Exterior of the Lucid Air sedan, unveiled on September 9, 2020 as the company’s first production vehicle.
Churchill Capital IV shares continued to fall for the second straight year on Wednesday after a deal was announced on Monday night to bring electric vehicle company Lucid public through a reverse merger.
Shares fell as much as 19.6% to $ 28.32 during midday trading, which contributed to a turbulent week for the special-purpose acquisition company, aka SPAC, of noted investor Michael Klein. The stock fell 38.6% on Tuesday. The decline is due to a nearly five-fold increase in the share price since early January, when the companies were first reported to be in talks.
Peter Rawlinson, CEO of Lucid, on Tuesday attributed the share price decline to media reports that the expected valuation of the company was between $ 12 billion and $ 15 billion, leading to an initial misunderstanding of the announced deal by investors.
“I think the market has not yet fully understood what is going on,” he told CNBC in a Zoom interview. “For me, what was announced overnight was fantastically positive compared to anything previously reported.”
The Wall Street Journal highlighted the confusion in an article on Wednesday with the first graphic in history: “Is Lucid Motors’ electric vehicle company worth $ 11.75 billion, $ 24 billion, or $ 57 billion?”
The equity value of the deal is $ 16.3 billion and would pay existing Lucid shareholders $ 11.75 billion. Lucid was valued at an initial pro forma valuation of $ 24 billion. Pending shareholder approval, the company would generate approximately $ 4.4 billion in cash for expansion plans for Lucid, including at its current facility in Arizona.
The deal between Lucid and Churchill of Newark, California is the largest in a series of such collaborations between EV companies and a SPAC. Previous SPAC deals with EV startups like Nikola, Fisker and Lordstown Motors achieved 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 doesn’t have its own stores. They are companies that have essentially no assets other than cash and 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 closes in the second quarter of this year.