One of the most promising electric vehicle startups, Lucid Motors, will soon go public. After weeks of speculation, the company confirmed late Monday that it will merge with a special purpose acquisition company (SPAC). Churchill Capital IV (New York Stock Exchange: CCIV), in an agreement that will be made public at the end of June.
As SPAC offerings progress, this is a very a big one. Lucid is one of the most promising startups in the industry and unsurprisingly the amount of money here is quite substantial.
Let’s take a closer look.
The key points of the deal
If you’ve followed other recent SPAC offerings, you probably know that they follow a somewhat standard form. The SPAC contributes its own money, raised through its initial public offering, as well as a so-called “PIPE” financed by third-party investors.
(“PIPE” is short for “private investment in public capital.” PIPE investors tend to be large mutual funds and generally get a favorable share price in exchange for a commitment to hold for a specified period after closing of the deal).
Here’s how this deal breaks down:
- Churchill Capital IV is contributing $ 2.1 billion in cash.
- The PIPE, said to be the largest in a SPAC deal, will add another $ 2.5 billion. Investors in PIPE are paying $ 15 per share, a 50% premium over the net asset value of the SPAC.
- PIPE investors include the Saudi Arabia Public Investment Fund, a Lucid investor since 2018, as well as funds and accounts managed by Black rock, Fidelity Investments, Franklin Templeton and several other prominent names.
- The post-merger value of the company is expected to be $ 24 billion. It will retain the Lucid Motors name, trade under the ticker symbol “LCID,” and continue to be led by current CEO Peter Rawlinson and the existing senior team.
Churchill Capital IV shareholders will collectively own 16.1% of Lucid after the merger. SPAC investors will own an additional 10.4% and existing Lucid shareholders will own the remaining 73.5%.
Why is Lucid worth so much?
There is talk of many electric vehicle start-ups that have the potential to be “next Tesla. “But Lucid is different: it has a fully developed product (and a portfolio of other products in the works), a near-completed factory, many pre-orders, an impressive management team, genuinely advanced technology, and so on.
Among the key points:
- Lucid already has a factory. Lucid’s Arizona factory is being built in stages. It will expand in the next few years, but the first stage is almost complete: production of Lucid’s first model, the Air luxury sedan, will begin later this year.
- Lucid’s EV technology is truly groundbreaking. Lucid has been supplying batteries and technology to teams in the Formula E electric vehicle racing series for several years. That experience has contributed to the design of an innovative battery module, which is optimized for large-scale mass production, as well as its impressive fast-charging technology: Top-of-the-line Lucid Airs will be able to add 300 miles of range in just 20 minutes. Lucid also has its own unique engines, inverters, and software.
- Lucid has a portfolio of products. Air will be followed in 2023 by a large luxury electric SUV. More, and more affordable, Lucids will follow for years to come.
- Lucid has a spectacular management team. CEO Peter Rawlinson has what should be the ultimate CV credential for EVs – he was chief engineer for Tesla’s Model S. Other senior executives bring extensive experience in companies such as Apple, Ford motor company, Audi, Mazda Motor, Y Ferrari.
And the brand? Lucid is positioning itself as a “post-luxury” company, which seems to mean more luxurious than Tesla, but in a modern, California-chic way, not in the opulent way of a German luxury brand.
The Air sedan will start at $ 69,900, after a government tax credit of $ 7,500. Top-of-the-line models (think $ 160,000) will have up to 517 miles of EPA-qualified range and up to 1,080 horsepower.
I sat on one of the first Air prototypes a few years ago and I can attest that it was spacious and very comfortable inside, with a spacious and relaxing feel. The production version seems to be a bit more refined, but it is very similar. I also spent some time talking to Rawlinson, and I can attest that he is an impressive and extremely knowledgeable leader.
So is Lucid stock a buy?
As I pointed out not long ago, Churchill Capital IV’s stock price was unrealistically high before the deal was announced. (It’s down significantly as I write this Tuesday morning, and I won’t be surprised if it drops further anytime soon.)
But with that said, for automotive investors who think EVs are the future (I do), and who think a startup can compete with global auto giants (Tesla has done well so far), Lucid Motors should. be on or near the top. off your watch list.