Exterior of the Lucid Air sedan, which debuted on September 9, 2020 as the company’s first production vehicle.
Shares in Churchill Capital IV continued to plummet for the second day in a row Wednesday after announcing a deal Monday night to bring electric vehicle firm Lucid public through a reverse merger.
The shares fell as much as 19.6% during midday trading to $ 28.32, adding to a tumultuous week for well-known investor Michael Klein’s special-purpose takeover company, also known as SPAC,. The stock fell 38.6% on Tuesday. The back-to-back declines follow a nearly five-fold rise in the stock price since early January, when the companies were first reported to be in talks.
Lucid CEO Peter Rawlinson on Tuesday attributed the drop 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 the market has yet to properly understand what is happening,” he told CNBC in an interview with Zoom. “Because for me, what was announced overnight was fantastically positive compared to everything that had been reported before.”
The Wall Street Journal highlighted the confusion in an article Wednesday with the first ever graph that read: “Is the electric vehicle company Lucid Motors worth $ 11.75 billion, $ 24 billion, or $ 57 billion?”
The share value of the deal is $ 16.3 billion and it would pay existing Lucid shareholders $ 11.75 billion. He valued Lucid with an initial proforma valuation of $ 24 billion. Pending shareholder approval, it would generate about $ 4.4 billion in cash for Lucid’s expansion plans, including at its current factory in Arizona.
The deal between Lucid and Churchill, based in Newark, California, is the largest in a series of deals involving electric vehicle companies and a SPAC. Previous SPAC deals with EV start-ups such as Nikola, Fisker, and Lordstown Motors earned 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 does not have its own operations. They are companies that have essentially no assets, except cash, and are listed 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 symbol “LCID” after the deal closes in the second quarter of this year.