Jane asked Kevin Do you still feel Pole Star is not a sexy EV play I'm invested in Tesla and Pollstar and I don't like lucid Arivian? well I'd love to answer that question for you. Thanks for answering or asking you Uh, correct I Don't believe that Polestar is a good investment I Don't believe that Pollstar has any unique Advantage other than solely price, you're not getting any kind of self-driving technology. You're not getting a spectacular supercharger. Network So I Don't believe you're actually creating any kind of real excitement uh, in terms of benefits for using the vehicle other than the price of the vehicle now.

I Also, don't believe you are appealing to the best demographic to appeal to for the transition to electric vehicles, which is dudes between 20 to 45 Which is exactly what Tesla does because dudes between 20 to 45 ish 25 to 45ish Gets so excited about technology that they tell everyone in the world that they know about the technology that they have and they show it off. It's like a long PP for them, they love it. Okay, it's like a company with a lot of pricing power. They love companies with a lot of pricing power which also happens to be what Paul star is not.

In fact, let's go look at the last earnings release from Polestar which I happen to pull up. Let's see what we have for the nine months ending: September 30th, 2022 we have Revenue sitting at 1.47 billion I believe these are I don't have the exact currency right here but I'll find out exactly what this is but We have 1.47 billion Whatever it is here, it is hold on all amounts percent of the reporters shown in thousands of US Dollars Okay, good so we have 1.476 US Dollars We have costs of sales unfortunately of 1.49 Now here's an example of a company that literally in my opinion, has zero pricing power not just already for the things that I mentioned. but consider this. 14 1 9 on a cost of sales divided into 1476 provides you a beautiful gross profit margin.

my friend of 3.9 that is terrible and explains why. Not only do they have uh, barely any profit on the top, but they have massive losses once you factor in their operating expenses of about 1.1 billion dollars leading to an operating loss that is nearly uh, what 80 percent higher than it was last year around this time at just over one billion dollars. Now of course they have, uh, some. it looks like Finance income here.

So we've got some other operations bringing in some income, but on the actual vehicle sales, it's a problem. I Have no idea how they pulled off an 890 million dollar Finance income and expense net here. that is interesting. That's where I would give them a little bit of opium.

Something like that is sustainable, but it's still a company that's burning money. Let's go ahead and see if we can find out uh a what the heck that Finance uh uh item is right there because that seems a little remarkable to me. Uh, But then let's also look at their statement of cash flow and figure out what's going on here. Yeah, it looks like Finance income was 711 mil.

So you've got some large Finance income here. We'll see what we can find here on finance income and then what we'll do is we also want to see a statement of cash flows Finance Income Here We Go Finance Income The Finance Income decrease. These are decreases in finance income. Hold on a second here.

This doesn't make quite much sense. Uh Finance Income and Expense Net: 890 million dollars This Is How They padded their net losses substantially. but where that is I don't understand because this doesn't show me under Finance income and finance expense. It must be an other item.

No, I don't know where that large number is coming from because they're actually showing that their Finance income decreased 93 percent or tuna Finance Income decreased by eight Uh, 8.8 million dollars from 9.6 million from three months ended last year Finance Income decreased. This is another period Finance Expenses increase. So Finance income in uh decreased Finance Expenses increase. That's what you would expect.

What is this? Fair value change? Uh, the gain in fair value for earn out liability in September of 2022 was 546 million dollars and 965 respectively. These are primarily attributable to a decrease in poll star share price. Okay, so they took basically they took some kind of extra income on the fact that their their uh, the payout they have to give to probably warrant liabilities is lower than expected because their share price fell. So in a perverted way, they're showing you more income here because their stock price fell.

Brilliant. That's no pricing power at all. Uh, so that and that would go. That's why we've got this.

Yeah, yeah, yeah, there it is. See, see, when we break out the earn out rights right here. This is the only reason they were able to prop up their net income was because of a change of fair value on on shares and they had to spend less money. So their Finance income plummeted.

No, that's true. Their Finance income plummeted 93 and their Finance expenses exploded like 4X because of interest rates. That makes sense. So in other words, the only reason their net income actually looked like it wasn't as bad as it should have been was because their stock price fell.

How ironic is that? Oh, our net income wasn't that bad because our stock price plummeted and now our warrant liability is less. That's ridiculous. Look at their quarterly uh uh. income over here.

Uh, again. Revenue Cost of Sales. There's virtually no gross profit over here, and this is on the three-month chart. Over here, we've got SG A, which is actually fortunately shrinking.

Which is good. You've got a shrinking SG A That's smart. They're trying to reduce their operating losses, but they're still losing money because they're barely making money on their vehicles. And now let's go ahead and look at their actual cash flow situation.

Their cash flow from operating activities in the nine months ending uh, September 2022 was actually negative. One billion dollars? That's terrible. And their cat their plant property and Equipment expenses was actually only 7.4 million. So they're not actually spending a lot of money investing in PPE I'm not sure if they use contract manufacturing.

that could be why. if they're using contract manufacturing, they might not have to invest in their plant property and Equipment But if they don't use Pro a contract manufacturing and they do it themselves, then then why are they not investing in more factories, right? Pulsar production and Volvos I think there they might be contracting production to Volvo In which case, it would make sense that your PPE is not going up here. But that also limits your potential for margin growth because you can't increase margins because you're constantly paying somebody else. So you're you've got a cash flow here of negative a billion bucks.

What do you have in terms of a balance sheet over here? Well, on current assets you're looking at: I'll give them about a billion in cash here. We've got no marketable Securities We've got some receivables. We've got inventory I Don't really care about inventory. Uh, because I I Consider that as part of cash flow anyway.

so I'm going to look at this as a billion bucks here of current assets. We've got non-current assets here of Goodwill that's worthless I can't sell Goodwill plant property and Equipment nominal 255 mil. That doesn't matter, that doesn't help me pay my debts. It's a depreciable asset.

One billion dollars is what they have. and we've got current liabilities of oh my Lord current liabilities of three billion dollars. So you've got three billion dollars current liabilities, you've got one billion dollars of free cash, and you've got total liabilities of about 3.5 billion dollars. So they're long-term liabilities are really just their earn out their warrants.

They don't have a lot of long-term liabilities, which is good, but the fact that they have 1.1 billion dollars of liabilities to credit institutions do within the next year. And they only have a billion dollars of cash. and they're losing a billion dollars of cash every nine months. And they've got trade payables of 100 or 817 million dollars and they have a three percent gross profit margin.

This is this is not a company I would touch with a 10-foot pole. So if you want to ask me why Pollstar is not sexy I'll go through all of it again, but that is my explanation as to why I Don't think Pollstar is sexy I'm a fundamentalist at heart I Don't care about what the market does in the short term, but I actually mean it when I say that. That's why I launched an ETF where I place my bets where the fundamentals are juicy, the fundamentals are not juicy. a Pulstar.

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