Lucid Motors in $4.4 Billion SPAC Deal With Churchill Capital

Building cars takes real money, and that’s exactly what electric vehicle (EV) startup Lucid Motors will have if shareholders agree to its business combination with Churchill Capital Corp. IV (NYSE: CCIV). Under a reverse merger announced Tuesday by Lucid and CCIV, the EV maker would realize around $4.4 billion in net proceeds from the deal.

Existing shareholders in CCIV are not amused. The stock traded down nearly a third in Tuesday’s premarket session to $38.22.

Before looking at why the blank-check company’s stock is taking a beating, let’s look at the good news for Lucid. According to a presentation filed with the U.S. Security and Exchange Commission, CCIV holds some $2.1 billion in trust that will go to the carmaker, and proceeds from a private investment in public equity (PIPE) offering will add another $2.5 billion (gross) to the company’s take.

Lucid will end up with $4.4 billion in cash on its balance sheet, not including a $600 million bridge loan that is “expected to be completed in the near term” and that the company will use for working capital. The reverse merger is expected to be completed in the second quarter, and CCIV stock will begin trading on the New York Stock Exchange under a new ticker symbol: LCID.

Existing shareholders in Lucid will contribute $11.75 billion to the acquisition value in the form of newly issued shares valued at $10 per share. Once the transaction is completed, existing shareholders will own 73.5% of the surviving company, CCIV shareholders will hold 16.1% and PIPE shareholders will own 10.4%. A total of 1.6 billion shares will be outstanding.

According to Bloomberg, the PIPE deal is the largest on record for a special-purpose acquisition company (SPAC) deal. The deal sold for $15 a share, 50% higher than CCIV’s net asset value, which translates to a pro-forma equity value of around $24 billion.

At Monday’s closing price, CCIV shares traded at $57.37, up more than 8% for the day. CCIV came public in mid-September at an IPO price of $10.25 per share and reached a post-IPO high of $64.86 last Thursday. If you own CCIV shares, do you sell now for whatever you can get or do you hold on expecting Lucid stock to jump following the closing of the transaction?

Lucid has altered its original plan to release its top-of-the-line $161,500 Lucid Air Dream Edition in 2021 and will focus its efforts this year on completing its Arizona assembly plant to deliver 577 vehicles this year. The company expects to grow volume to more than 20,000 in 2022 and to nearly 49,000 in 2023.

The company expects to make its first non-GAAP profit of $632 million in 2025. After four years of net losses, it estimates to total around $4 billion in the next four years.

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