Al Root

Polestar shares plummeted on Wednesday after the company reported its second-quarter deliveries and warned investors that it may not be able to survive as a "going concern."

Shares of the electric-vehicle start-up were down 17% at $1.10 in late trading. The S&P 500 was up 0.1% and the Dow Jones Industrial Average fell 0.5%.

While Polestar said its retail sales were up 51% in the first half of 2025 -- the company sold 18,049 vehicles in the second quarter, up 38% year over year -- it reported that gross profit margins in the second quarter were negative 97.2%. That compares with positive 10.4% a year ago.

Included in the gross profit calculation was a one-time asset write-off of $739 million for the Polestar 3. Higher costs and tariffs also weighed on margins, the company said.

The company raised $200 million by selling stock. More stock is also a positive, but it means there are more shares outstanding.

CFRA analyst Garrett Nelson downgraded shares to Sell from Hold on Wednesday, cutting his price target to 50 cents from $1.

"Risks surrounding Polestar remain high, as the company highlighted going concern risk and uncertainty on its ability to remain in compliance with its debt covenants in the earnings release, raising red flags," he wrote.

Going concern warnings are significant. "A going concern opinion is warranted when there is substantial doubt the company can continue to conduct its normal business operations in the foreseeable future without having to liquidate a portion of its assets and/or restructure its obligations," accounting expert Robert Willens explained.

"Like other upstart EV manufacturers, we think the primary challenge Polestar faces is achieving the size and scale with which to compete with larger auto makers, noting a handful of bankruptcies among smaller EV manufacturers already," Nelson said. "We see Polestar's struggles continuing as EV incentives are discontinued in the U.S. and as consumers increasingly turn toward hybrids."

The federal $7,500 purchase tax credit for qualifying EVs goes away at the end of September. That will make it harder to sell EVs or shrink losses at EV makers.

Polestar investors are clearly concerned. Polestar's stock peaked at $16.41 in November 2021, according to Bloomberg.

Write to Al Root at allen.root@dowjones.com

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September 03, 2025 15:29 ET (19:29 GMT)

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