Excessive-profile SPAC craters following the announcement of the plan to merge with the electrical automotive firm Lucid
A record reverse merger deal between Lucid Motors and Churchill Capital Corp IV dropped the shares of SPAC owned by well-known investor Michael Klein early on in trading.
Special Purpose Acquisition Company (SPAC) shares were down as much as 46% to less than $ 31 per share. The stock traded at $ 41.95 per share at 10:50 am on Tuesday.
The decline is due to Churchill’s shares rising more than 470% after it was first reported that the companies were in talks about a merger last month. With the official announcement of the contract on Monday evening, the companies confirmed a delay in the delivery of their first car – a luxury sedan named Air – from this spring to the second half of this year.
Lucid also expects negative free cash flow through 2024 and will require $ 600 million in bridge funding by the time the deal is expected to close in the second quarter, according to a company investor presentation.
“This is a capital-intensive business,” said Lucid CEO Peter Rawlinson during CNBC’s “Squawk on the Street” Tuesday. “Our balance sheet will secure our runway until 2023.”
The deal between Lucid and Churchill of Newark, California, is the largest in a series of such collaborations between EV companies and so-called blank check companies.
The equity value of the deal is $ 16.3 billion and would pay existing Lucid shareholders $ 11.75 billion. It rates Lucid at an initial pro forma valuation of $ 24 billion. Previous SPAC deals with EV startups like Nikola, Fisker and Lordstown Motors achieved pro forma valuations of less than $ 4 billion.
The deal, announced Monday evening, will generate approximately $ 4.4 billion in cash for expansion plans for Lucid, including the current facility in Arizona.
“I think this has enabled us to secure our future,” said Rawlinson. “This means we can safely accelerate our business model.”
Rawlinson, a former Tesla technical director and veteran of the automotive industry, joined the company in 2013 as chief technology officer before adding his responsibilities as CEO in April 2019.
The combined company is expected to be listed on the New York Stock Exchange under the ticker “LCID” upon closing.
Lucid was founded in 2007 as Atieva, a name it now uses for its technical and engineering division that supplies batteries for the Formula E electric circuit. The company initially focused on electric battery technology before changing its name to an electric vehicle manufacturer in 2016, three years after Rawlinson joined the company to lead technology development.
Lucid struggled with some difficulty raising capital to fund his plans until he received $ 1 billion from the Saudi Arabian sovereign wealth fund in September 2018.
Rawlinson described SPAC deals last year as easy money but not enough capital to get a vehicle into production, which has led companies like Fisker to look for contract manufacturers.
Prior to the announcement at Klein’s company, Rawlinson said the company had the funds to begin producing the air at a facility in Casa Grande, Arizona, southeast of Phoenix.
The new funding is intended to support Lucid in its expansion plans. Rawlinson expects the Air to be the catalyst for a number of future all-electric vehicles, including an SUV starting production in early 2023, and cheaper vehicles across the board.
Lucid currently employs almost 2,000 people. The US is expected to employ 3,000 people domestically by the end of 2022.
The deal includes a total investment of around $ 4.6 billion. It is funded with $ 2.1 billion in cash from CCIV and a fully committed PIPE of $ 2.5 billion at $ 15 per share from the Saudi Arabian state fund, as well as funds and accounts held by BlackRock, Fidelity and managed by others.
Correction: This article has been updated to correct the store’s equity value. It’s $ 16.3 billion.