The exterior of the Lucid Air sedan, which debuted on September 9, 2020 as the company’s first production car.
Bright
Shares of Churchill Capital IV continued to plummet for the second consecutive day on Wednesday following the announcement of a deal Monday evening to make electric-vehicle company Lucid public via a reverse merger.
Shares fell a whopping 19.6% during afternoon trading to $ 28.32, adding to a tumultuous week for the special acquisition company, also known as a SPAC, of noted investor Michael Klein. The stock was 38.6% lower on Tuesday. The back-to-back decline follows a nearly fivefold increase in the stock price since early January, when the companies were first reported in talks.
Lucid CEO Peter Rawlinson on Tuesday attributed the fall in the stock price to media reports that the company’s expected valuation was between $ 12 billion and $ 15 billion, leading to an initial misunderstanding of the announced deal by investors.
“I think the market doesn’t quite understand what’s going on,” he told CNBC in a Zoom interview. “Because to me what was announced overnight was fantastically positive compared to everything previously reported.”
The Wall Street Journal highlighted the confusion in an article Wednesday with the story’s first chart: “Is Lucid Motors, an electric vehicle company, worth $ 11.75 billion, $ 24 billion or $ 57 billion?”
The deal’s equity is $ 16.3 billion and would pay existing Lucid shareholders $ 11.75 billion. It valued Lucid at an initial pro forma value of $ 24 billion. Pending shareholder approval, it would generate approximately $ 4.4 billion in cash for expansion plans for Lucid, including at its current Arizona plant.
The deal between Newark, California-based Lucid and Churchill is the largest in a string of such deals involving EV companies and a SPAC. Previous SPAC deals with EV startups such as Nikola, Fisker and Lordstown Motors yielded pro forma valuations of less than $ 4 billion.
A SPAC is a blank check company created as an alternative to an IPO because it raises money to buy something but has no business of its own. They are companies that have essentially no assets other than cash, and they are traded on an exchange before merging with private companies.
The company is expected to be listed on the New York Stock Exchange under the ticker “LCID” after the deal closed in the second quarter of this year.