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Shares of SPAC for Electric-Car Company Lucid Plummet 20% More After Merger Announcement

Lucid
  • Shares of Churchill Capital IV continued to plummet for a second consecutive day after the company announced a deal Monday night to bring EV firm Lucid public through a reverse merger.
  • The stock closed down 18.5% to $28.70 a share, adding to a tumultuous week for the special purpose acquisition company, also known as a SPAC.
  • Shares were off 38.6% on Tuesday.

Shares of Churchill Capital IV plummeted for a second consecutive day Wednesday after the company announced a deal Monday night to bring electric-vehicle firm Lucid public through a reverse merger.

The stock closed down 18.5% to $28.70 a share, adding to a tumultuous week for the special purpose acquisition company, also known as a SPAC, from well-known investor Michael Klein. Shares were off 38.6% on Tuesday. The back-to-back drops follow a nearly fivefold increase in the share price since early January, when it was first reported the companies were in talks.

Lucid CEO Peter Rawlinson on Tuesday attributed the decline in the share price to media reports that the company's expected valuation was between $12 billion and $15 billion, which led to an initial misunderstanding of the announced deal by investors.

"I think that the market is yet to properly comprehend what's going on," he told CNBC in a Zoom interview. "Because to me, what was announced overnight was fantastically positive compared with anything that had been reported before."

The Wall Street Journal highlighted the confusion in an article Wednesday, with the first paragraph of the story saying: "Is electric-vehicle company Lucid Motors 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. It valued Lucid at an initial pro forma valuation of $24 billion. Pending shareholder approval, it would generate about $4.4 billion in cash for expansion plans for Lucid, including at its current factory in Arizona.

The deal between Newark, California-based Lucid and Churchill is the largest in a series of such tie-ups involving EV companies and a SPAC. Previous SPAC deals with EV start-ups such as Nikola, Fisker and Lordstown Motors garnered pro forma valuations of less than $4 billion.

A SPAC is a blank-check company, formed as an alternative to an IPO, because it raises funds to buy something but doesn't have any operations of its own. SPACs are companies with essentially no assets other than cash and they trade on a stock 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.

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