | (33,149 | ) | | (33,149 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive loss |
| | (33,149 | ) | (1,007,454 | ) | (1,040,603 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Shareholders contributions |
| 35,231 | | | 35,231 | |||||||||||||||||||
Issuance of new shares |
547,157 | | | | 547,157 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2021 |
1,865,909 | 35,231 | (16,784 | ) | (1,761,860 | ) | 122,496 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the Consolidated Financial Statements.
F-35
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Note 1 - Significant accounting policies and judgements
General information
Polestar Automotive Holding Limited (the Parent), together with its subsidiaries, hereafter referred to as Polestar, Polestar Group or the Group, is a limited company incorporated in Hong Kong. Polestar Group operates principally in the automotive industry, engaging in research and development, manufacturing, branding and marketing, and the commercialisation and selling of vehicles, technology solutions and services related to battery electric vehicles. Polestar Group has a presence in nineteen markets across Europe, North America, and Asia. Polestar Group has its management headquarters located at Assar Gabrielssons väg 9, 41878 Göteborg, Sweden.
In September 2020, a common control transaction restructured Polestar Group such that the parent company changed from Polestar Automotive (Shanghai) Co., Ltd (incorporated in the Peoples Republic of China) to Polestar Automotive Holding Limited (incorporated in Hong Kong). Refer to Note 3 Common control transaction for more details.
Polestar Group operations remained unchanged through this transaction. However, the jurisdiction changed from China to Hong Kong and the reporting currency changed from the Renminbi (CNY), the official currency of the Peoples Republic of China, to the United States dollar (USD). The reporting currency of Polestar Group is the same as the currency of the registered share capital of the parent company.
On September 27, 2021, Polestar Group entered into a business combination agreement with Gores Guggenheim Inc., a Special Purpose Acquisition Company (SPAC). Immediately following the closing of the proposed transaction, the post-combination company intends to change its name to Polestar Automotive Holding UK Limited and expects to begin trading on the National Association of Securities Dealers Automated Quotations (NASDAQ) under the ticker symbol PSNY.
As of December 31, 2021, PSD Investment Limited, a company controlled by Mr. Li Shufu, a private person, owns 42.7% of the Group. An additional 49.5% is owned by Volvo Cars via its subsidiaries Snita Holding B.V. and PS Investment AB, both limited companies. Other related parties and management own 1.8%, and the remaining 6.0% ownership is held by external investors.
Basis of preparation
The Consolidated Financial Statements in this annual report of Polestar Group are prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. For group financial reporting purposes, Polestar Group companies apply the same accounting principles, irrespective of national legislation, as defined in the Group accounting directives. Such accounting principals have been applied consistently for all periods, unless otherwise stated.
This annual report is prepared in the presentation currency USD.
Going concern
Polestar Groups financial statements have been prepared on a basis that assumes Polestar Group will continue as a going concern and the ordinary course of business will continue in alignment with Managements 2022-2025 business plan.
F-36
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Management assessed Polestar Groups ability to continue as a going concern and evaluated whether there are certain events or conditions, considered in the aggregate, that may cast substantial doubt about Polestar Groups ability to continue as a going concern. All information available to Management pertaining to the twelve-month period after the issuance date of these consolidated financial statements was used in performing this assessment.
Historically, Polestar Group has financed its operations primarily through short-term working capital loan arrangements with credit institutions (i.e., 12 months or less), contributions from shareholders, and extended trade credit from related parties. Since inception, Polestar Group has generated recurring net losses and negative operating and investing cash flows. Net losses for the years ended December 31, 2021, 2020 and 2019, amounted to $1,007,454, $484,858 and $197,975, respectively. Negative operating and investing cash flows for the years ended December 31, 2021, 2020 and 2019, amounted to $441,828, $300,757 and $475,507. respectively. Management forecasts that Polestar Group will continue to generate negative operating and investing cash flows in the near future, until sustainable commercial operations are achieved. Securing financing to support operating and development activities represents an ongoing challenge for Polestar Group.
Managements 2022-2025 business plan indicates that Polestar Group depends on additional financing that is expected to be funded via a combination of new short-term working capital loan arrangements, long-term loan arrangements, private equity contributions from existing shareholders, and the successful public listing in the United States from a merger with a SPAC that is expected to be completed in the first half of 2022. The timely realisation of these financing endeavors is crucial for Polestar Groups ability to continue as a going concern. If Polestar is unable to obtain financing from these sources or if such financing is not sufficient to cover forecasted operating and investing cash flow needs, Polestar Group will need to seek additional funding through other means (e.g., issuing new shares of equity or issuing bonds). Management has no certainty that Polestar Group will be successful in securing the funds necessary to continue operating and development activities as planned.
Based on these circumstances, Management has determined there is substantial doubt about Polestar Groups ability to continue as a going concern. There are ongoing efforts in place to mitigate the uncertainty. The consolidated financial statements do not include any adjustments to factor for the going concern uncertainty.
Adoption of new and revised standards
Effects of new and amended IFRS
Management has concluded the adoption of any of the below accounting pronouncements has not or will not have a material impact on the Groups financial statements.
In May 2020, the IASB published an amendment to IFRS 16 Leases (IFRS 16) COVID-19-Related Rent Concessions in which they provide an accounting policy choice to lessees to apply practical relief for rent concessions arising due to the COVID-19 pandemic. The practical expedient permits a lessee to elect not to assess whether a COVID-19-related rent concession is a lease modification and instead account for any change in lease payments resulting from the COVID-19-related rent concessions as it would under IFRS 16 Leases, if the change were not a lease modification. In March 2021, the IASB published an amendment to IFRS 16 for Covid-19-related rent concessions beyond June 30, 2021 that extends the applicability of the 2020 amendment to IFRS 16.
In August 2020, the IASB published Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9 Financial Instruments (IFRS 9), IAS 39, IFRS 7, IFRS 4 Insurance Contracts (IFRS 4) and IFRS 16), finalising its response to the ongoing reform of interest rate benchmarks around the world. The amendments
F-37
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
relate to changes to contractual cash flows, hedge accounting, and disclosures. For changes to contractual cash flows, a company is not required to derecognise or adjust the carrying amount of a financial instrument for changes required by the interest rate benchmark reform but will instead update the effective interest rate to reflect the change to the alternative benchmark rate. Related to hedge accounting, a company does not have to discontinue its hedge accounting solely because it makes changes required by the interest rate benchmark reform if the hedge meets other hedge accounting criteria. Amendments to disclosure requirements aim to assist reporting entities to provide investors with useful information about the effects of the reform on their financial statements.
New and amended IFRS issued but not yet effective
Management has concluded the adoption of any of the below accounting pronouncements, that were issued but not effective for the period ended December 31, 2021, will not have a material impact on the Groups financial statements.
The amendment to IFRS 3 updates reference to the Conceptual Framework for Financial Reporting and adds an exception for the recognition of liabilities and contingent liabilities within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets (IAS 37) and IFRIC Interpretation 21 Liens (IFRIC 21). The amendment also clarifies that contingent assets acquired in a business combination should not be recognised by the acquirer at the acquisition date. This amendment will be effective for annual reporting periods beginning on or after January 1, 2022.
The amendment to IAS 37 clarifies that both incremental and other contract performance costs directly related to the performance of the contracts are classified as direct contract performance costs. This amendment will be effective for annual reporting periods beginning on or after January 1, 2022.
Amendments to IAS 16 Property, Plant and Equipment (IAS 16) clarify the accounting for costs related to the sale of property, plant and equipment (PPE). The amendment prohibits deducting proceeds produced before an asset is available for use from its cost. Accordingly, an entity will recognise such sales proceeds and related costs in profit or loss. The amendment also clarifies the meaning of testing whether an asset is functioning properly as assessing if the technical and physical performance of the asset matches the capabilities needed to be used in the production or supply of goods or services, for rental to others, or for administrative purposes. The amendments are effective for annual periods beginning on or after January 1, 2022.
The amendments to IAS 1 clarify that the presentation of liabilities as current or non-current is based off the rights that are in existence at the end of the reporting period, not the expectations about an entitys exercise of certain rights to defer the settlement of a liability or other subsequent events. The amendments are applied retrospectively for annual periods beginning on or after January 1, 2023.
The amendment to IFRS 10 Consolidated Financial Statement (IFRS 10) and IAS 28 Investments in Associates and Joint Ventures (IAS 28) clarifies the accounting treatment of sales or contributions of assets between an investor and its associates or joint ventures. If the non-cash asset sold or contributed constitutes a business under IFRS 3, the full gain or loss will be recognised by the investor. If the assets do not meet the definition of a business, the investor will recognise a gain or loss only to the extent of the investment of the other investors in the joint venture. An effective date has yet to be set for this amendment.
In May 2020, the IASB issued Annual Improvements to IFRSs 2018 2020 Cycle. The improvements have amended four standards with effective date January 1, 2022: i) IFRS 1 First-time Adoption of International Financial Reporting Standards (IFRS 1) in relation to allowing a subsidiary to measure cumulative translation
F-38
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
differences using amounts reported by its parent, ii) IFRS 9 in relation to which fees an entity includes when applying the 10 percent test for derecognition of financial liabilities, iii) IAS 41 Agriculture in relation to the exclusion of taxation cash flows when measuring the fair value of a biological asset, and iv) IFRS 16 in relation to an illustrative example of reimbursement for leasehold improvements.
In June 2020, the IASB published amendments to IFRS 4 which deferred the expiry date of the temporary exemption from applying IFRS 9 to annual periods beginning on or after January 1, 2023.
In June 2020, the IASB published amendments to IFRS 17 to address concerns and implementation challenges that were identified after IFRS 17 was published. The amendment revised the effective date to January 1, 2023 but may be applied earlier provided the entity applies IFRS 9 and IFRS 15 Revenue from Contracts with Customers (IFRS 15) at or before the date of initial application of the Standard. Further, among other changes, the amendment (1) includes additional scope exceptions, (2) includes additional guidance for recognition of insurance acquisition cash flows, (3) clarifies the application of IFRS 17 in interim financial statements, and (4) simplifies the presentation of insurance contracts in the statement of financial position.
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies which require companies to disclose their material accounting policy information rather than their significant accounting policies and provide guidance on how to apply the concept of materiality to accounting policy disclosures. These amendments are effective on or after January 1, 2023.
In February 2021, the IASB issued amendments to IAS 8: Definition of Accounting Estimates which clarify how companies should distinguish changes in accounting policies from changes in accounting estimates. These amendments are effective on or after January 1, 2023. The Group does not expect any material impact from the adoption of these amendments.
In May 2021, the IASB issued amendments to IAS 12 Income Taxes (IAS 12): Deferred Tax related to Assets and Liabilities Arising From a Single Transaction that clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. These amendments are effective on or after January 1, 2023. The Group does not expect any material impact from the adoption of these amendments.
In December 2021, the IASB issued an amendment to IFRS 17: Initial Application of IFRS 17 and IFRS 9 Comparative Information, which provides a transition option relating to comparative information about financial assets presented on initial application of IFRS 17. The amendment is aimed at helping entities to avoid temporary accounting mismatches between financial assets and insurance contract comparative information for users of financial statements. The amendment is effective on or after January 1, 2023. The Group does not expect any impact from the adoption of this amendment.
Presentation
In the Consolidated Statement of Financial Position, an asset is classified as a current asset when it is held primarily for the purpose of trading, is expected to be realised within twelve months of the date of the Consolidated Statement of Financial Position or consists of cash or cash equivalents, provided it is not subject to any restrictions. All other assets are classified as non-current. A liability is classified as a current liability when it is held primarily for the purpose of trading or is expected to be settled within twelve months of the date of the Consolidated Statement of Financial Position. All other liabilities are classified as non-current.
Basis of consolidation
The consolidated accounts include the Parent company and all subsidiaries over which the Parent, either directly or indirectly, exercises control. The Parent controls an entity when the Parent is exposed to, or has rights to,
F-39
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
variable returns from its involvement with the entity, has the ability to affect those returns through its power over the entity, and if it has power over decisions which affect investor returns (i.e., voting or other rights). All subsidiaries are fully consolidated from the date on which control is transferred to the Parent. They are deconsolidated from the date that control ceases. All inter-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated upon consolidation. As of December 31, 2021, 2020 and 2019, the Parent had thirty-three, eighteen, and twelve fully consolidated subsidiaries, respectively.
Segment reporting
Polestar Group determined it has one reportable segment as the chief operating decision maker (CODM) assesses financial information and the performance of the business on a consolidated basis. The Group manages its business as a single operating segment, which is the business of manufacturing and selling electric vehicles. All substantial decisions regarding allocation of resources as well as the assessment of performance is based on the Group as a whole.
Polestar Group uses the management approach in determining reportable operating segments. The management approach considers the internal organisation and reporting used by the Groups CODM to allocate resources and assess performance as the source for determining the Groups reportable segments. Polestar Groups CODM has been identified as the Chief Executive Officer (CEO) as he assesses the performance of the Group and has the function and sole ability to make overall decisions related to the allocation of the Groups resources. Polestar Group allocates resources and assesses financial performance on a consolidated basis.
The following tables show the breakdown of Polestar Groups revenue from external customers and non-current assets (PPE and intangibles and goodwill) by geographical location:
2021 | 2020 | 2019 | ||||||||||
Revenue |
||||||||||||
USA |
248,168 | 25,077 | | |||||||||
Norway |
231,456 | 156,077 | | |||||||||
UK |
206,866 | 41,605 | | |||||||||
Sweden |
189,656 | 162,062 | 73,257 | |||||||||
Netherlands |
135,030 | 150,133 | | |||||||||
China |
40,819 | 13,850 | 19,158 | |||||||||
Germany |
117,549 | 34,880 | | |||||||||
Other regions1 |
167,637 | 26,561 | | |||||||||
|
|
|
|
|
|
|||||||
Total |
1,337,181 | 610,245 | 92,415 | |||||||||
|
|
|
|
|
|
|||||||
Non-current assets |
||||||||||||
USA |
64,072 | 612 | | |||||||||
Norway |
1,660 | 2,351 | | |||||||||
UK |
2,484 | 1,304 | | |||||||||
Sweden |
954,842 | 876,330 | 653,583 | |||||||||
Netherlands |
2,541 | 63 | | |||||||||
China |
532,492 | 489,880 | 362,757 | |||||||||
Germany |
24,009 | 2,063 | | |||||||||
Other regions2 |
9,667 | 406 | | |||||||||
|
|
|
|
|
|
|||||||
Total |
1,591,767 | 1,373,009 | 1,016,340 | |||||||||
|
|
|
|
|
|
F-40
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
1 | Revenue: Other regions primarily consist of Belgium, Switzerland, and Denmark in 2021. Other regions primarily consist of Belgium in 2020. |
2 | Non-current assets: Other regions primarily consist of Canada in 2021. Other regions primarily consist of Belgium in 2020. |
Foreign currency
In preparing the financial statements of the Group, transactions in currencies other than the entitys functional currency (i.e., foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting date, assets and liabilities denominated in a foreign currency are translated to the functional currency using the closing exchange rate and items of income and expense are translated at the monthly average exchange rate. Foreign currency gains and losses arising from translation differences are recognised in the Consolidated Statement of Loss.
For more information about currency risk, see Note 2 Financial risk management.
Accounting policies
Use of estimates and judgements
The preparation of these Consolidated Financial Statements, in accordance with IFRS, requires management to make judgements, estimates, and assumptions that affect the application of the Groups accounting policies, the reported amount of assets, liabilities, revenues, expenses, and other related financial items. Management reviews its estimates and assumptions on a continuous basis; changes in accounting estimates are recognised in the period in which the estimates are revised, and prospectively thereafter. Details of critical estimates and judgements which the Group considers to have a significant impact upon the financial statements are set out below and the corresponding impacts can be seen in the following notes:
a) Revenue recognition determining the transaction price of performance obligations included with sales of vehicles, variable consideration for volume related discounts to fleet customers, and revenue from sales of vehicles with repurchase obligations Note 4 Revenue.
b) Intangible assets capitalizing intellectual property and determining the useful lives Note 12 Intangible assets and goodwill.
c) Impairment testing Note 12 Intangible assets and goodwill.
d) Valuation of loss carry-forwards Note 10 Income tax expense.
Actual results could differ materially from those estimates using different assumptions or under different conditions.
Cash and cash equivalents
Cash consists of cash in banks with an original term of three months or less. All highly-liquid, short-term investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value are classified as cash equivalents.
In the Consolidated Statement of Cash Flows, cash and cash equivalents consists of cash and cash equivalents as defined above.
F-41
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Marketable securities
Marketable securities are financial instruments with maturities less than one year that can quickly be converted into cash. Polestars marketable securities consist of short-term money market funds (i.e., time deposits in banks). The balance in marketable securities as of December 31, 2021 and 2020 amounted to $1,258 and nil, respectively.
Restricted cash
Restricted cash mainly consists of deposits that have been pledged to secure short-term bank loans. The balance in restricted cash as of December 31, 2021 and 2020 amounted to nil and $50,206, respectively. As of December 31, 2021 and 2020, the Group did not have any other cash and cash equivalents balances held by entities that are not available for use by the Group. Cash and cash equivalents held in Chinese entities are available for use by the Group via an intercompany short-term revolving credit facility.
Government grants
The Groups subsidiaries based in the Peoples Republic of China received government grants which were conditioned to be used for production and production related costs and grants for non-specified purposes. These grants are not tied to the future trends or performance of the Group and are not required to be refunded under any circumstance. Receipt of such grants are either reported as a deduction to the related expense or as other operating income, depending on the nature of the grant received. For the years ended December 31, 2021 and 2020, government grants amounted to $309 and $1,284, respectively.
Revenue recognition
Revenue from contracts with customers is measured at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. In determining the transaction price, the Group evaluates whether the contract includes other promises that constitute a separate performance obligation to which a portion of the transaction price needs to be allocated. When consideration in a contract includes variable amounts, the Group estimates the consideration to which Polestar will be entitled in exchange for transferring goods to the customer, using either the expected value method or the most likely amount method. The Group makes judgements related to potential returns, liabilities to customers related to performance obligations and potential sales discounts when considering revenue.
For contracts that contain more than one performance obligation, Polestar Group allocates the transaction price to each performance obligation on a relative standalone selling price basis. The standalone selling price of the distinct good or service underlying each performance obligation is determined at contract inception. It represents the price at which Polestar Group would sell a promised good or service separately to a customer. If a standalone selling price is not directly observable, Polestar Group instead estimates it, using appropriate data that reflects the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods or services to the customer.
Polestar Group disaggregates revenue by major category based on what it believes are the primary economic factors that may impact the nature, amount, timing, and uncertainty of revenue and cash flows from customer contracts.
Sales of vehicles
Revenue from the sales of vehicles includes sales of the Groups vehicles as well as related accessories and services. Revenue is recognised when the customer obtains control of delivered goods or services, and thus has
F-42
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
the ability to direct the use of, and obtain the benefits from, the goods or services. Polestar Group includes various services and maintenance (i.e., extended service) offers with the sale of each vehicle for a period of time specified in the contract.
Polestar Group also provides connected services, including access to the internet and over-the-air software and performance updates, which provide Polestars customers new features and improvements to existing vehicle functionality. Although Polestars connected services improve the in-vehicle experience, it is not required when driving a Polestar vehicle.
These services and maintenance and connected services are considered stand-ready obligations as Polestar cannot determine (1) when a customer will access a service, or (2) the quantity of a service the customer will require (i.e., delivery is within control of the customer). Polestar uses an expected cost-plus margin approach for estimating the transaction price for these stand-ready obligations as this is determined to be the most suitable method for estimating stand-alone selling price for performance obligations other than the vehicle. These services are available throughout the automotive industry, there is public information that is readily accessible, and there is a stable market and cost structure to determine the appropriate inputs to the cost-plus margin calculation. The related performance obligations are satisfied in accordance with the terms of each service, and revenue is deferred and recognised on a straight-line basis over the contract period as a stand-ready obligation. The deferred revenue is presented as contract liabilities, since the customers payments are made before the services are transferred.
The residual amount of the transaction price is allocated to the performance obligation associated with the delivery of the vehicle because the vehicle represents the most valuable component of the contract, Polestars vehicles are not sold on a stand-alone basis such that an established price exists separate from the services and maintenance, and there is wide variation in market price among the limited competitors in this new space. The transaction price allocated to the delivery of the vehicle is recognised at a point in time on the delivery date. Polestar has continued to evaluate and monitor the number of observable inputs available for use in estimating the standalone selling price of its vehicles. As part of its ongoing analysis, Polestar has determined that use of the residual method continues to be the most appropriate method for estimating the standalone selling price of its vehicles.
Vehicles are sold to individuals (end customers), fleet customers, financial service providers, and dealers. Since commercialisation of Polestar vehicles commenced in the third quarter of 2020, the Group had not recognised a significant number of customer returns, and therefore has not accrued any obligations for returns, refunds, or other similar obligations for the years ended December 31, 2021 and 2020.
As part of certain dealer contracts, Polestar provides a residual value guarantee (RVG). The RVG does not affect the customers control of the vehicle (i.e., the customer is not constrained in its ability to direct the use of, and obtain substantially all of the benefits from, the vehicle), but it does impact the transaction price as the guarantee effectively reduces the compensation to which Polestar is entitled. Polestar evaluates variables such as recent car auction values, future price deterioration due to expected changes in market conditions, vehicle quality data, and repair and recondition costs to determine the amount of the residual value. Polestar pays the difference between the determined residual value and the contracted residual value up-front, in cash, and accounts for it under IFRS 15 as a direct reduction to the transaction price. Polestar will continue to evaluate its method for recognising RVGs and amend how it accounts for them, if necessary.
There are no significant payment terms for end customers, fleet customers, financial service providers, or dealers as payment is due on or near the date of invoice.
F-43
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Consideration received by fleet customers is variable in nature as the customer can receive volume related discounts, which are annual rebates based on the number of vehicles ordered throughout the year. There is no significant variability in consideration received from other customers.
Sales of software and performance engineered kits
Revenue from the sales of software is related to intellectual property licensed to Volvo Cars under which Volvo Cars obtained rights to provide software upgrades to their customers vehicle computer systems in exchange for sales-based royalties to Polestar Group. Software upgrades are downloaded and installed at Volvo Cars dealerships at a point in time. The Groups performance obligation is satisfied at the point in time the Group transfers the licensed know-how to Volvo Cars, which is when Volvo Cars obtains control of the intellectual property and has the ability to direct the use of, and obtain the benefits from, the license. The Group recognises license revenue from sales-based royalties in the period in which Volvo Cars sales of software occur.
Revenue from the sales of performance engineered kits is related to intellectual property licensed to Volvo Cars under which Volvo Cars obtained rights to provide optimisations and enhancements to their customers vehicles in exchange for sales-based royalties to Polestar Group. Performance engineered kits are installed at Volvo Cars manufacturing plants as part of Volvo Cars normal manufacturing processes. The Groups performance obligation is satisfied at the point in time the Group transfers the licensed know-how to Volvo Cars, which is when Volvo Cars obtains control of the intellectual property and has the ability to direct the use of, and obtain the benefits from, the license. The Group recognises license revenue from sales-based royalties in the period in which Volvo Cars sales of vehicles with the performance engineered kits occur. During the year ended December 31, 2019, revenue from the sale of performance engineered kits was inclusive of a one-time contract termination fee paid by Volvo Cars that was accounted for as a contract modification. Polestar Group and Volvo Cars entered into a new license agreement in December 2020.
There are no significant payment terms as payment is due near the date of invoice.
Sales of carbon credits
Revenue from the sale of carbon credits is recognised when the performance obligation is satisfied and when the customer, an original equipment manufacturer (OEM), obtains control of the carbon credits and has the ability to direct the use of, and obtain the benefits from, the carbon credits transferred.
There are no significant payment terms as payment is due near the date of invoice.
Vehicle leasing revenue
During the year ended December 31, 2021, Polestar Group entered into operating lease arrangements that mainly relate to vehicles sold with repurchase obligations. The Group entered into transactions to sell vehicles under which the Group maintains the right or obligation to repurchase the vehicles from the customer in the future (i.e., a forward or call option). The Group accounts for such arrangements as operating leases and records revenue from the sale of related vehicles as lease income.
Operating leases are initially measured at cost and depreciated on a straight-line basis over the lease term to the estimated residual value. Incremental direct costs incurred in connection with the acquisition of operating lease contracts are capitalised and also amortised on a straight-line basis over the lease term. In the Consolidated Statement of Financial Position, such operating leases are presented as vehicles under operating leases and recognised as PPE. Vehicle leasing revenue is recognised on a straight-line basis over the lease term. For sales of
F-44
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
vehicles with repurchase obligations that are accounted for as operating leases, the entire amount due to Polestar is paid up-front at contract inception. Deferred revenue is recorded for the difference between the cash received from the sale of the vehicle and the vehicles repurchase value.
Other revenue
Other revenue consists of revenue generated through the Groups sale of research and development services and intellectual property licensed to Volvo Cars under which Volvo Cars obtained rights to source and sell parts and accessories for the Groups vehicles to customers in exchange for sales-based royalties to Polestar Group. The performance obligation related to the sale of research and development services is satisfied over time as Polestar maintains an enforceable right to payment as costs are incurred and services are provided. As such, revenue from the sale of research and development services is recognised over time.
The performance obligation related to intellectual property licensed to Volvo Cars is satisfied at the point in time the Group transfers the licensed know-how to Volvo Cars which is when Volvo Cars obtains control of the intellectual property and has the ability to direct the use of, and obtain the benefits from, the license. The Group recognises license revenue from sales-based royalties in the period in which Volvo Cars sales of parts and accessories occur.
There are no significant payment terms as payment is due near the date of invoice.
Contract liabilities
Contract liabilities to customers are obligations related to contracts with customers and are recognised when Polestar Group is obligated to transfer goods or services for which consideration has already been received. Contract liabilities to customers include sales generated obligations, deferred revenue from service contracts (i.e., services to be performed) and operating leases, and Connected Services related to the Polestar 1 (PS1) and Polestar 2 (PS2).
As the Group satisfies its performance obligations, revenue is recognised, and the contract liability is reduced. As stated above, delivery of services and maintenance is within the customers control. Accordingly, the Group expects to recognise revenue related to such service contract liabilities over the 3-year period following initial recognition, consistent with the terms of the contractually offered services. Related to connected services, the Group expects to recognise revenue over the 8-year period following initial recognition, consistent with the expected utilisation of the services. In the case of volume related discounts that are triggered over time, a short-term contract liability will also be recognised as payment is due within a twelve-month period, in line with contractual payment terms. For deferred revenue generated through operating leases, the Group expects to recognise revenue on a straight-line basis, consistent with the terms of the contract. During the third quarter of 2020, the Group entered the commercial space and started selling vehicles, generating contract liabilities in 2020 that did not previously exist in 2019.
Cost of sales
For the years ended December 31, 2021, 2020 and 2019, cost of sales amounted to $1,336,321, $553,724 and $39,790, respectively. Costs of sales are related to the sales of vehicles and related accessories and services, which includes depreciation related to PPE and right-of-use (ROU) assets and amortisation of manufacturing engineering. Sales of software and performance engineered kits and other revenue are related to items which were originally developed with the intent of internal use, not with the intent to sell. As such, all costs were appropriately capitalised or expensed as described in Accounting policies Intangible assets and goodwill Internally developed IP.
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Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Employee benefits
Polestar Group compensates its employees through short-term employee benefits, other long-term benefits, and post-employment benefits. Generally, an employee benefit is recognised in accordance with IAS 19, Employee Benefits, when an employee has provided service in exchange for employee benefits to be paid in the future or when Polestar Group is contractually committed to providing a benefit without a realistic probability of withdrawal from its commitment. For the years ended December 31, 2021, 2020 and 2019, Polestar Group did not extend termination benefits or share-based payments to employees.
Short-term employee benefits
Short-term employee benefits consist of wages, salaries, social benefit costs, paid annual leave and paid sick leave, and bonuses that are expected to be settled within twelve months of the reporting period in which services are rendered. Short-term employee benefits are recognised at the undiscounted amounts expected to be paid when the liabilities are settled and presented within current provisions and other current liabilities in the Consolidated Statement of Financial Position.
Short-term employee benefits include Polestar Groups Annual Bonus Program (the Polestar Bonus), which is a cash-settled short-term incentive program for all permanent employees in all countries. The bonus is based on certain key performance indicators (KPIs). Bonuses are expressed as a percentage of employees annual base salaries and the target bonus varies by employee location and level. The program runs during the calendar year and bonus pay-out is made on a pro-rata basis based on employment during the year. Employees need to have joined the organisation as of December 1st of the year in order to be eligible for the program. An estimate of the expected costs of the program are calculated and recognised at the end of each reporting period.
Other long-term benefits
Polestar Groups only other long-term benefit is the annual Long Term Variable Pay Program (LTVP), which is a cash-settled incentive program for certain key management personnel that is based on (1) valuation of Volvo Cars after a three year period (i.e., the vesting period) and (2) Volvo Cars achievement of certain profit and revenue growth metrics. The LTVP program was instituted at Polestar Group to incentivise key management personnel who transferred employment from Volvo Cars to Polestar Group. Payouts are based on a synthetic share price derived from an independent third-party valuation that is calculated using a discounted cash flow analysis of Volvo Cars and a market analysis of peer companies. Depending on the employees position, they are eligible to receive an award equivalent to a certain percentage of their annual base salary that is capped at a 300% ceiling. Employees must remain employed to be eligible to receive the award. The fair value of the LTVP is recognised on the annual grant date, subsequently remeasured at the end of reach reporting date, and presented within current and non-current provisions in the Consolidated Statement of Financial Position.
Post-employment benefits
Polestar Groups post-employment benefits are comprised of defined contribution pension plans and the Swedish defined benefit pension (ITP 2) that is managed by the mutual insurance company Alecta.
For defined contribution plans, premiums are paid to a separate legal entity that manages pension plans on behalf of various employers. There is no legal obligation to pay additional contributions if this legal entity does not hold sufficient assets to pay all employee benefits. Contributions payable are recognised in the reporting period in which services are rendered and presented within current and non-current provisions in the Consolidated Statement of Financial Position. Contribution rates are unique to each employee.
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Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Polestar Groups only defined benefit plan is the ITP 2 plan in Sweden. This plan is accounted for as a multi-employer defined contribution plan under IAS 19 because Alecta does not distribute sufficient information that enables employers to identify their share of the underlying financial position and performance of ITP 2. This treatment is specific to companies operating in Sweden under the guidance discussed in the Swedish Financial Reporting Board pronouncement UFR 10, Accounting for the pension plan ITP 2 financed through an insurance in Alecta, and IAS 19.3239, Multi-employer plans. The premiums for retirement pensions and survivors pensions are calculated individually and are based on salary, previously earned pension benefits, and expected remaining years of service, among other factors. Premiums of $3,507 are estimated to be paid to Alecta for the year ended December 31, 2022 related to ITP 2.
Polestar Groups share of the total savings premiums for ITP 2 in Alecta for the years ended December 31, 2021, 2020 and 2019, amounted to 0.13056%, 0.05375% and 0.06478%, respectively. Further, Polestar Groups share of the total number of active policy holders as of December 31, 2021, 2020 and 2019, amounted to 0.04485%, 0.02605% and 0.02069%, respectively. The collective consolidation level comprises the market value of Alectas asset as a percentage of the insurance obligations calculated in accordance with Alectas actuarial methods and assumptions. The collective funding ratio is normally allowed to vary between 125% and 175%. If the consolidation level falls below 125% or exceeds 175%, measures are taken to increase the contract price for new subscriptions and to expand exiting benefits or introduce premium reductions. As of December 31, 2021 and 2020, Alectas surplus of consolidation level amounted to 172% and 148%, respectively.
Leases
Polestar as lessee
At inception of a contract, the Group assesses whether the contract is or contains a lease. In determining the lease term, management considers all relevant facts and circumstances related to exercising an extension option or not exercising a termination option. Such options are only included in the lease term if the extension option or termination option is reasonably certain to be exercised or not exercised, respectively. If circumstances surrounding the Groups decision related to extension and termination options change, the Group reassesses the term of the lease accordingly. As of December 31, 2021 and 2020, no material lease extension options existed.
At the lease commencement date, an ROU asset and a lease liability are recognised on the Consolidated Statement of Financial Position with respect to all lease arrangements in which the Group is a lessee. The lease liability is initially measured at an amount equal to the present value of the future lease payments under the lease contract, discounted by the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise in-substance fixed payments, among other fixed lease payments, and variable lease payments that depend on an index or a rate, the exercise price of purchase options (if the lessee is reasonably certain to exercise the options), and payments of penalties for terminating the lease (if the lease term reflects the exercise of an option to terminate the lease). The practical expedient of including non-lease components in the measurement of the lease liability for all asset classes is applied.
The ROU asset is initially measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, and the estimate of costs to dismantle and remove the underlying asset or the site on which it is located, less any lease incentives received. The asset is subsequently depreciated on a straight-line basis from the commencement date to the earlier of the end of the useful life of the underlying asset or the end of the lease term. For more information regarding amortisation of the ROU asset, refer to Note 9 Leases. The ROU asset is reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
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Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
The Group elected the practical expedient to account for leases with lease terms which end within twelve months of the initial date of application as a short-term lease. The Group also elected the practical expedient to not recognise a ROU asset and lease liability for short-term and low-value leases. Low value assets are defined as asset classes that are typically of low value, for example, small IT equipment (cellphones, laptops, computers, printers) and office furniture. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense over the lease term in the Consolidated Statement of Loss.
On the Consolidated Statement of Financial Position, the lease liabilities are presented within current interest-bearing liabilities and other non-current interest-bearing liabilities in the Consolidated Statement of Financial Position. In the Consolidated Statement of Loss, depreciation expense of the ROU assets is presented on the same line item(s) as similar items of PPE. The interest expense on the lease liability is presented as part of finance expenses. In the Consolidated Statement of Cash Flows, amortisation of the lease liability is presented as a cash flow from operating activities. Lease related interest expense is presented within cash flows from operating activities.
The Group has certain leases stemming from contract manufacturing agreements related to the production of Polestar vehicles. These agreements are associated with unique type bound tooling and equipment (PS Unique Tools) used in the production of Polestar vehicles at certain suppliers and vendors. The PS Unique Tools are suited specifically for Polestar vehicles and Polestar has the right to direct the use of the related assets. The production of Polestar vehicles occupies 100% of these assets capacity; as such, the PS Unique Tools are also recognised as ROU assets by the Group.
Sale leaseback transactions
The Group enters into transactions to sell vehicles concurrent with agreements to lease the same vehicles back for a period of six to twelve months. At the end of the rental period, Polestar is obligated to repurchase the car. Due to this repurchase obligation, this transaction is accounted for as a financial liability. Accordingly, the Group does not record a sale of these vehicles for accounting purposes and depreciates the assets over their useful lives.
Polestar as lessor
In the Consolidated Statement of Financial Position, vehicles associated with the Groups operating leases are recognised as non-current assets and presented as vehicles under operating leases. The vehicles are initially measured at cost and depreciated on a straight-line basis over their respective lease term to their estimated residual value. Incremental direct costs incurred in connection with the acquisition of lease contracts are capitalised and amortised on a straight-line method over the lease term. Liabilities related to repurchase obligations are recognised as other non-current and current liabilities. Following repurchase by Polestar, the vehicles are reclassified to inventory.
Finance income and expense
Finance income and expense represent items outside the Groups core business. These items are presented separately from operating income and include net foreign exchange rate gains (losses) on financial activities, interest income on bank deposits, expenses to credit facilities, interest expense, and other finance expenses.
Income tax expense
Polestar Groups Income tax expense consists of current tax and deferred tax. Taxes are recognised in the Consolidated Statement of Loss, except when the underlying transaction is recognised directly in equity or the Consolidated Statement of Comprehensive Loss, whereupon related taxation is also recognised in equity or the Consolidated Statement of Comprehensive Loss.
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Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Current tax is tax that must be paid or will be received for the current year. Current tax also includes adjustments to current tax attributable to previous periods. Deferred tax is calculated according to the balance sheet method for all temporary differences, with the exception of book goodwill in excess of tax goodwill recorded in purchase accounting, which arises between the tax value and the carrying amount of assets and liabilities.
Deferred tax assets and liabilities are measured at the nominal amount and at the tax rates that are expected to be applied when the asset is realised or the liability is settled, using the tax rates and tax rules that have been enacted or substantively enacted at the date of the Consolidated Statement of Financial Position.
Deferred tax assets relating to deductible temporary differences and loss carry forwards are recognised to the extent it is probable that they will be utilised in the future. Deferred tax assets and deferred tax liabilities are offset when they are attributable to the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis and the affected company has a legally adopted right to offset tax assets against tax liabilities.
The recognition of deferred tax assets requires assumptions to be made about the level of future taxable income and the timing of recovery of deferred tax assets. These assumptions take into consideration forecasted taxable income by relevant tax jurisdiction. The measurement of deferred tax assets is subject to uncertainty and the actual result may diverge from judgements due to future changes in projected earnings by the company, business climate, and changes to tax laws. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used. If needed, the carrying amount of the deferred tax asset will be altered. The judgements that have been made affect Net loss both positively and negatively.
Intangible assets and goodwill
An intangible asset is recognised when it is identifiable, Polestar Group controls the asset, and it is expected to generate future economic benefits. Intangible assets have either finite or indefinite lives. Finite lived intangible assets are intellectual property (IP), both acquired and internally developed, and software. Indefinite lived intangible assets are Goodwill and Trademarks.
Intangible assets are measured at acquisition or internal development cost, less accumulated amortisation and, as applicable, impairment loss. Intangible assets with finite lives are amortised on a straight-line basis. The Group makes estimates and judgements related to expected usage of intangible assets in accordance with Managements 2022-2025 business plan, product life cycles, technological obsolescence, developments, and advancements specific to the battery electric vehicle industry. Management estimates the useful life of intangible assets by taking into account judgements on how the Group plans to utilise such intangibles in accordance with the business plan and any related rights and obligations under its contractual agreements. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. The useful lives of intangible assets with indefinite useful lives, goodwill and trademarks, are assessed annually to determine whether the indefinite designation continues to be appropriate. Intangible assets with indefinite useful lives are tested for impairment annually or if an event which could give rise to impairment occurs.
Manufacturing engineering
Amortisation for manufacturing engineering, reflecting engineering performed in terms of production facility layout, is included in Cost of sales.
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Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Acquired IP
Polestar Group has entered into agreements with Volvo Car Group (Volvo Cars) and Zhejiang Geely Holding Group Company Limited (Geely), a related party. regarding the development of technology for both upgrades of existing models and upcoming models. The technology can be either Polestar unique or commonly shared. In both cases, Polestar Group is in control of the developed product, either through a license or through ownership of the IP.
Acquired IP are finite-lived intangible assets which are amortised once the acquired IP is ready for its intended use, over their estimated useful lives for 3-7 years. The remaining useful life of acquired IP is between 1-6 years. Amortisation of acquired IP related to the PS1 and PS2 is included in research and development expenses as it represents foundational IP that is leveraged across multiple functions of the Group.
Internally developed IP
Internally developed IP are finite-lived intangible assets which are amortised over their estimated useful lives for 3-7 years. Amortisation of internally developed IP is included in research and development expenses and commences when the internally developed IP is ready for its intended use. Polestar Groups research and development activities are divided into a concept phase and a product development phase. Costs related to the concept phase are expensed in the period incurred, whereas costs related to the product development phase are capitalised upon the commencement of product development. Each phase is identified by work plans, budgeted, and tracked internally by research and development personnel.
Costs incurred in the concept phase are expensed as incurred when (1) the Group is conducting research activities such as obtaining new knowledge, formulating a project concept, and searching for components to support the project (e.g., materials, devices, and processes) and (2) the Group cannot yet demonstrate that an intangible asset exists that will generate probable future economic benefits.
Costs incurred in the product development phase are capitalised when (1) the Group is conducting development activities such as designing, constructing, and testing pre-production prototypes, tools, systems, and processes, (2) technical feasibility of completing the intangible asset exists, (3) resources required to complete the intangible asset are available to the Group, (4) the Group intends and has the ability to use or sell the intangible asset to generate future economic benefits, and (5) related expenditures can be reliably measured.
Research and development expenses recognised for the years ended December 31, 2021, 2020 and 2019, amounted to $232,922, $183,849 and $34,386, respectively and were substantially related to the amortisation of PS1 and PS2 technology.
Software
Software is a finite-lived intangible asset which is amortised over its estimated useful life of 3-8 years. Amortisation of software is included in research and development expenses, selling expenses, or administrative expenses depending on the way in which the assets have been used.
Trademarks
Trademarks are assumed to have indefinite useful lives since Polestar Group has the right and the intention to continue to use the trademarks for the foreseeable future, while generating net positive cash flows for Polestar Group. Trademarks were generated when Volvo Cars acquired Polestar Group in July 2015. Trademarks are recognised at fair value at the date of the acquisition less any accumulated impairment losses.
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Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable assets and liabilities acquired in a business combination. Goodwill was generated as a result of Volvo Cars acquiring Polestar Group in July 2015. For more detailed information on goodwill and intangible assets, see Note 12 Intangible assets and goodwill.
Property plant and equipment
Items of PPE are recognised at acquisition cost, less accumulated depreciation, and as applicable, accumulated impairment loss. The cost of an acquired asset includes its purchase price, expenditures directly attributed to the acquisition and subsequent preparation of the asset for its intended use, and the initial estimate of costs to dismantle and remove the item of PPE and restore the site on which it was located. Repairs and maintenance expenditures are expensed in the period incurred. Expenses related to leasehold improvements and other costs which enhance or extend the life of PPE are capitalised over the useful life of the asset.
Buildings under development are measured at actual costs. The actual costs include various construction expenditures during the construction period, borrowing costs capitalised before the building is ready for intended use, and other relevant costs. Buildings under development are not depreciated and are transferred to fixed assets when ready for the intended use.
PPE are depreciated on a straight-line basis down to their residual value, which is typically estimated to be zero, over their estimated useful lives. Each part of a tangible asset, with a cost that is significant in relation to the total cost of the item, is depreciated separately when the useful life for that part differs from the useful life of the other parts of the item.
The following useful lives are applied in Polestar Group:
Asset | Useful lives (in years) | |
Buildings |
30-50 | |
Machinery and equipment |
3-7 |
Depreciation of PPE is included in costs of sales as well as selling or administrative expenses, depending on the nature of the item being depreciated.
Tangible assets are derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Consolidated Statement of Loss as other operating income and expense.
Impairment
At the end of each reporting period, tangible and definite-lived intangible assets are assessed for indications of impairment. Tangible and definite-lived intangible assets are tested for impairment when an impairment indicator is determined to exist. Indefinite-lived intangible assets, intangible assets not yet available for use, goodwill and trademarks are tested for impairment at least once annually or when an impairment indicator is determined to exist.
For the impairment assessment, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets (i.e., a cash-
F-51
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
generating-unit or CGU). Polestar Group does not test assets for impairment individually because Polestar Group constitutes a single CGU in which assets do not generate cash flows that are independent of those of other assets. All assets are concentrated around battery electric vehicle technologies and processes that are utilised in Polestar Groups operations.
In testing the CGU for impairment, the CGUs carrying amount is compared to its recoverable amount. The recoverable amount is the higher of the CGUs fair value less costs of disposal or Value In Use. Value In Use is defined as the present value of the future cash flows expected to be derived from an asset (i.e., a discounted cash flow). For the years ended December 31, 2021 and 2020, this discounted cash flow was calculated based on estimations regarding future cash flows as seen in the 2021-2025 business plan, a terminal growth rate of 2.0% for cash flows through the next 10 years, and an after-tax discount rate of 10.1%. The estimated future cash flows are based on assumptions valid at the date of the impairment test that represent the best estimate of future economic conditions. Such estimates are calculated using estimates, assumptions, and judgements related to future economic conditions, market share, market growth, and product profitability which are consistent with Polestar Groups latest business plan.
When the carrying amount of the CGU is determined to be greater than the recoverable amount, an impairment loss is recognised by first reducing the CGUs goodwill and then reducing other assets in the CGU on a pro rata basis. For the years ended December 31, 2021 and 2020, no impairment losses were recognised. No impairment loss would have been recognised in the years ended December 31, 2021 and 2020 under a stress case scenario utilising an after-tax discount rate of 15.1% to calculate the recoverable amount of the CGU.
Financial instruments
Financial instruments are any form of contract that gives rise to a financial asset in one company and a financial liability or equity instrument in another company.
Classification of financial assets and liabilities
The classification of financial instruments is based on the business model in which these instruments are held, on their contractual cash flows and takes place at initial recognition. Assessments of the contractual cash flows are made on an instrument-by-instrument basis. Polestar Group applies one business model for interest-bearing instruments. All interest-bearing instruments are held to collect contractual cash flows and are carried at amortised cost.
Initial recognition
Financial assets and liabilities are recognised on the Consolidated Statement of Financial Position on the date when Polestar Group becomes party to the contractual terms and conditions (i.e., the transaction date). Financial assets are initially recognised at the price that would be received when selling an asset or being paid to transfer a liability in an orderly transaction between market participants at the measurement date (Fair Value), plus transaction costs directly attributable to the acquisition of the financial asset, except for those financial assets carried at fair value through the Consolidated Statement of Loss.
Subsequent measurement
For the purpose of subsequent measurement, financial instruments are measured at amortised cost or financial fair value through profit or loss (FVTPL).
F-52
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Financial instruments carried at FVTPL consist of financial assets with cash flows other than those of principal and interest on the nominal amount outstanding. Changes in fair value of these instruments are recognised in profit and loss as finance income (expense).
Financial instruments carried at amortised cost are non-derivative financial instruments with contractual cash flows that consist solely of payments of principal and interest on the nominal amount outstanding. These financial instruments are subsequently carried at amortised cost using the effective interest method. Gains and losses are recognised in the Consolidated Statement of Loss when the financial assets carried at amortised cost are impaired or derecognised. Interest effects on the application of the effective interest method are also recognised in the Consolidated Statement of Loss as well as effects from foreign currency translation.
Financial assets
Financial assets on the Consolidated Statement of Financial Position consist of trade receivables, other current and non-current financial assets, derivative assets, marketable securities and cash and cash equivalents.
A financial asset or a portion of a financial asset is derecognised when substantially all significant risks and benefits linked to the asset have been transferred to a third party. Where Polestar Group concludes that all significant risks and benefits have not been transferred, the portion of the financial assets corresponding to Polestar Groups continuous involvement continues to be recognised.
Financial liabilities
Financial liabilities in the Consolidated Statement of Financial Position encompass liabilities to credit institutions, trade payables, other current and non-current financial liabilities and derivative liabilities.
A financial liability or a portion of a financial liability is derecognised when the obligation in the contract has been fulfilled, cancelled or has expired.
The Group classifies its derivative financial instruments and marketable securities as carried at FVTPL, while all other financial assets and liabilities are carried at amortised cost.
Impairment of financial assets
The Group assesses, on a forward-looking basis, the expected credit loss associated with financial assets measured at amortised cost. For the initial recognition of financial assets carried at amortised cost, primarily trade receivables with similar risk characteristics, an analysis is made to identify the need for a provision for expected credit losses (ECL). The Group uses the simplified approach for estimating ECLs, which requires expected lifetime losses to be recognised from the initial recognition of the receivable. The Group considers historical credit loss experience, current economic conditions, supportable forecasts for future economic conditions, macroeconomic conditions (e.g., impacts of the Covid-19 pandemic), and other expectations of collectability. The ECL provision is revaluated on an ongoing basis after initial recognition.
When an ECL is calculated, and if it is material, it is recognised in an allowance account which decreases the amount of gross trade receivables. The amount of the expected credit loss will be recognised as an expense in the Consolidated Statement of Loss. As of December 31, 2021 and 2020 no ECLs have been recognised for the Groups financial assets, as historically credit losses have been nil, and no expected credit losses are in view.
F-53
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Derivative financial instruments
The Group periodically holds derivative financial instruments in the form of currency swaps to hedge its foreign currency risk exposure. Polestar Group does not apply cash-flow hedge accounting. The Group accounts for its foreign currency swaps in accordance with IFRS 9; the carrying value of the hedged item is adjusted for fair value changes attributable to the risk being hedged, and those fair value changes are recognised in the Consolidated Statement of Loss. As of December 31, 2021 and 2020, the Group did not have any foreign currency swaps outstanding. As of December 31, 2019, Polestar Group had two foreign currency swap contracts outstanding which were entered into at the end of December 2019. These contracts expired in September and December 2020, respectively.
Fair value measurement
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required, or permitted, to be either recorded or disclosed at fair value, the Group considers the principal or most advantageous market in which it would operate, and it also considers assumptions that market participants would use when pricing the asset or liability.
A three-tiered hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value. This hierarchy requires that the Group use observable market data, when available, and minimise the use of unobservable inputs when determining fair value:
Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 Observable, market-based inputs, other than quoted prices, in active markets for identical assets or liabilities.
Level 3 Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
Financial assets and liabilities of the Group primarily consist of cash and cash equivalents, marketable securities, restricted cash, trade receivables, trade payables, and short-term and long-term borrowings. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Polestar Groups assessment of the significance of a particular input to the fair value measurements requires judgement and may affect the valuation of the assets and liabilities being measured and their classification within the fair value hierarchy.
Inventories
Inventories are measured at the lower of acquisition or manufacturing cost and net realisable value and consist primarily of finished goods as of December 31, 2021 and 2020. Net realisable value is calculated as the selling price in the ordinary course of business less estimated costs of completion and selling costs. The acquisition or manufacturing costs of inventory includes costs incurred in acquiring the inventories and bringing them to their present location and condition, including, but not limited to, costs such as freight and customs duties. Costs for research and development, selling, administration and financial expenses are not included. For groups of similar products, a group valuation method is applied. The cost of inventories of similar assets is established using the first-in, first-out method (FIFO).
F-54
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Equity
Distributed group contributions to the owners, along with the related tax effect, are recorded in equity in accordance with the principles for shareholders contributions. If any unconditional shareholders contributions are received from the main owner, they are recognised in equity.
Provisions and contingent liabilities
Provisions are recognised on the Consolidated Statement of Financial Position when a legal or constructive obligation exists as a result of a past event, it is deemed more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are regularly reviewed and adjusted as further information becomes available or circumstances change. If the effect of the time value of money is material, non-current provisions are recognised at present value by discounting the expected future cash flows at a pre-tax rate reflecting current market assessments of the time value of money. The discount rate does not reflect such risks that are taken into consideration in the estimated future cash flow. Revisions to estimated cash flows (both amount and likelihood) are allocated as operating cost. Changes to present value due to the passage of time and revisions of discount rates to reflect prevailing current market conditions are recognised as a financial cost.
Warranty
Polestar Group issues various types of product warranties, under which the Group generally guarantees the performance of products delivered and services rendered for a certain period of time. The estimated warranty costs include those costs which are related to contractual warranties, warranty campaigns (i.e., recalls), and warranty cover in excess of contractual warranties or campaigns. Warranty cover in excess of contractual warranties or campaigns occurs when Polestar Group provides a customer warranty type assistance, above and beyond the stated nature of the contract. This type of warranty cover is normal practice in maintaining a strong business relationship with the customer; the Group accordingly includes the estimate of this provision in total estimated warranty costs. In the future, the Group, may at various times initiate a recall if any products or vehicle components, including any systems or parts sourced from our suppliers, prove to be defective or noncompliant with applicable laws and regulations.
All warranty provisions are recognised at the time of the sale of vehicles. The initial calculations of the warranty provision are based on historical warranty statistics, considering factors like known quality improvements and costs for remedying defaults. The warranty provision is subsequently adjusted if recalls for specific quality problems are made. On a quarterly basis, the provisions are adjusted to reflect the latest available data such as actual spend and exchange rates. The provisions are reduced by warranty reimbursements from suppliers. Such refunds from suppliers decrease Polestar Groups warranty costs and are recognised to the extent these are considered to be virtually certain, based on historical experience or agreements entered into with suppliers.
Other provisions
Other provisions primarily comprise expected costs for provisions for the Groups long-term incentive plan, short-term incentive plan, and other taxes and related charges. Other provisions can also include provisions for anticipated losses, giving consideration to historical trends, various other risks, and specific agreements related to recoveries provided by suppliers which cannot be allocated to any other class of provision.
Contingent liabilities
When a possible obligation does not meet the criteria for recognition as a liability, it may be disclosed as a contingent liability. These possible obligations derived from past events and their existence will be confirmed
F-55
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
only when one, or several, uncertain future events, which are not entirely within the Groups control, take place or fail to take place. A contingent liability could also exist for a present obligation, due to a past event, where an outflow of resources is less than likely or when the amount of the obligation cannot be reliably measured.
Borrowing costs
Borrowing costs are expensed as incurred unless they are directly attributable to the acquisition, construction or production of a qualifying asset and are therefore part of the cost of that asset.
Note 2 Financial risk management
Management of financial risks
As a result of its business and the global nature of its operations, Polestar Group is exposed to market risks from changes in foreign currency exchange rates, interest rate risk, credit risk and liquidity risk.
Foreign currency exchange risk
The global nature of Polestar Groups business exposes cash flows to risks arising from fluctuations in currency exchange rates. Relative changes in currency exchange rates have a direct impact on Polestar Groups operating income, finance income, finance expense, Consolidated Statement of Financial Position and Consolidated Statement of Cash Flows. To mitigate the impact of currency exchange rate fluctuations for the business operations, the Group continually assesses its exposure to exchange rate risks.
Translation exposure risk
Currency translation risk arises from the consolidation of foreign subsidiaries that maintain net assets denominated in functional currencies other than USD (i.e., the functional currency of the Parent). Translation risk also arises from the conversion of balances denominated in foreign currencies to the functional currency using monthly closing exchange rates. Such currency effects (i.e., foreign currency gains and losses) are recorded in the Consolidated Statement of Comprehensive Loss. The Group is primarily exposed to currency translation risk from subsidiaries with functional currencies in the Swedish krona (SEK), the Euro (EUR) and the Chinese yuan (CNY).
Transaction exposure risk
Currency transaction risk arises from future commercial transactions and settlement of recognised assets and liabilities denominated in a currency that is not the functional currency of the relevant Group entity. Primarily, the Group is exposed to currency transaction risk in Group companies with SEK and CNY as the functional currency. The primary risks in these companies are CNY/SEK, USD/SEK, EUR/SEK and EUR/CNY due to trade receivables, trade payables, and short-term credit facilities.
F-56
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
During the year ended December 31, 2021, the Group was primarily exposed to changes in CNY/SEK, USD/SEK and EUR/SEK foreign exchange rates. The following table illustrates the impact of a 10% change in the Groups foreign exchange rates:
Impact on loss before income taxes |
||||||||
CNY/SEK exchange rate - increase/decrease 10% |
+/- | 111,743 | ||||||
USD/SEK exchange rate - increase/decrease 10% |
-/+ | 56,052 | ||||||
EUR/SEK exchange rate - increase/decrease 10% |
+/- | 46,871 | ||||||
GBP/SEK exchange rate - increase/decrease 10% |
-/+ | 41,688 | ||||||
NOK/SEK exchange rate - increase/decrease 10% |
+/- | 36,493 |
During the year ended December 31, 2020, the Group was primarily exposed to changes in CNY/SEK and EUR/SEK foreign exchange rates. The following table illustrates the impact of a 10% change in these foreign exchange rates:
Impact on loss before income taxes |
||||||||
CNY/SEK exchange rate - increase/decrease 10% |
+/- | 86,794 | ||||||
EUR/SEK exchange rate - increase/decrease 10% |
-/+ | 34,732 |
During the year ended December 31, 2019, the Group was primarily exposed to changes in the EUR/CNY and EUR/SEK foreign exchange rate. The following table illustrates the impact of a 10% change in this foreign exchange rate:
Impact on loss before income taxes |
||||||||
EUR/CNY exchange rate - increase/decrease 10% |
+/- | 13,465 | ||||||
EUR/SEK exchange rate - increase/decrease 10% |
-/+ | 11,220 |
During the year ended December 31, 2021, the Group had transaction exposure to the Parents functional currency related to USD/SEK foreign exchange rates in the amount of $56,052. During the years ended December 31, 2020 and 2019, the Group had no significant transaction exposure to the USD and the USD currency effect was entirely related to translation exposure reflected in the Consolidated Statement of Comprehensive Loss.
The Groups overall currency exposure is reduced by natural hedging, which consists of the currency exposures of the business operations of different entities partially offsetting each other at the Group level. These natural hedges eliminate the need for hedging to the extent of the matched exposures.
Interest rate risk
The Polestar Groups main interest rate risk arises from short-term liabilities to credit institutions with variable rates, which exposes the Group to cash flow interest rate risk. As of December 31, 2021 and 2020, the nominal amount of liabilities to credit institutions with floating interest rates was $642,338 and $363,490, respectively. Management closely monitors the effects of changes in the interest rates on the Groups interest rate risk exposures, but the Group currently does not take any measures to hedge interest rate risks. Interest rate risk associated with these loans is limited given their short-term duration.
The table below shows the estimated effect on profit or loss and equity of a parallel shift of the interest rate curves up or down by one percent on all loans. This analysis assumes that all other variables, in particular foreign
F-57
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
currency rates, remain constant. The calculation considers the effect of financial instruments with variable interest rates, financial instruments at fair value through profit or loss or available for sale with fixed interest rates, and the fixed rate element of interest rate caps. The analysis is performed on the same basis for 2021 and 2020.
Impact on loss before income taxes |
||||||||||||||||
2021 | 2020 | |||||||||||||||
Interest rates - increase/decrease by 1% |
+/- | 1,791 | +/- | 3,518 |
Credit risk
The Polestar Group is exposed to counterparty credit risks if contractual partners, fleet customers, for example, are unable or only partially able to meet their contractual obligations. Polestar Groups credit risk can be divided into financial credit risk and operational credit risk. Credit risk encompasses both the direct risk of default and the risk of a deterioration of creditworthiness, as well as concentration risks. The Group defines default as the inability to collect receivables once all reasonable means of collection have been unsuccessful and the expectation of recovering contractual cash flows on the receivables is not probable.
Financial credit risk
Financial credit risk on financial transactions is the risk that Polestar Group will incur losses as a result of non-payment by counterparties related to the Groups bank accounts, bank deposits, derivative transactions, and other liquid assets. In order to minimise financial credit risk, Polestar Group has adopted a policy of dealing with only well-established international banks or other major participants in the financial markets as counterparties. Further, Polestar Group also considers the credit risk assessment of its counterparties by the capital markets and places priority on institutions with high creditworthiness and balanced risk diversification. The credit rating of financial counterparties used during the years ended December 31, 2021 and 2020 were in the range of BBB to A+.
Assets that potentially subject the Group to concentrations of credit risk primarily consist of cash and cash equivalents, marketable securities, restricted cash, and trade receivables. Cash and cash equivalents, restricted cash and marketable securities are all invested in major financial institutions with high credit ratings. Generally, these assets may be redeemed upon demand and, therefore, bear low risk. Risks associated with the Groups trade receivables are further specified below.
Operational credit risk
Operational credit risk arises from trade receivables. It refers to the risk that a counterparty will default on its contractual obligations which would, in turn, result in financial loss to the Group. Trade receivables at Polestar Group mostly consist of receivables resulting from the global sales of vehicles and technology. The credit risk from trade receivables encompasses the default risk of customers. Management evaluates for concentrations of credit risk at the customer level based on the outstanding trade receivables balance of each respective customer account. As of December 31, 2021, an unrelated party accounted for $23,031 (12.54%) of the Groups total trade receivables (i.e., trade receivables plus trade receivables - related parties). As of December 31, 2020, Volvo Cars accounted for $194,503 (63.21%) of the Groups total trade receivables, and an unrelated customer accounted for $32,392 (10.53%). Refer to Note 23 - Related party transactions for more details on related parties. Historically,
F-58
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
the Group has not incurred any losses from these customers and does not have any contractual right to off-set its payables and receivables.
Polestar has four categories of customers when considering sales of vehicles: (1) end customers who pay up-front for vehicles, (2) fleet customers, (3) dealers, and (4) financial service providers. All credit risk related to sales to end customers who pay up-front for vehicles is eliminated due to the nature of the payment. To reduce risk related to fleet customers, credit risk reviews are performed prior to entering into related sales agreements. Depending on the creditworthiness of its customers, Polestar Group may establish credit limits to reduce credit risks. For sales to dealers, title to Polestar vehicles remains with Polestar until the dealer pays the invoice in full, which is generally on the invoice date or the day after (i.e., payment is received before the vehicle ships and credit risk is thereby mitigated). Polestar sells vehicles to financial service providers, who then form separate contractual relationships with end customers. To reduce the risk related to such financial service providers, Polestar Group has selected a few credible financing providers in each market. Credit risk reviews, establishment of credit limits, and selection of credible financial service providers must be strictly followed and monitored, globally. The maximum amount of credit risk exposure is the carrying amount of trade receivables. See Note 14 - Financial instruments for further details.
Liquidity risk
Liquidity risk is the risk that Polestar Group is unable to meet ongoing financial obligations on time. The Group faces liquidity risk as all loans from financial institutions are short-term in nature, typically with a credit term of one year or less, and trade payables with related parties represent working capital arrangements under which the liquidity needs of the Group are highly dependent on the continued flexible payment terms offered to the Group by its related parties. These flexible payment terms are not a contractual right and may be called upon in the future. Refer to Note 23 - Related party transactions for additional information on these arrangements. Polestar Group needs to have adequate cash and highly liquid assets on hand to ensure the Group can meet its short-term financing obligations and other working capital needs. Polestar manages its liquidity by holding adequate volumes of liquid assets such as cash and cash equivalents and accounts receivable, by maintaining credit facilities in addition to the cash inflows generated by its business operations and through capital contributions from private equity investors.
As of December 31, 2021 and 2020, the Group held cash and cash equivalents of $756,677 and $316,424, respectively, that were available for managing liquidity risk. The Group entered into short-term financing arrangements with credit institutions and other financial service providers to enhance short term liquidity and financing needs. Refer to Note 21 - Liabilities to credit institutions for further details on short-term borrowings. The Groups short-term and mid-term liquidity management takes into account the maturities of financial assets and financial liabilities and estimates of cash flows from business operations.
Management has established an appropriate liquidity risk management framework for management of the Groups short, medium and long-term funding and liquidity management requirements and the Group prepares long-term planning in order to mitigate funding and re-financing risks. Depending on liquidity needs, Polestar Group will enter into financing and debt agreements and/or lending agreements. All draws on loans are evaluated against future liquidity needs and investment plans.
Capital management
Safeguarding the Groups ability to continue as a going concern, driving growth to provide future returns for shareholders, and maintaining an optimal capital structure to reduce the cost of capital are Polestar Groups primary objectives when managing capital and implementing related capital management strategies. To maintain
F-59
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
or adjust the capital structure, the Group may issue new shares, sell assets to reduce debt, or enter into short term debt and financing arrangements to increase cash on hand. Capital is calculated as equity attributable to owners of the Parent as shown on the Consolidated Statement of Financial Position plus total borrowings and lease liabilities, less cash and cash equivalents.
Note 3 Common control transaction
On September 14, 2020, Polestar was restructured so that 100% of ownership interests in the Polestar Group were transitioned from Polestar Automotive (Shanghai) Co., Ltd (incorporated in the Peoples Republic of China) (Old Parent) to Polestar Automotive (Singapore) Pte. Ltd which is a wholly owned entity of Polestar Automotive Holding Limited (incorporated in Hong Kong) (New Parent). The restructuring represented a common control transaction rather than a business combination under the guidance in IFRS 3, Business Combinations, because (1) the New Parent was a shell company that did not meet the definition of a business at the time of the transaction, (2) ultimate control of the Polestar Group was the same before and after the transaction, and (3) control of the Polestar Group was not transitory (i.e., organised to effect a grooming transaction).
Accordingly, the restructuring was recognised using the historic value method (i.e., the assets and liabilities are measured using the existing book value) and the impact of the restructuring is reflected in the Consolidated Statement of Changes in Equity under the Changes in the consolidated group subheading. Additionally, the presentation of the Consolidated Statement of Changes in Equity was required to be adjusted following the restructuring. Prior to the restructuring, the concept of share capital did not exist under the Old Parents limited company structure in China. Ownership interests were only represented by percentages of paid-in capital, as adjusted by accumulated losses and cumulative translation adjustments. Under the New Parents private company limited structure in Hong Kong, share capital was introduced to the Polestar Groups equity and the Consolidated Statement of Changes in Equity. Therefore, capital infusions in the Old Parent are shown as other contributed capital in the Consolidated Statement of Changes in Equity prior to the restructuring. Total equity prior to the restructuring did not change, and restructuring resulted in issued share capital in the New Parent equivalent to the ownership percentages under the Old Parent.
Consideration transferred for the Polestar Group from the New Parent to the Old Parent under the restructuring was equal to the initial investment of the controlling owners in the Polestar Group. However, when the Polestar Group was separated from the Old Parent, the intercompany relationship between the Old Parent and the Polestar Group was severed which resulted in the realisation of accumulated gains in equity of $5,801 in the Old Parent which were historically eliminated upon consolidation. The $5,801 adjustment to equity does not reflect cash consideration transferred, but rather, the non-cash impact of separating intercompany interests and changing parent entities under the same controlling owners.
F-60
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Note 4 Revenue
Polestar Group disaggregates revenue by major category based on the primary economic factors that may impact the nature, amount, timing, and uncertainty of revenue and cash flows from these customer contracts as seen in the table below:
2021 | 2020 | 2019 | ||||||||||
Sales of vehicles1 |
1,290,031 | 542,783 | | |||||||||
Sales of software and performance engineered kits |
25,881 | 35,434 | 73,107 | |||||||||
Sales of carbon credits |
6,299 | 27,141 | | |||||||||
Vehicle leasing revenue |
6,217 | | | |||||||||
Other revenue |
8,753 | 4,887 | 19,308 | |||||||||
|
|
|
|
|
|
|||||||
Total |
1,337,181 | 610,245 | 92,415 | |||||||||
|
|
|
|
|
|
1 | Revenues related to sales of vehicles are inclusive of insignificant extended and connected services included in the sale of vehicles and sales-generated obligations such as discounts and rebates offered to fleet customers. |
For the year ended December 31, 2021, other revenue primarily consisted of license revenue generated from sales-based royalties received from Volvo Cars on sales of parts and accessories for Polestar vehicles which Volvo Cars began selling to customers during 2021. For the year ended December 31, 2020, other revenue primarily consisted of revenue generated through the sale of technology to a related party. For the year ended December 31, 2019, other revenue primarily consisted of revenue generated through the sale of research and development (R&D) services to a related party.
The Groups two largest customers that are not related parties accounted for $135,544 (10.14%) and $129,873 (9.71%) of revenue, respectively, for the year ended December 31, 2021. For the year ended December 31, 2020, Volvo Cars accounted for $107,948 (17.7%) of the Groups revenue and an unrelated customer accounted for $71,361 (11.69%) of the Groups revenue. For the year ended December 31, 2019, Volvo Cars accounted for $91,092 (98.6%) of the Groups revenue. Prior to 2020, the Groups principal operations related to the sale of R&D services and software and performance engineered kits within its related party network. Refer to Note 23 - Related party transactions for further details.
F-61
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Contract liabilities
Sales generated obligation |
Deferred revenue extended service |
Deferred revenue connected services |
Deferred revenue operating leases & other |
Total | ||||||||||||||||
Balance as of January 1, 2020 |
| | | | | |||||||||||||||
Provided for during the year |
2,436 | 8,972 | 5,799 | | 17,207 | |||||||||||||||
Utilised during the year |
| | (130 | ) | | (130 | ) | |||||||||||||
Translation differences and other |
| (5 | ) | | | (5 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of December 31, 2020 |
2,436 | 8,967 | 5,669 | | 17,072 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
of which current |
2,436 | 1,487 | 725 | | 4,648 | |||||||||||||||
of which non-current |
| 7,480 | 4,944 | | 12,424 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Provided for during the year |
65,862 | 20,612 | 14,472 | 25,869 | 126,815 | |||||||||||||||
Utilised during the year |
(43,469 | ) | (3,673 | ) | (1,450 | ) | (5,554 | ) | (54,146 | ) | ||||||||||
Translation differences and other |
(127 | ) | (2,226 | ) | (98 | ) | | (2,451 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of December 31, 2021 |
24,702 | 23,680 | 18,593 | 20,315 | 87,290 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
of which current |
24,702 | 11,178 | 2,521 | 19,967 | 58,368 | |||||||||||||||
of which non-current |
| 12,502 | 16,072 | 348 | 28,922 |
As of December 31, 2021, the aggregate amount of the transaction price related to sales of vehicles allocated to the remaining performance obligations was $87,290. Polestar will recognise revenue related to the extended service on a straight-line basis over the 3-year period following initial recognition, consistent with the terms of the contractually offered services. Polestar will recognise revenue related to connected services on a straight-line basis over the 8-year period following initial recognition, consistent with the expected utilisation of the services.
Revenue recognised during the year ended December 31, 2021 related to contract liabilities outstanding as of January 1, 2021 was $4,648, and no revenue was recognised during the period related to performance obligations fully (or partially) satisfied in prior periods. Since Polestar Group did not enter the commercial space until the third quarter of 2020, there were no contract liabilities provided for, or utilised, during 2019. Accordingly, no revenue was recognised during the year ended December 31, 2020 related to contract liabilities outstanding as of December 31, 2019 or performance obligations fully (or partially) satisfied.
F-62
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Note 5 Depreciation and amortisation by function
Polestar will use acquired research and development related to PS1 and PS2 to serve as the basis for the development of future car models and technology. As such, amortisation of these intangible assets is included in research and development expenses. The following table illustrates depreciation and amortisation by function:
2021 | Property, plant and equipment |
Right-of-use assets |
Intangible assets |
Total | ||||||||||||
Cost of sales |
30,557 | 9,822 | 13,672 | 54,051 | ||||||||||||
Research and development expenses |
1,845 | 385 | 174,639 | 176,869 | ||||||||||||
Selling, general and administrative expenses |
3,774 | 4,404 | 65 | 8,243 | ||||||||||||
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|
|
|
|
|
|
|||||||||
Total |
36,176 | 14,611 | 188,376 | 239,163 | ||||||||||||
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|
|
|
|
|||||||||
2020 |
||||||||||||||||
Cost of sales |
38,671 | 6,947 | 14,447 | 60,065 | ||||||||||||
Research and development expenses |
| | 152,395 | 152,395 | ||||||||||||
Selling, general and administrative expenses |
1,402 | 2,170 | 44 | 3,616 | ||||||||||||
|
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|
|
|
|
|
|
|||||||||
Total |
40,073 | 9,117 | 166,886 | 216,076 | ||||||||||||
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|
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2019 |
||||||||||||||||
Cost of sales |
6,639 | 405 | 1,788 | 8,832 | ||||||||||||
Research and development expenses |
| | 22,095 | 22,095 | ||||||||||||
Selling, general and administrative expenses |
527 | 1,096 | | 1,623 | ||||||||||||
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|
|
|
|
|
|
|||||||||
Total |
7,166 | 1,501 | 23,883 | 32,550 | ||||||||||||
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|
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Note 6 Employee benefits
The following table discloses total expenses related to employee benefits:
2021 | 2020 | 2019 | ||||||||||
Short-term employee benefits |
100,461 | 70,555 | 43,046 | |||||||||
Post-employment benefits |
18,600 | 10,590 | 6,283 | |||||||||
|
|
|
|
|
|
|||||||
Total |
119,061 | 81,145 | 49,329 | |||||||||
|
|
|
|
|
|
Post-employment benefits expense reflects expenses related to defined contribution plans and defined benefit plans, inclusive of expenses related to the ITP 2. Expenses related to defined contribution plans amounted to $13,916, $7,975 and $4,616 for the years ended December 31, 2021, 2020 and 2019, respectively.
The following table discloses total expenses related to employee benefits for the Groups Executive Management Team (EMT) and managing directors at the Groups sales units:
2021 | 2020 | 2019 | ||||||||||
Short-term employee benefits |
5,094 | 5,788 | 4,333 | |||||||||
Post-employment benefits |
525 | 351 | 605 | |||||||||
Other long-term benefits |
417 | 600 | 469 | |||||||||
|
|
|
|
|
|
|||||||
Total benefits to key management personnel only |
6,036 | 6,739 | 5,407 | |||||||||
|
|
|
|
|
|
F-63
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
The Groups EMT has the authority and responsibility for planning, directing, and controlling the Polestar Groups activities. In September 2021, Johan Malmqvist succeeded Ian Zhang as Chief Financial Officer of Polestar. As of December 31, 2021 the EMT consists of the following individuals:
a) Thomas Ingenlath (Chief Executive Officer, CEO);
b) Johan Malmqvist (Chief Financial Officer, CFO); and
c) Dennis Nobelius (Chief Operating Officer, COO).
As of December 31, 2020, the EMT (Prior EMT) consisted of:
a) Thomas Ingenlath (Chief Executive Officer, CEO);
b) Ian Zhang (Chief Financial Officer, CFO); and
c) Dennis Nobelius (Chief Operating Officer, COO).
As of December 31, 2019. the 2019 EMT consisted of:
a) Thomas Ingenlath (Chief Executive Officer, CEO); and
b) Ian Zhang (Chief Financial Officer, CFO).
The CEO has the ultimate authority for approval of actions proposed by each member of the EMT.
Note 7 Other operating income and expense
Other operating income and expenses consisted of:
2021 | 2020 | 2019 | ||||||||||
Other operating income |
||||||||||||
Net foreign exchange rate differences |
| 2,478 | 914 | |||||||||
Sold services |
847 | | 1,153 | |||||||||
Other operating income |
1,776 | 1,598 | 446 | |||||||||
|
|
|
|
|
|
|||||||
Total |
2,623 | 4,076 | 2,513 | |||||||||
|
|
|
|
|
|
|||||||
Other operating expenses | 2021 | 2020 | 2019 | |||||||||
Net foreign exchange rate differences |
49,298 | | | |||||||||
Non-income tax |
1,064 | 1,347 | 447 | |||||||||
Other operating expenses |
314 | 963 | 727 | |||||||||
|
|
|
|
|
|
|||||||
Total |
50,676 | 2,310 | 1,174 | |||||||||
|
|
|
|
|
|
F-64
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Note 8 Finance income and expense
The below table details the Groups finance income and expenses:
Finance income | 2021 | 2020 | 2019 | |||||||||
Net foreign exchange rate gains on financial activities |
31,574 | | 2,940 | |||||||||
Interest income on bank deposits |
1,396 | 3,199 | 13,286 | |||||||||
|
|
|
|
|
|
|||||||
Total |
32,970 | 3,199 | 16,226 | |||||||||
|
|
|
|
|
|
|||||||
Finance expense |
||||||||||||
Interest expense on credit facilities and financing obligations |
11,681 | 13,169 | 12,722 | |||||||||
Interest expense to related companies |
30,801 | 11,210 | 5,128 | |||||||||
Net foreign exchange rate losses on financial activities |
| 7,527 | | |||||||||
Interest expense related to lease liabilities |
2,377 | 2,122 | 584 | |||||||||
Credit facility expenses |
377 | | 504 | |||||||||
Other finance expenses |
13 | 6 | 2,254 | |||||||||
|
|
|
|
|
|
|||||||
Total |
45,249 | 34,034 | 21,192 | |||||||||
|
|
|
|
|
|
For the years ended December 31, 2021, 2020 and 2019, interest expense to related parties was comprised of interest on overdue trade payables balances and interest on related party borrowings. Refer to Note 23 - Related party transactions for further discussion.
F-65
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Note 9 Leases
As a lessee, Polestar Group primarily leases buildings and manufacturing production equipment. The Group also has short-term and low value leases related to the leasing of temporary spaces and small IT equipment, respectively. The lease term for land and buildings is generally 2 - 15 years with the exception of one long term land lease with a term of 50 years. The lease term for machinery and equipment is generally 2-6 years.
The following table depicts the changes in the Groups ROU assets, which are included within PPE:
Buildings and land |
Machinery and equipment |
Total | ||||||||||
Acquisition cost |
||||||||||||
Balance as of January 1, 2020 |
18,731 | 398 | 19,129 | |||||||||
Additions |
13,332 | 48,197 | 61,529 | |||||||||
Effect of foreign currency exchange rate differences |
1,902 | 351 | 2,253 | |||||||||
|
|
|
|
|
|
|||||||
Balance as of December 31, 2020 |
33,965 | 48,946 | 82,911 | |||||||||
Additions |
12,345 | 31 | 12,376 | |||||||||
Effect of foreign currency exchange rate differences |
(1,197 | ) | 1,122 | (75 | ) | |||||||
|
|
|
|
|
|
|||||||
Balance as of December 31, 2021 |
45,113 | 50,099 | 95,212 | |||||||||
|
|
|
|
|
|
|||||||
Accumulated depreciation |
||||||||||||
Balance as of January 1, 2020 |
(1,464 | ) | (43 | ) | (1,507 | ) | ||||||
Depreciation expense |
(2,376 | ) | (6,741 | ) | (9,117 | ) | ||||||
Effect of foreign currency exchange rate differences |
(356 | ) | (54 | ) | (410 | ) | ||||||
|
|
|
|
|
|
|||||||
Balance as of December 31, 2020 |
(4,196 | ) | (6,838 | ) | (11,034 | ) | ||||||
Depreciation expense |
(6,180 | ) | (8,431 | ) | (14,611 | ) | ||||||
Effect of foreign currency exchange rate differences |
217 | (178 | ) | 39 | ||||||||
|
|
|
|
|
|
|||||||
Balance as of December 31, 2021 |
(10,159 | ) | (15,447 | ) | (25,606 | ) | ||||||
|
|
|
|
|
|
|||||||
Carrying amount as of December 31, 2020 |
29,769 | 42,108 | 71,877 | |||||||||
|
|
|
|
|
|
|||||||
Carrying amount as of December 31, 2021 |
34,954 | 34,652 | 69,606 | |||||||||
|
|
|
|
|
|
Amounts related to leases recognised in the Consolidated Statement of Loss are as follows:
2021 | 2020 | 2019 | ||||||||||
Expense relating to short-term leases |
1,300 | 1,390 | | |||||||||
Expense relating to leases of low value assets |
4,218 | 25 | | |||||||||
Effect of foreign currency exchange rate differences |
39 | 584 | (8 | ) |
The current and non-current portion of the Groups lease liabilities are as follows:
2021 | 2020 | |||||||
Current lease liability |
10,250 | 11,187 | ||||||
Non-current lease liability |
66,575 | 61,840 | ||||||
|
|
|
|
|||||
Total |
76,825 | 73,027 | ||||||
|
|
|
|
F-66
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Expected future lease payments to be made to satisfy the Groups lease liabilities are as follows:
2021 | 2020 | |||||||
Within 1 year |
10,250 | 11,187 | ||||||
Between 1 and 2 years |
11,715 | 10,003 | ||||||
Between 2 and 3 years |
10,375 | 9,576 | ||||||
Between 3 and 4 years |
8,596 | 8,841 | ||||||
Between 4 and 5 years |
42,032 | 6,944 | ||||||
Later than 5 years |
6,361 | 44,638 | ||||||
|
|
|
|
|||||
Total |
89,329 | 91,189 | ||||||
|
|
|
|
Refer to Note 24 - Commitments and contingencies for details on commitments related to the Groups leases and ROU assets as of December 31, 2021.
For the years ended December 31, 2021, 2020 and 2019, total cash outflows (inflows) for leases amounted to $8,578, $2,298 and $939, respectively.
As a lessor, the Group recognised revenue from operating leases in the amount of $6,217 for the year ended December 31, 2021. For the majority of the Groups lease contracts, vehicles are paid for upfront at contract inception and repurchased by Polestar at the end of the lease term. Expected future, undiscounted lease payments to be received from the Groups operating leases outstanding as of December 31, 2021 is $711, all of which will be earned in 2022. The following table depicts the changes in the Groups vehicles under operating leases:
Vehicles under operating leases |
||||
Acquisition cost |
||||
Balance as of January 1, 2021 |
| |||
Additions |
124,764 | |||
|
|
|||
Balance as of December 31, 2021 |
124,764 | |||
|
|
|||
Accumulated depreciation |
||||
Balance as of January 1, 2021 |
| |||
Depreciation expense |
(4,138 | ) | ||
|
|
|||
Balance as of December 31, 2021 |
(4,138 | ) | ||
|
|
|||
Carrying amount as of December 31, 2021 |
120,626 | |||
|
|
Note 10 Income tax expense
Income tax expense recognised in the Consolidated Statement of Loss is as follows:
2021 | 2020 | 2019 | ||||||||||
Current income tax for the year |
(3,336 | ) | (1,966 | ) | (93 | ) | ||||||
Deferred taxes |
5,517 | (4,422 | ) | 3,874 | ||||||||
China withholding taxes |
(2,517 | ) | (7,147 | ) | (5,796 | ) | ||||||
|
|
|
|
|
|
|||||||
Total |
(336 | ) | (13,535 | ) | (2,015 | ) | ||||||
|
|
|
|
|
|
Deferred taxes have been calculated applying tax rate per jurisdiction, and for group accounting entries a Hong Kong corporate income tax rate of 16.5% in 2021 and 15.8 % in 2020 has been applied. For 2019, a Chinese tax rate of 25 % has been applied, see Note 3 - Common control transaction.
F-67
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Information regarding current year income tax expense based on the applicable Hong Kong tax rate is as follows:
2021 | 2020 | 2019 | ||||||||||
Income before tax for the year |
(1,007,118 | ) | (471,323 | ) | (195,960 | ) | ||||||
Tax according to the applicable Hong Kong tax rate1 |
166,174 | 74,449 | 48,989 | |||||||||
Operating income/costs, non-taxable |
(5,407 | ) | (2,178 | ) | (2,060 | ) | ||||||
Effect of different tax rates |
64,384 | 34,700 | (2,022 | ) | ||||||||
Tax effect on deferred tax due to change of tax rate |
| (575 | ) | 993 | ||||||||
Withholding tax |
(2,517 | ) | (7,147 | ) | (5,796 | ) | ||||||
Non-recognition of deferred tax assets on other temporary differences |
(9,042 | ) | (32,223 | ) | (14,869 | ) | ||||||
Not recognised tax loss carry-forward |
(213,928 | ) | (80,434 | ) | (26,847 | ) | ||||||
Other |
| (127 | ) | (403 | ) | |||||||
|
|
|
|
|
|
|||||||
Total |
(336 | ) | (13,535 | ) | (2,015 | ) | ||||||
|
|
|
|
|
|
1 | 2021: 16.5%, 2020: 15.8%, 2019: 25% (Chinese tax rate, see Note 3 Common control transaction). |
Information regarding the income tax expense for 2019 is based on the applicable Chinese tax rate (25%). The shift from the applicable Chinese tax rate in 2019 to the applicable Hong Kong tax rate in 2020 is due to the change in group composition that occurred in September 2020. The restructuring represented a common control transaction and resulted in certain tax losses in Sweden of $30,418 to be forfeited. Refer to Note 3Common control transaction for further discussion. The Hong Kong tax rate in the table above is reflective of the Inland Revenue (Amendment (No. 7) Bill 2017 (the Bill), which was passed by the Hong Kong Legislative Council in 2018. The Bill introduces the two-tiered profits tax rates regime, under which, the first 2,000,000 Hong Kong Dollar (HKD) of profits of the qualifying group entity will be taxed at 8.25%, and profits above 2,000,000 HKD will be taxed at 16.5%.
Information regarding the composition of recognised deferred tax assets is as follows:
Specification of deferred tax assets | 2021 | 2020 | ||||||
Unutilised tax loss carry-forward |
| 1,031 | ||||||
Other temporary differences |
3,850 | 1,126 | ||||||
|
|
|
|
|||||
Recognised value of deferred tax assets as of December 31 |
3,850 | 2,157 | ||||||
|
|
|
|
As of December 31, 2021 and 2020, deferred tax liabilities related to intangible assets amounted to $509 and $6,548, respectively.
All changes in deferred tax assets and liabilities have been reported in the Consolidated Statement of Loss for the years ended December 31, 2021, 2020 and 2019, respectively.
Information regarding unrecognised deferred tax assets:
The Group recognises deferred tax assets to the extent that the Group believes that the likelihood of recognition is probable. In making such a determination, the Group considers reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and the results of recent operations. As of December 31, 2021 and 2020, the Group made the judgement that there is not sufficient, objectively verifiable
F-68
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
evidence available which would demonstrate that it is more likely than not that the Group would be able to realise all deferred tax assets in the future. This resulted in deferred tax assets not being recognised for a tax effected amount of $339,389 and $125,464 as of December 31, 2021 and 2020, respectively. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used. Significant management judgements and assumptions are required in determining the recognition of deferred tax assets related to tax losses and other temporary deductible differences. A change in judgement or assumption could have a material impact on the recognition of deferred tax assets.
Tax loss carryforwards through the year of expiration are as follows:
Due date | 2021 | 2020 | ||||||
2022 |
| | ||||||
2023 |
| | ||||||
2024 |
74,736 | 74,736 | ||||||
2025 |
193,596 | 186,930 | ||||||
2026 |
158,427 | 291,494 | ||||||
2027 onwards |
1,126,554 | | ||||||
|
|
|
|
|||||
Tax loss carryforwards as of December 31 |
1,553,313 | 553,160 | ||||||
|
|
|
|
The increase in tax losses available for carryforward are mainly attributable to the decline in earnings as a consequence of the Group scaling headcount and research and development expenses to meet the demands of the growing business. Tax losses in Sweden of $1,113,842 have an indefinite carryforward period. Tax losses in China of $430,035 have a five-year carryforward period. Other deductible temporary differences with a tax value of $40,544 and $32,265 have not been recognized as of December 31, 2021 and 2020, respectively.
F-69
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Note 11 Net loss per share
Basic Net loss per share is calculated by dividing Net loss attributable to common shareholders by the weighted average number of shares outstanding during the year. Diluted Net loss per share takes into account the impact of events which increase the number of issued shares. For the year ended December 31, 2021, 4,306,466 shares issuable upon conversion of the convertible notes were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive. Refer to Note 18 - Equity for further details related to the convertible notes. No dilutive event occurred for the years ended December 31, 2020 or 2019. Dilutive Net loss per share was the same as basic Net loss per share for all periods presented. The following table presents the computation of basic and diluted Net loss per share for the years ended December 31, 2021, 2020 and 2019:
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Class A and B Common |
Class A Common |
Class A Common |
||||||||||
Numerator: |
||||||||||||
Net loss attributable to common shareholders |
(1,007,454 | ) | (484,858 | ) | (197,975 | ) | ||||||
|
|
|
|
|
|
|||||||
Denominator: |
||||||||||||
Weighted-average number of common shares outstanding |
229,341,491 | 201,727,758 | 200,000,000 | |||||||||
|
|
|
|
|
|
|||||||
Net loss per share (in U.S. dollars): |
||||||||||||
Basic and diluted |
(4.39 | ) | (2.40 | ) | (0.99 | ) | ||||||
|
|
|
|
|
|
On September 14, 2020 as part of the common control transaction described in Note 3 - Common control transaction, 200,000,000 shares were issued to existing owners. For the purposes of calculating basic and diluted net loss per share, these shares are treated as issued and outstanding from January 1, 2019 through December 31, 2020.
Refer to Note 18 - Equity for more details on the rights of Class A and B common shareholders.
F-70
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Note 12 Intangible assets and goodwill
Intangible assets were as follows:
Internally developed IP |
Software | Acquired IP | Total | |||||||||||||
Acquisition cost |
||||||||||||||||
Balance as of January 1, 2020 |
15,314 | 215 | 859,345 | 874,874 | ||||||||||||
Additions |
25,557 | 990 | 311,546 | 338,093 | ||||||||||||
Effect of foreign currency exchange rate differences |
3,131 | 138 | 102,423 | 105,692 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance as of December 31, 2020 |
44,002 | 1,343 | 1,273,314 | 1,318,659 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Additions |
112,844 | 11 | 349,876 | 462,731 | ||||||||||||
Effect of foreign currency exchange rate differences |
(4,962 | ) | (87 | ) | (81,335 | ) | (86,384 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance as of December 31, 2021 |
151,884 | 1,267 | 1,541,855 | 1,695,006 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Accumulated amortisation and impairment |
||||||||||||||||
Balance as of January 1, 2020 |
(13,202 | ) | | (19,984 | ) | (33,186 | ) | |||||||||
Amortisation expense |
(1,143 | ) | (133 | ) | (165,610 | ) | (166,886 | ) | ||||||||
Effect of foreign currency exchange rate differences |
(1,901 | ) | (5 | ) | (7,410 | ) | (9,316 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance as of December 31, 2020 |
(16,246 | ) | (138 | ) | (193,004 | ) | (209,388 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Amortisation expense |
(1,025 | ) | (157 | ) | (187,194 | ) | (188,376 | ) | ||||||||
Effect of foreign currency exchange rate differences |
1,612 | 12 | 13,561 | 15,185 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance as of December 31, 2021 |
(15,659 | ) | (283 | ) | (366,637 | ) | (382,579 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Carrying amount as of December 31, 2020 |
27,756 | 1,205 | 1,080,310 | 1,109,271 | ||||||||||||
Carrying amount as of December 31, 2021 |
136,225 | 984 | 1,175,218 | 1,312,427 | ||||||||||||
|
|
|
|
|
|
|
|
Additions to internally developed IP were primarily related to the Polestar Precept and various other internal programs for the years ended December 31, 2021, 2020 and 2019. Additions of acquired IP during the years ended December 31, 2021, 2020 and 2019 were related to acquisitions of PS2 and Polestar 3 (PS3) IP from Volvo Cars. During the year ended December 31, 2021, Polestar also acquired IP related to the Polestar 4 (PS4) from Geely.
F-71
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
The July 2015 acquisition of Polestar Performance AB by Volvo Cars and subsequent acquisition of Polestar Performance AB and Polestar Holding AB by Polestar Automotive (Shanghai) Co. Ltd. generated goodwill of $55,991. As of December 31, 2021 and 2020, the balance of goodwill amounted to $53,282 and $59,129, respectively. The balance of trademarks as of December 31, 2021 and 2020 amounted to $2,647 and $2,937, respectively. The changes to the carrying amount of goodwill and trademarks were as follows:
Goodwill | Trademarks | |||||||
Balance as of January 1, 2020 |
51,834 | 2,575 | ||||||
Effect of foreign currency exchange rate differences |
7,295 | 362 | ||||||
|
|
|
|
|||||
Balance as of December 31, 2020 |
59,129 | 2,937 | ||||||
|
|
|
|
|||||
Effect of foreign currency exchange rate differences |
(5,847 | ) | (290 | ) | ||||
|
|
|
|
|||||
Balance as of December 31, 2021 |
53,282 | 2,647 | ||||||
|
|
|
|
Note 13 Property, plant and equipment
As of December 31, 2021 and 2020, PPE are recognised in the Consolidated Statement of Financial Position with carrying amounts of $208,193 and $201,671, respectively. Of these amounts, $34,954 and $29,769 is related to ROU assets for leased buildings and land, and $34,652 and $42,108 is related to ROU assets for leased machinery and equipment, respectively. Refer to Note 9 Leases for more details on the Groups ROU assets and operating leases.
F-72
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Property, plant and equipment was as follows:
Buildings and land |
Buildings under development |
Machinery and equipment |
Machinery under development |
Total | ||||||||||||||||
Acquisition cost |
||||||||||||||||||||
Balance as of January 1, 2020 |
45,138 | | 65,384 | 1,012 | 111,534 | |||||||||||||||
Additions |
904 | | 61,000 | 796 | 62,700 | |||||||||||||||
Divestments and disposals |
(86 | ) | | | | (86 | ) | |||||||||||||
Effect of foreign currency exchange rate differences |
2,864 | | 5,095 | 70 | 8,029 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of December 31, 2020 |
48,820 | | 131,479 | 1,878 | 182,177 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Additions |
2,106 | | 6,315 | 33,622 | 42,043 | |||||||||||||||
Reclassifications |
| | 7,977 | (7,977 | ) | | ||||||||||||||
Effect of foreign currency exchange rate differences |
1,304 | | 2,206 | 143 | 3,653 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of December 31, 2021 |
52,230 | | 147,977 | 27,666 | 227,873 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| ||||||||||||||||||||
Depreciation and impairment |
| |||||||||||||||||||
Balance as of January 1, 2020 |
(646 | ) | | (8,267 | ) | | (8,913 | ) | ||||||||||||
Depreciation expense |
(1,744 | ) | | (38,329 | ) | | (40,073 | ) | ||||||||||||
Divestments and disposal |
69 | | | | 69 | |||||||||||||||
Effect of foreign currency exchange rate differences |
(55 | ) | | (3,411 | ) | | (3,466 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of December 31, 2020 |
(2,376 | ) | | (50,007 | ) | | (52,383 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Depreciation expense |
(2,266 | ) | | (33,910 | ) | | (36,176 | ) | ||||||||||||
Effect of foreign currency exchange rate differences |
(70 | ) | | (657 | ) | | (727 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of December 31, 2021 |
(4,712 | ) | | (84,574 | ) | | (89,286 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Carrying amount as of December 31, 2020 |
46,444 | | 81,472 | 1,878 | 129,794 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Carrying amount as of December 31, 2021 |
47,518 | | 63,403 | 27,666 | 138,587 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
Note 14 Financial instruments
For both financial instruments carried at fair value and financial instruments measured at amortised cost, there was no difference between fair value and carrying amount. The following table shows the carrying amounts of financial assets measured at fair value on a recurring basis:
Financial instruments carried at FVTPL | 2021 | 2020 | ||||||
Carrying amount | ||||||||
Financial assets |
||||||||
Marketable securities |
1,258 | | ||||||
|
|
|
|
|||||
Total |
1,258 | | ||||||
|
|
|
|
As of December 31, 2019, the Group carried a derivative asset and liability at fair value on a recurring basis, in the amounts of $101 and $352, respectively. These derivatives were financial instruments carried at FVTPL.
For the years ended December 31, 2021 and 2020, the realised loss on derivatives was nil and $554, respectively. For the year ended December 31, 2019, the realised gain on derivatives was $16,615.
F-73
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
The following table shows the carrying amounts of financial assets and liabilities measured at amortised cost:
Financial instruments carried at amortised cost | 2021 | 2020 | ||||||
Carrying amount | ||||||||
Financial assets |
||||||||
Trade receivables and trade receivables - related parties |
172,441 | 307,694 | ||||||
Cash and cash equivalents |
756,677 | 316,424 | ||||||
Restricted cash |
| 50,206 | ||||||
Other current receivables |
38,741 | 2,676 | ||||||
Other non-current receivables |
1,682 | 316 | ||||||
|
|
|
|
|||||
Total |
969,541 | 677,316 | ||||||
|
|
|
|
|||||
Financial liabilities |
||||||||
Trade payables and trade payables - related parties |
1,541,974 | 1,145,408 | ||||||
Liabilities to credit institutions |
642,338 | 363,490 | ||||||
Interest-bearing current liabilities1 and interest-bearing current liabilities - related parties |
24,072 | 11,187 | ||||||
Other non-current liabilities |
11,764 | 312 | ||||||
Accrued expenses and accrued expenses - related parties |
502,809 | 203,107 | ||||||
|
|
|
|
|||||
Total |
2,722,957 | 1,723,504 | ||||||
|
|
|
|
1 | The Groups short-term lease liability is presented separately in Note 9 Leases. |
Total interest income arising on financial assets measured at amortised cost related mainly to cash and cash equivalents as of December 31, 2021, 2020 and 2019, and amounted to $1,396, $3,199 and $13,286, respectively. Total interest expense arising on financial liabilities measured at amortised cost related mainly to liabilities to credit institutions and other financing obligations as of December 31, 2021, 2020 and 2019, and amounted to $42,482, $24,379 and $17,850, respectively.
The following table shows the maturities for the Groups financial assets and liabilities as of December 31, 2021:
2021 | ||||||||||||||||
Due within 1 year |
Due between 1 and 5 years |
Due beyond 5 years |
Total | |||||||||||||
Financial assets |
||||||||||||||||
Trade receivables and trade receivables - related parties |
172,441 | | | 172,441 | ||||||||||||
Cash and cash equivalents |
756,677 | | | 756,677 | ||||||||||||
Marketable securities |
1,258 | | | 1,258 | ||||||||||||
Restricted cash |
| | | | ||||||||||||
Other current receivables |
38,741 | | | 38,741 | ||||||||||||
Other non-current receivables |
| 1,682 | | 1,682 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
969,117 | 1,682 | | 970,799 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial liabilities |
||||||||||||||||
Trade payables and trade payables - related parties |
1,541,974 | | | 1,541,974 |
F-74
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
2021 | ||||||||||||||||
Due within 1 year |
Due between 1 and 5 years |
Due beyond 5 years |
Total | |||||||||||||
Liabilities to credit institutions |
642,338 | | | 642,338 | ||||||||||||
Accrued expenses and accrued expenses - related parties |
502,809 | | | 502,809 | ||||||||||||
Interest-bearing current liabilities1 and interest-bearing current liabilities - related parties |
24,072 | | | 24,072 | ||||||||||||
Other non-current liabilities |
| 11,764 | | 11,764 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
2,711,193 | 11,764 | | 2,722,957 | ||||||||||||
|
|
|
|
|
|
|
|
1 | The Groups short-term lease liability is presented separately in Note 9 Leases. |
The following table shows the maturities for the Groups financial assets and liabilities as of December 31, 2020:
2020 | ||||||||||||||||
Due within 1 year |
Due between 1 and 5 years |
Due beyond 5 years |
Total | |||||||||||||
Financial assets |
||||||||||||||||
Trade receivables and trade receivables - related parties |
307,694 | | | 307,694 | ||||||||||||
Cash and cash equivalents |
316,424 | | | 316,424 | ||||||||||||
Restricted cash |
50,206 | | | 50,206 | ||||||||||||
Other current receivables |
2,676 | | | 2,676 | ||||||||||||
Other non-current receivables |
| | 316 | 316 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
677,000 | | 316 | 677,316 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial liabilities |
||||||||||||||||
Trade payables and trade payables - related parties |
1,145,408 | | | 1,145,408 | ||||||||||||
Liabilities to credit institutions |
363,490 | | | 363,490 | ||||||||||||
Accrued expenses and accrued expenses - related parties |
203,107 | | | 203,107 | ||||||||||||
Other non-current liabilities |
| 312 | | 312 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
1,712,005 | 312 | | 1,712,317 | ||||||||||||
|
|
|
|
|
|
|
|
No financial instruments were offset by the Group.
Note 15 Trade receivables
Trade receivables from contracts with customers represent sales transactions, conducted via sales units, within the markets in which the Group operates. The average credit term to finance service providers and fleet customers is two weeks. Trade receivables related parties were comprised of sales transactions with related parties in relation to sale of R&D services, software and performance engineered kits.
F-75
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
The following table details the aging analysis of the trade receivables:
Not overdue | 1-30 days overdue |
30-90 days overdue |
>90 days overdue |
Total | ||||||||||||||||
2021 |
||||||||||||||||||||
Gross trade receivables |
89,348 | 53,289 | 14,403 | 713 | 157,753 | |||||||||||||||
Trade receivables related parties |
7,210 | 7,310 | | 168 | 14,688 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net trade receivables |
96,558 | 60,599 | 14,403 | 881 | 172,441 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
2020 |
||||||||||||||||||||
Gross trade receivables |
54,354 | 32,382 | 9,879 | 2,635 | 99,250 | |||||||||||||||
Trade receivables related parties |
194,891 | 12,745 | 405 | 403 | 208,444 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net trade receivables |
249,245 | 45,127 | 10,284 | 3,038 | 307,694 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
Management determines that a receivable is written off once reasonable means of collection have been unsuccessful and the Group has no reasonable expectations of recovering the entire contractual cash flows, or a portion thereof. Historically, the Group has had no credit losses. As of December 31, 2021 and 2020, Polestar Group has performed an ECL assessment and found no significant effects resulting from the analysis; no write-offs were made for trade receivables.
Further information on credit risks for trade receivables is included in Note 2 Financial risk management.
Note 16 Inventories
The Groups inventory primarily consisted of vehicles as follows:
2021 | 2020 | |||||||
Work in progress |
3,586 | 7,723 | ||||||
Finished goods and good for resale |
610,124 | 460,792 | ||||||
Provision for impairment |
(67,967 | ) | (35,984 | ) | ||||
|
|
|
|
|||||
Total |
545,743 | 432,531 | ||||||
|
|
|
|
Inventories recognised as an expense during the years ended December 31, 2021, 2020 and 2019 amounted to $1,234,062, $551,508 and $33,771, respectively and were included in Cost of sales.
As of December 31, 2021 and 2020, write-downs of inventories to net realisable value amounted to $67,967 and $35,984, respectively. The write down was recognised as an expense during the years ended December 31, 2021 and 2020 and was included in Cost of sales in the Consolidated Statement of Loss.
Note 17 Other current assets
Other current assets for the Group were as follows:
2021 | 2020 | |||||||
Value added tax receivables |
63,698 | 44,660 | ||||||
Prepaid expenses and accrued income |
40,077 | 9,926 | ||||||
Advances to suppliers |
6,424 | 3,072 | ||||||
Other current assets |
10,003 | 2,673 | ||||||
|
|
|
|
|||||
Total |
120,202 | 60,331 | ||||||
|
|
|
|
F-76
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
As of December 31, 2021, prepaid expenses and accrued interest income consisted primarily of accrued transaction costs related to the proposed business transaction with Gores Guggenheim Inc. As of December 31, 2020, prepaid expenses and accrued interest income consisted primarily of prepaid expenses related to marketing and accrued interest income.
Note 18 Equity
Share capital
As presented in Note 3 Common control transaction, the concept of share capital did not exist under the Old Parents limited company structure and was introduced under the New Parents private company limited structure. As of December 31, 2020, share capital consisted of Class A common shares which were fully paid, authorised, issued and outstanding.
After the issuance of 14,371,808 Class A common shares in December 2020, total common shares issued and outstanding were 214,371,808 as of December 31, 2020, with each common share valued at $6.15 (in ones). Class A common shares were issued at no par value.
In March 2021, the Groups Board of Directors distributed 18,032,787 shares of newly authorised Class B common shares at $30.50 (in ones) a share for proceeds of $550,000; related issuance costs amounted to $2,843. Of the 18,032,787 shares issued, 4,262,295 were issued to Geely. In July 2021, 17,345,079 Class A common shares were converted to Class B common shares. Following these events, total Class A and Class B common shares issued and outstanding were 232,404,595, with each share valued at $8.04 (in ones). Class A and B common shares were both issued with no par value.
As of December 31, 2021, share capital consists of Class A and Class B common shares which were fully paid, authorised, issued and outstanding. Changes to the number of common shares issued and outstanding were as follows:
Class A | Class B | |||||||
Balance as of September 14, 20201 |
200,000,000 | | ||||||
Issuance during the year |
14,371,808 | | ||||||
|
|
|
|
|||||
Balance as of December 31, 2020 |
214,371,808 | | ||||||
|
|
|
|
|||||
Issuance during the year |
| 18,032,787 | ||||||
Conversion from Class A to Class B |
(17,345,079 | ) | 17,345,079 | |||||
|
|
|
|
|||||
Balance as of December 31, 2021 |
197,026,729 | 35,377,866.00 | ||||||
|
|
|
|
1 | September 14, 2020 is the date of the common control transaction. Refer to Note 3 Common control transaction for further details. |
The rights of Class A and Class B common shareholders are identical, except with respect to voting rights as specified below.
Voting rights
Polestar Group has two classes of common shares which carry no right to fixed income. On any matter presented to the shareholders of the Group at any meeting of the shareholders, the holders of Class A common shares are entitled to ten votes per share; holders of Class B common shares are entitled to one vote per share.
F-77
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Convertible note
In July 2021, Geely and two other third-parties invested in non-interest-bearing convertible notes of $35,231 from Polestar Group. Of the $35,231, $9,531 is held by Geely. The convertible notes (Notes) are non-interest bearing and not eligible to receive a coupon or dividend for the first 24 months after issuance, at which point in time the convertible notes will be eligible to receive dividends equivalent to Class B common shares, pending approval from the Board of Directors.
The convertible notes will be automatically converted into Class B common shares upon (1) an issuance of equity securities in an amount greater than $50,000 to any entity that owns more than 35% voting power in the Polestar Group, (2) the occurrence of an initial public offering, combination with a special purpose acquisition company, or direct listing of the Polestar Group, (3) a liquidation of the Polestar Group, or (4) the non-occurrence of any of the preceding events by the 24-month anniversary of the issuance of the convertible note (i.e., each a qualifying conversion event).
Except in liquidation, the conversion price of a qualifying conversion event is dependent upon the per share price of the corresponding equity securities offered and may be subject to a discount, depending on the time elapsed since the issuance of the convertible note. In liquidation, the convertible notes are converted to Class B common shares at a fixed conversion price. Additionally, the Polestar Group has the ability to convert the convertible note to Class B common shares for a fixed conversion price at will prior to the occurrence of a qualifying conversion event. The convertible notes may only be settled via the issuance of equity, regardless of whether or not a qualifying conversion event occurs.
Accordingly, the Group accounted for the convertible notes as equity upon issuance and classified them within other contributed capital. As of December 31, 2021 all $35,231 of the convertible notes remained outstanding as none of the convertible notes had been converted to Class B common shares.
Currency translation reserve
The currency translation reserve comprises exchange rate differences resulting from the translation of financial reports of foreign operations that have prepared their financial reports in a currency other than Polestar Groups reporting currency.
Accumulated deficit
Accumulated deficit comprises Net loss for the year and preceding years less any profits distributed. Accumulated deficit also includes the effects of business combinations under common control within Polestar Group.
F-78
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Note 19 Current and non-current provisions
The changes in the Groups current and non-current provisions were as follows:
Warranties | Provision for employee benefits |
Other provisions |
Total | |||||||||||||
Balance as of January 1, 2020 |
2 | 3,533 | 2,230 | 5,765 | ||||||||||||
Additions |
58,651 | 1,595 | 12,453 | 72,699 | ||||||||||||
Utilisation |
(24,348 | ) | | (24,348 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance as of December 31, 2020 |
34,305 | 5,128 | 14,683 | 54,116 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
of which current |
18,759 | 3,928 | 12,892 | 35,579 | ||||||||||||
of which non-current |
15,546 | 1,200 | 1,791 | 18,537 | ||||||||||||
Balance as of January 1, 2021 |
34,305 | 5,128 | 14,683 | 54,116 | ||||||||||||
Additions |
68,081 | 6,867 | 4,853 | 79,801 | ||||||||||||
Utilisation |
(33,332 | ) | (4,207 | ) | (8,498 | ) | (46,037 | ) | ||||||||
Reversals |
(4,967 | ) | (160 | ) | | (5,127 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance as of December 31, 2021 |
64,087 | 7,628 | 11,038 | 82,753 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
of which current |
28,660 | 6,325 | 9,057 | 44,042 | ||||||||||||
of which non-current |
35,427 | 1,303 | 1,981 | 38,711 |
Provision for employee benefits relates to the Groups short-term incentive plan and LTVP. Refer to Note 6 Employee benefits for more details.
Warranty campaign
During the year ended December 31, 2021, the Group did not initiate any safety recalls or service campaigns.
In the fourth quarter of 2020, Polestar performed a safety recall and service campaign related to the PS2 to replace defective power inverters and high voltage coolant heaters (HVCH). Polestar is engaged in a sourcing level agreement with Volvo Cars related to the PS2 where Volvo Cars is the party having a relationship with the ultimate supplier. Volvo Cars subsequently compensated Polestar for the recalls, in full, in the amount of $78,978 for the faulty inverters and HVCH. Vehicles affected by the recall included those that had been sold to end customers as well as those still in inventory as of year-end, which were subsequently repaired before being sold to end customers. As of December 31, 2020, the Group has recovered all costs associated with the recall and service campaign.
To the extent vehicles had not been sold to end customers as of year-end, no warranty provision has been recognised for those vehicles. Costs for these vehicles are initially recognised in inventory as vehicles are repaired and subsequently reported as cost of goods sold upon sale to end customers.
F-79
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Note 20 Other current liabilities
Other current liabilities for the Group were as follows:
2021 | 2020 | |||||||
Accrued expenses and prepaid income |
186,748 | 97,620 | ||||||
Accrued interest |
305 | 490 | ||||||
Personnel related liabilities |
19,642 | 13,090 | ||||||
Value added tax payable |
46,464 | 55,965 | ||||||
Other liabilities |
19,082 | 461 | ||||||
Liabilities related to repurchase obligations |
92,421 | | ||||||
|
|
|
|
|||||
Total |
364,662 | 167,626 | ||||||
|
|
|
|
Accrued expenses and prepaid income consisted of primarily accrued expenses related to marketing and product development; personnel related liabilities consisted of wages, salaries, and other benefits payable.
Note 21 Liabilities to credit institutions
The carrying amount of Polestar Groups borrowings as of December 31, 2021 are as follows:
Currency |
Nominal amount in respective currency (thousands) |
TUSD | ||||||
USD |
400,000 | 400,000 | ||||||
CNY |
830,000 | 130,559 | ||||||
CNY |
500,000 | 78,650 | ||||||
|
|
|||||||
Total |
609,209 | |||||||
|
|
The carrying amount of Polestar Groups unsecured borrowings as of December 31, 2020 are as follows:
Currency |
Nominal amount in respective currency (thousands) |
TUSD | ||||||
CNY |
984,551 | 150,735 | ||||||
CNY |
300,000 | 45,930 | ||||||
EUR |
120,700 | 148,082 | ||||||
|
|
|||||||
Total |
344,747 | |||||||
|
|
As of December 31, 2021, the Group had the following outstanding bank loans:
a) A working capital loan agreement with a bank in China. The loan is secured on certain assets equal to approximately 70% of its value and benefits from a subsidiary guarantee from Polestar Shanghai as well as letters of keep well from both Volvo Cars and Geely. Polestar does not anticipate needing to rely on these letters. The outstanding principal balance as of December 31, 2021 was $400,000. The loan carries interest at a fixed rate of 1.883%.
b) An unsecured working capital loan from a bank in China. The outstanding balance as of December 31, 2021 was $130,559. This loan was agreed to in July 2021; part of this loan was funded in July 2021 and part was funded in September 2021, with an overall expiry of July 2022. The loan carries interest at a rate of 3.915% per annum.
F-80
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
c) An unsecured working capital loan from a bank in China. The outstanding balance as of December 31, 2021 was $78,650. This loan was agreed to in June 2021 with an expiry of June 2022. The loan carries interest at the latest 12-month national interbank offered rate plus 1.1%.
In the ordinary course of business, Polestar, on a market-by-market basis, enters into multiple low-value working capital credit facilities with various financial service providers to ensure the Group can meet vehicle demand and fund operations related to vehicle sales. These facilities provide access to credit for 1-4 years, with the option to renew as mutually determined by Polestar Group and the financial service provider. As of December 31, 2021 and 2020, the aggregate amount outstanding under these arrangements was $32,453 and $1,345, respectively. Of the $32,453 outstanding as of December 31, 2021, $13,789 was related to the working capital loan with Volvo Cars, further detailed in Note 23 Related party transactions.
As of December 31, 2020, the Group had the following outstanding bank loans:
a) An unsecured working capital loan from a bank in China. The outstanding balance as of December 31, 2020 was $150,735. This loan was agreed to in June 2020 with an expiry of June 2021. The loan carries interest at the interbank loan prime rate plus 0.065%, settled either monthly or quarterly.
b) An unsecured working capital loan from a bank in China. The outstanding balance as of December 31, 2020 was $45,930. This loan was agreed to in December 2020 with an expiry of May 2021. The loan carries interest at the latest 12-month national interbank rate minus 0.37%, settled quarterly.
c) An uncommitted facility from a bank in the United Kingdom. The outstanding balance as of December 31, 2020 was $148,082. This loan was agreed to in December 2020 with an expiry of June 2021. The loan carries interest at 2.1% per annum over the relevant interbank offered rate, plus a flat arrangement fee of 0.25% to be paid on the value of the facility payable. Interest is to be paid at the end of the agreed upon financing term.
Since all of the above identified contracts are short-term with terms of twelve months or less, the carrying amount of each contract is deemed to be a reasonable approximation of fair value. The Groups risk management policies related to its debt instruments are further detailed in Note 2 Financial risk management.
The Groups creditors do not require Polestar to maintain any material debt covenants. Unless the Group is unable to make its debt payments, there are no events, financial or otherwise, which trigger default under the debt contracts.
Financing obligations
Polestar has entered into contracts to sell vehicles and then lease such vehicles back for a period of up to twelve months. At the end of the leaseback period, Polestar is obligated to repurchase the vehicles. Accordingly, the consideration received for these transactions was recorded as a financing transaction. As of December 31, 2021 and 2020, $14,465 and $17,398 of this financing obligation was outstanding, respectively, and had accrued interest of $1,679 and $301, respectively. As the financing obligation is short-term in nature, the total outstanding amount is reflected in liabilities to credit institutions in the Consolidated Statement of Financial Position.
F-81
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Note 22 Supplemental cash flow information
Supplemental cash flow information was as follows:
2021 | 2020 | 2019 | ||||||||||
Non-cash investing and financing activities |
||||||||||||
Purchases of intangible assets in trade payables related parties and accrued expenses related parties |
357,760 | 143,986 | 135,989 | |||||||||
Initial recognition of ROU assets and liabilities |
12,376 | 61,529 | 4,484 | |||||||||
Purchases of property, plant and equipment in trade payables |
17,341 | 13,101 | 3,626 |
Note 23 Related party transactions
Related parties are as follows:
a) a member of the board of directors, CEO and other key management employees in any Polestar entity;
b) a spouse or co-habitee of, or a person under the custody of, any person referred to in a) above;
c) legal entities controlled by any person, alone or jointly, referred to under a) and b) above;
d) a legal entity that is a parent company, subsidiary, joint venture, or associate within Geely and Volvo Cars;
e) a legal entity in which a company within the Polestar Group holds, or otherwise controls, between 20-50 % (i.e., an associate or joint venture of any company within the Polestar Group); or
f) a person, or a close family member of such person, that has direct or indirect control or joint control of a Polestar entity, has significant influence over a Polestar entity or is a member of the key management of Polestar Group.
Historically, Polestar Group existed as a joint venture between Geely and Volvo Cars. Geely is primarily owned and operated by Mr. Li Shufu. Geely, through a combination of wholly owned and partially owned entities, owns a controlling number of equity interests in Volvo Cars. Therefore, Mr. Li Shufu, as a controlling equity interest holder in Geely, effectively controls Geely and Volvo Cars. All transactions with either Geely or Volvo Cars are considered related party transactions.
The Groups relationship with Geely and Volvo Cars assisted in the development of favorable agreements with both parties at arms length reach. The primary agreement between Geely/Volvo Cars and the Group was a contract manufacturing agreement to produce the PS2; the primary agreements between Volvo Cars and the Group related to the acquisition of technology developed by Volvo Cars and various services provided by Volvo Cars. Such agreements provided advantages for the Group, including cost management and go-to-market efficiency.
All agreements with related parties are on an arms length basis.
F-82
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
As of December 31, 2021, the Group has related party agreements in the following functions:
Product development
The agreements in place to support the Groups product development includes license and intellectual property, patents, R&D services, design, and technology agreements with Volvo Cars and Geely. The Group owns its developed Polestar Unique technology, which was created using purchased R&D, design services, and licenses to critical common technology from Volvo Cars.
Procurement
The Group entered into Service Agreements with Volvo Cars regarding the procurement of direct (production related) materials.
Manufacturing
In the fourth quarter of 2021, Polestar entered into a unique vendor tooling agreement with Geely whereby Geely agrees to provide manufacturing OEM services for the Polestar model 4 vehicle (PS4). Refer to Note 24 Commitments and contingencies for further details regarding this unique vendor tooling agreement.
The Group purchased contract manufacturing services, manufacturing and logistics engineering services, and entered into tool sharing agreements with related parties.
Until November 2021, production of the PS2 was executed at the Geely owned Luqiao plant through contract manufacturing agreements. In November 2021, ownership transferred to Volvo Cars and the plant was renamed to Taizhou.
Manufacturing engineering includes activities related to the development of the production process (i.e., deciding which manufacturing equipment should be utilised and where equipment should be situated to ensure an efficient production process), rather than development of the vehicle itself. The Group outsourced the manufacturing engineering for the production process of the PS1, PS2, and PS3 to Volvo Cars.
Activities related to logistics engineering (i.e., activities related to the determination of how different components are delivered to the production sites) were outsourced to Volvo Cars for the PS1, PS2, and PS3.
Tool sharing occurs when the Group purchases production tools, together with Volvo Cars, to obtain synergies from utilising the same tools.
Polestar enters into machinery and equipment lease arrangements with Geely and certain building lease agreements with Volvo Cars. Refer to Note 9 Leases for more information on Polestars leasing arrangements.
Sales and distribution
Prior to entering the commercial space in the third quarter of 2020, the Groups principal operations related to the sale of R&D services, software, and performance engineered kits to Volvo Cars. Additionally, in 2020, the Group sold and delivered prototype engines to Geely and commercial vehicles and carbon credits to Volvo Cars. Refer to Note 4 Revenue for further discussion on revenue recognised in accordance with IFRS 15.
Polestar Group sells vehicles to related parties, Volvo Cars and Volvofinans Bank AB (Volvofinans Bank). Volvofinans Bank sells these vehicles to end customers when the end customers choose to finance the vehicles via Volvofinans Bank.
F-83
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Polestar Group and Volvo Car Financial Services, doing business as Polestar Financial Services (PFS), entered into residual value guarantee agreements with Bank of America, National Association (BANA) in the US. BANA sought to obtain economic protection against degradations in the residual value of leased vehicles it funds, and Polestar USA agreed to provide such protection as a service for a fee.
The Group purchases sales and distribution services from Volvo Cars related to distribution and outbound logistics, market research, delivery of vehicles and other products and global customer service.
Information technology
While the Group has its own information technology (IT) department, to a certain extent it operates in a shared IT environment with Volvo Cars and purchases service and software license agreements related to resource planning systems, operations, infrastructure, networking, communications, collaboration, integration and application hosting.
Other support
Other related party agreements in place with Volvo Cars primarily relate to service agreements to support corporate and/or back-office functions, including human resources (HR), legal, accounting, and other functions.
HR support services relate to activities associated with payroll administration, training and workforce administration.
Legal support services include routine work associated with patent and brand registrations and competition law.
Accounting and finance support services include finance administration, local legal entity accounting and financial reporting.
Polestar outsources inbound and outbound logistics to Volvo Cars as the Groups and Volvo Cars vehicles are typically manufactured at the same production sites. Inbound logistics relate to supplier shipments to various production sites; outbound logistics relate to the transport of vehicles to end customers. The Group outsources customs handling to Volvo Cars as it does not currently have its own customs department. Warranty provision calculations and claims handling are also outsourced to Volvo Cars.
Financing
In May 2021, the Group entered into a working capital credit facility with Volvo Cars and subsequently borrowed $13,789 of the line, which has a maturity of one year. As of December 31, 2021, the entire amount of this financing arrangement remained outstanding.
Working capital loans
In 2020, the Group entered into two working capital loans with Volvo Car (Asia Pacific) Investment Holdings Co., Ltd. The first loan was for $143,600 and was amended seven times, where each amendment served to extend the term of the loan. The loan commenced in July 2018 with an original maturity of July 2019 and an amended maturity of December 2020. The second loan was for $214,950 and was amended two times, where each amendment served to extend the term of the loan. The loan commenced in July 2020 with an original maturity of September 2020 and an amended maturity of December 2020, where the Group paid the loan back in full. The Group did not incur any fees associated with the amendments on either loan.
F-84
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
The interest rates for the loans with Volvo Car (Asia Pacific) that commenced in July 2018 and July 2020 were 3.45% and 3.48%, respectively. The Group repaid each loan in a lump sum together with all the principal and interest at the date of maturity in December 2020. For the years ended December 31, 2021, December 31, 2020 and 2019, interest expense for these loans was nil, $8,684 and $5,037, respectively.
Convertible notes
Of the $35,231 in convertible notes issued on July 28, 2021, $9,531 is related to Geely. As of December 31, 2021, all $9,531 of the Notes related to Geely are outstanding as none of the Notes had been converted to shares of Class B common shares. Refer to Note 18 Equity for further details on the Notes.
Share issuances
Of the 14,371,808 Class A common shares issued in December 2020 to raise $438,340 in capital, 7,185,904 Class A common shares were issued to Snita Holding B.V., a subsidiary of Volvo Cars, representing $219,170 of the total capital raised. 7,185,904 Class A common shares were issued to PSD Investment Limited, representing $219,170 of the total capital raised.
Of the 18,032,787 Class B common shares issued in March 2021 to raise $550,000 in capital, 4,262,295 Class B common shares were issued to Geely, representing $130,000 of the total capital raised. Refer to Note 18 - Equity for further details on these share issuances.
The agreements discussed above impact the Groups financial statements as follows:
Sale of goods, services and other
Related party revenue transactions relate to product development and sales and distribution agreements discussed above. Total revenue recognised for each related party is as follows:
2021 | 2020 | 2019 | ||||||||||
Volvo Cars |
73,660 | 107,948 | 91,092 | |||||||||
Volvofinans Bank AB |
52,973 | 30,167 | | |||||||||
Geely |
2,347 | 9,340 | 1,295 | |||||||||
|
|
|
|
|
|
|||||||
Total |
128,980 | 147,455 | 92,387 | |||||||||
|
|
|
|
|
|
For the year ended December 31, 2021, revenue from related parties amounted to $128,980 or 9.65% of total revenue. For the year ended December 31, 2020, revenue from related parties amounted to $147,455 or 24.16% of total revenue. For the year ended December 31, 2019, related party revenue was $92,387 or 99.97% of total revenue.
Purchases of goods, services and other
Purchases from related parties include agreements related to product development, procurement, manufacturing, IT, licenses to intellectual property, and other agreements as discussed above.
F-85
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Purchases of PS2 vehicles were from Geely until the change in plant ownership in November 2021; purchases and their related payables were from Volvo Cars subsequent to this event. The total purchases of goods, services and other for each related party was as follows:
2021 | 2020 | 2019 | ||||||||||
Volvo Cars |
570,429 | 276,849 | 383,255 | |||||||||
Geely |
1,200,295 | 782,864 | 3,926 | |||||||||
Volvofinans Bank AB |
5,748 | | | |||||||||
|
|
|
|
|
|
|||||||
Total |
1,776,472 | 1,059,713 | 387,181 | |||||||||
|
|
|
|
|
|
Cost of R&D and intellectual property
In 2021, Polestar Group entered into agreements with Volvo Cars and Geely to acquire technology leveraged in the development of the PS2, PS3, and PS4. In 2020, the Group entered into similar agreements with Volvo Cars to acquire technology leveraged in the development of the PS1, PS2, and PS3. The Group is in control of the developed product either through a license or through ownership of the IP and the recognised asset reflects the relevant proportion of Polestar Groups interest. The recognised asset associated with these agreements as of December 31, 2021 was $1,175,218, of which acquisitions attributable to 2021 were $349,876. The recognised asset associated with these agreements as of December 31, 2020 was $1,080,308, of which acquisitions attributable to 2020 were $311,546.
Amounts due to related parties
Amounts due to related parties include transactions from agreements associated with purchases of intangible assets, sales and distribution, procurement, manufacturing and other support with Volvo Cars and Geely.
Trade payables related parties and accrued expenses related parties |
2021 | 2020 | ||||||
Volvo Cars |
1,507,308 | 554,676 | ||||||
Geely |
235,622 | 627,729 | ||||||
Volvofinans Bank AB |
504 | 15 | ||||||
|
|
|
|
|||||
Total |
1,743,434 | 1,182,420 | ||||||
|
|
|
|
The Groups interest expense on current liabilities due to Volvo Cars for the years ended December 31, 2021 and 2020 was $11,521 and $11,210, respectively. The Groups interest expense on current liabilities due to Geely for the years ended December 31, 2021 and 2020 was $19,280 and nil, respectively.
Amounts due from related parties
Amounts due from related parties include transactions related to product development and sales and distribution agreements discussed above.
Trade receivables related parties and accrued income related parties | 2021 | 2020 | ||||||
Volvo Cars |
15,457 | 194,503 | ||||||
Geely |
4,025 | 13,319 | ||||||
Volvofinans Bank AB |
309 | 622 | ||||||
|
|
|
|
|||||
Total |
19,791 | 208,444 | ||||||
|
|
|
|
F-86
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Incentives to key management personnel
During the year-ended December 31, 2019, Volvo Cars provided an equity-based investment opportunity for certain members of the Groups management team. The Polestar Investment Plan was launched to incentivise the retention of key personnel with pivotal roles in the development of the Group into a successful standalone company. Each participant was offered the opportunity to purchase shares in Polestar Investment AB (PSINV AB), a subsidiary of Volvo Cars. Accordingly, participants of the Polestar Investment Plan are indirectly minority owners of the Group. In accordance with external valuation, the investment in PSINV AB was made at fair market value.
The total ownership interest of the Groups members of management who hold shares in PSINV AB is 45.25% of total shares issued under Volvo Cars Polestar Investment Plan. Management evaluated the Polestar Investment Plan to determine whether it qualified as an equity-settled share-based payment transaction within the scope of IFRS 2, as the participants receive shares of equity in exchange for their investment and more than one entity is involved in delivering the benefit to the participants. Given Polestar Group does not receive identifiable or unidentifiable goods or services in exchange for the equity purchase of PSINV AB, the transaction is not within the scope of IFRS 2. Furthermore, the Polestar Investment Plan is an agreement with Volvo Cars and individual members of Polestar Groups prior EMT, as participants were given the option to purchase equity shares in PSINV AB, an entity outside of the legal entity structure of Polestar Group. Therefore, the Polestar Investment Plan is not a share-based payment transaction in the scope of IFRS 2 and there is no financial statement impact on the Group.
Refer to Note 6 - Employee benefits for details on compensation to the EMT and managing directors at the Groups sales units.
Share capital
Related party share ownership as of December 31, 2021 and 2020 was as follows:
Class A | 2021 | 2020 | ||||||
Snita Holding B.V. |
95,961,904 | 105,461,904 | ||||||
PSD Investment Limited |
99,340,825 | 107,185,904 | ||||||
PS Investment AB |
1,724,000 | 1,724,000 | ||||||
|
|
|
|
|||||
Total |
197,026,729 | 214,371,808 | ||||||
|
|
|
|
Class B | 2021 | 2020 | ||||||
Snita Holding B.V. |
17,345,079 | | ||||||
Geely |
4,262,295 | | ||||||
|
|
|
|
|||||
Total |
21,607,374 | | ||||||
|
|
|
|
As of December 31, 2019, related parties collectively owned 200,000,000 Class A common shares, of which Volvo Cars (China) Investment Co., Ltd held 100,000,000 shares and Zhejiang Geely Holding Group Co., Ltd held 100,000,000 shares.
Refer to Note 18 Equity for further details.
F-87
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
Note 24 Commitments and contingencies
Commitments
In December 2021, Polestar entered into a unique vendor tooling agreement and a unique in-house tooling and equipment agreement for the PS4. These agreements were entered into as part of Polestars and Geelys intent to enter into a more detailed agreement related to manufacturing OEM services for the PS4 prior to the commencement of production. Aggregate payments Polestar will make to Geely under this agreement and the amounts of future commitments are $137,382 as of December 31, 2021.
Around the same time, Polestar Group also entered into agreements with Geely to acquire technology and related services leveraged in the development of the PS4. Under these agreements, Geely will perform development services in pursuit of achieving project milestones through 2025 for which the Group will make certain milestone payments to Geely, totaling an aggregate amount of $414,055. Future commitments related to these agreements as of December 31, 2021 were $329,216. The agreements also obligate Polestar to make certain royalty payments per vehicle sold once the PS4 reaches commercialisation.
In 2019, Polestar Group entered into a type bound and unique equipment agreement for the PS3. In addition, Polestar Group entered into volume commitments related to common technology shared with Volvo Cars. If Polestars share of Volvo Cars investment in common tooling is not recovered by Volvo Cars, Polestar will reimburse Volvo Cars such costs.
As of December 31, 2021, commitments to acquire PPE and intangible assets were $235,573 and $501,207, respectively. As of December 31, 2020, commitments to acquire PPE and intangible assets were $79,365 and $313,675, respectively.
Contingencies
In the normal course of business, the Group is subject to contingencies related to legal proceedings and claims and assessments that cover a wide range of matters. Liabilities for such contingencies are recorded to the extent that it is probable the liability is incurred, and the amount is reasonably estimable. Associated legal costs related to such contingencies are expensed as incurred.
In March 2021, a Swedish investment firm specialising in class action lawsuits, initiated class action activities in Norway against Polestar Norway. The class action suit alleges the Polestar Norway issued misleading statements regarding the range of the PS2 vehicle, which Polestar Norway rejects. As of the date these financial statements were issued, these class action activities consisted of the initial steps of soliciting individuals who purchased a PS2 vehicle in Norway to join the class action suit against Polestar Norway; no claim has been filed in court. The Swedish investment firm refers to a potential total claim of $2,530. Simultaneously, a Norwegian automobile association for car owners (NAF) has sent separate claim letters to Polestar Norway on behalf of a few members, on the same grounds as the class action lawsuit. These claims have also been rejected by Polestar Norway.
The Group did not have any liabilities related to such contingencies as of December 31, 2021 and 2020.
Note 25 Subsequent events
Management has evaluated events subsequent to December 31, 2021 and through April 21, 2022, the date these Consolidated Financial Statements were authorised for issuance by the Board of Directors. The following events
F-88
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
which occurred subsequent to December 31, 2021 merited disclosure in these Consolidated Financial Statements. Management determined that no adjustments were required to the figures presented as a result of these events.
On February 28, 2022, Polestar entered into a 12-month single currency, green trade facility with an aggregate principal amount of EUR 350,000,000 with Standard Chartered Bank, Nordea Bank ABP, Citibank Europe PLC and ING Belgium SA. Polestar has the option to extend this facility by an additional 12 months and request an accordion increase for an additional principal amount of EUR 250,000,000. On March 24, 2022, Polestar made a drawdown of EUR 86,634,703, or approximately $94,500. This loan carries interest at the relevant interbank offered rate plus 2.1% per annum and has a repayment period of 90 days.
On March 3, 2022, Snita B.V. and PSD Investment Ltd. each issued official declarations of intent that set forth their intention to fund Polestars continued growth under the Groups current business plan. Both parties intend to subscribe to their pro rata share of any future equity or equity-linked securities issued by Polestar.
On March 11, 2022, Polestar entered into a letter of intent with The Hertz Corporation (Hertz) pursuant to which Hertz intends to commit to purchase 65,000 or more Polestar vehicles during a 5-year period beginning in 2022. Polestar and Hertz intend to sign four regional purchase agreements covering the United States, Canada, Europe, and Australia. The new global strategic partnership was announced by Polestar and Hertz Global Holdings, Inc. on April 4, 2022. Availability of vehicles is expected to begin in Spring 2022 in Europe and late 2022 in North America and Australia. Under the partnership, Hertz is expected to initially order PS2s.
In March 2022, Polestar signed two agreements with Geely for Polestar to license technology from Geely related to the development and manufacturing of the PS4. The duration of these agreements is through 2024.
On April 14, 2022, Volvo Cars and Polestar entered into a letter of agreement to extend the terms of SEK 5,046,000,000, or the equivalent of $528,064, in related party trade payables due from Polestar as part of Volvo Cars ongoing support of Polestar and its growth strategy. These related party trade payables are now due to Volvo Cars on June 30, 2023.
In June 2021, four new employee incentive plans were approved by the Board of Directors. All four of the programs are expected to go into effect in 2022 upon the completion of the business combination with Gores Guggenheim Inc. The new incentive plans awarded to the EMT and select management team members include (1) a one-time issuance of restricted shares of Class A common shares in a value equal to a certain percentage of the awardees base salary. Upon issuance, one third of these shares vest immediately, while the remaining shares vest in equal installments on the 12-month and 24-month anniversary of the original issuance and (2) a replacement of the current LTVP in the form of an annual issuance of restricted shares and performance shares of Class A common shares equal to a certain percentage of the awardees base salary, depending on awardees position at the Polestar Group, with a 3-year vesting period. The new incentive plans awarded to all employees include (3) a one-time issuance of Class A common shares in a value equal to 4% of the awardees base salary and (4) an annual share matching program whereby the awardee is offered the opportunity to invest up to 2% of their base salary of the Polestar Group and receive the issuance of Class A common shares in equal value for free.
In connection with the business combination agreement with Gores Guggenheim Inc. as described in Note 1 Significant accounting policies and judgements, Volvo Cars entered into an agreement with Polestar Group, which was subsequently amended in March 2022, to subscribe for mandatory convertible preference shares in Polestar Automotive Holding UK Limited. Concurrently with the closing of the business combination agreement with Gores Guggenheim Inc., the preference shares will be issued in consideration of the payment by Volvo Cars of a cash amount totaling $588,826, which will be used to repay outstanding payables owed to Volvo Cars. Each
F-89
Notes to the Consolidated Financial Statements
(in thousands of U.S. dollars unless otherwise stated)
preference share will be convertible into Class A common shares at a conversion price of $10.00 per Polestar Automotive Holding UK Limited Ordinary Share. The execution of this agreement is contingent on the closing of the business combination with Gores Guggenheim Inc.
F-90
Polestar Automotive Holding UK PLC (formerly known as Polestar Automotive Holding UK Limited)
Consolidated Financial Statements for the period September 15, 2021 to December 31, 2021
F-91
Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Director of Polestar Automotive Holding UK PLC (formerly known as Polestar Automotive Holding UK Limited)
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Polestar Automotive Holding UK PLC (formerly known as Polestar Automotive Holding UK Limited) (the Company) as of September 15, 2021 and December 31, 2021, the related statement of changes in equity for the period September 15, 2021 to December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 15, 2021 and December 31, 2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Deloitte AB
Gothenburg, Sweden
April 21, 2022
We have served as the Companys auditor since 2022.
F-92
Polestar Automotive Holding UK PLC (formerly known as Polestar Automotive Holding UK Limited)
Consolidated Statements of Financial Position
(in U.S. dollars unless otherwise stated)
Note | December 31, 2021 |
September 15, 2021 |
||||||||||
Assets |
||||||||||||
Other receivables - related parties |
3 | 10 | 1 | |||||||||
|
|
|
|
|||||||||
Other current assets |
2 | 28,846,674 | | |||||||||
Total assets |
28,846,684 | 1 | ||||||||||
|
|
|
|
|||||||||
Equity |
||||||||||||
Share capital |
3 | (10 | ) | (1 | ) | |||||||
|
|
|
|
|||||||||
Total equity |
(10 | ) | (1 | ) | ||||||||
|
|
|
|
|||||||||
Liabilities |
||||||||||||
Other current liabilities - related parties |
2 | (28,846,674 | ) | | ||||||||
|
|
|
|
|||||||||
Total liabilities |
(28,846,674 | ) | | |||||||||
|
|
|
|
|||||||||
Total equity and liabilities |
(28,846,684 | ) | (1 | ) | ||||||||
|
|
|
|
F-93
Polestar Automotive Holding UK PLC (formerly known as Polestar Automotive Holding UK Limited)
Consolidated Statements of Changes in Equity
(in U.S. dollars unless otherwise stated)
Note | Share capital | Total | ||||||||||
Balance as of September 15, 2021 |
3 | 1 | 1 | |||||||||
Issuance of new shares |
3 | 9 | 9 | |||||||||
|
|
|
|
|||||||||
Balance as of December 31, 2021 |
10 | 10 | ||||||||||
|
|
|
|
F-94
Notes to the Consolidated Financial Statements
(in U.S. dollars unless otherwise stated)
Note 1 - Significant accounting policies
General Information
Polestar Automotive Holding UK PLC (formerly known as Polestar Automotive Holding UK Limited) (the Company), company number 13624182, was incorporated as a private company under the laws of England and Wales on September 15, 2021 as a direct wholly owned subsidiary of Polestar Automotive Holding Limited, a limited company incorporated in Hong Kong. Effective May 5, 2022, the Company re-registered as a public limited company. Together with its subsidiaries, Polestar Automotive Holding Limited is referred to as Polestar, Polestar Group or the Group. The Company is registered as a USD company.
The Company was formed for the purpose of becoming the ultimate parent company in the Polestar Group following the transactions contemplated in the business combination agreement, dated September 27, 2021 (the Business Combination Agreement) by and among the Company, Polestar Group, and Gores Guggenheim Inc. (GGI), a special purpose acquisition company. The Company maintains one direct wholly owned subsidiary, PAH UK Merger Sub Inc. (Merger Sub), a Delaware corporation. Merger Sub was incorporated on September 15, 2021 to facilitate the consummation of the Business Combination Agreement. As of December 31, 2021, Merger Sub had no assets, liabilities, or operations.
In connection with the Business Combination Agreement, Merger Sub will merge with and into GGI, pursuant to which the separate corporate existence of Merger Sub will cease, with GGI being the surviving corporation and becoming a wholly owned subsidiary of the Company. Following the consummation of the transactions contemplated by the Business Combination Agreement, the Company will be the surviving publicly-traded corporation. However, the consummation of the transactions contemplated by the Business Combination Agreement is subject to numerous conditions, and there can be no assurances that such conditions will be satisfied.
Basis of accounting
The Consolidated Statements of Financial Position and Consolidated Statements of Changes in Equity have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), on the historical cost basis, and in the presentation currency USD. All amounts are in actual USD unless otherwise stated. Separate statements of operations, comprehensive income, and cash flows have not been presented in the Consolidated Financial Statements because there have been no operating activities in the Company during the period September 15, 2021 to December 31, 2021.
Other financial assets and other financial liabilities
Financial instruments are any form of contract that gives rise to a financial asset in one company and a financial liability or equity instrument in another company. A financial asset or financial liability is included in the balance sheet when the entity becomes a party to the contractual terms of the instrument. Other financial liabilities and other financial assets, including liabilities to and receivables from related parties, are valued at amortized cost. A financial asset is removed from the balance sheet when the contractual right to cash flow from the asset has ceased or been settled. The same applies where the risks and benefits associated with the holding are essentially transferred to another party and the entity no longer has control over the financial asset. A financial liability is derecognised when the agreed obligation has been fulfilled or ceased.
Transaction costs in an offering of equity securities
In the event of offering of equity securities, incremental costs that otherwise would not have been incurred are deferred and capitalized in the balance sheet as an financial asset at amortized cost instead of expensed as incurred. When cash is received from investors as part of the offering, such deferred incremental costs are derecognised and deducted from additional paid-in capital.
F-95
Notes to the Consolidated Financial Statements
(in U.S. dollars unless otherwise stated)
Note 2 - Related party transaction with Polestar Group
During the period September 15, 2021 to December 31, 2021, Polestar Group incurred $28,846,674 in transaction costs related to the transactions contemplated in the Business Combination Agreement. These costs consist of professional service fees for lawyers, accountants, bankers, and other advisors. The Company will become the ultimate parent company following the consummation of the transactions contemplated in the Business Combination Agreement and will reimburse the related Polestar Group entity for these costs. As such, the Polestar Group entity is a related party to the Company. Upon the consummation of the transactions contemplated in the Business Combination Agreement, these costs will offset proceeds from the transactions in equity. Accordingly, the Company recorded these costs in the Companys Consolidated Statements of Financial Position under the captions Other current assets and Other current liabilities - related parties.
Note 3 - Share capital
The Company was incorporated on September 15, 2021 and issued 1 Class A ordinary share at $1 to an entity in the Polestar Group. On October 15, 2021, the Company had the following changes in equity:
| A sub-division of initial equity from 1 Class A ordinary share at $1 per share to 100 Class A ordinary shares at $0.01 per share. |
| A share issuance of 900 Class A ordinary shares at $0.01 per share to the related Polestar Group entity. |
As of December 31, 2021, the Companys authorized share capital consists of 1,000 Class A ordinary shares at $0.01 per share, for a total of $10. Each Class A ordinary share maintains one voting right. The entire amount of this equity is held by an entity in the Polestar Group and recorded as a receivable under the caption Other receivables - related parties in the Companys Consolidated Statements of Financial Position.
Note 4 - Subsequent events
Management has evaluated events subsequent to December 31, 2021 and through April 21, 2022, the date these Consolidated Financial Statements were authorised for issuance by the Boar