Shares of SPAC for electric car company Lucid plummet another 20% after merger announcement

  • Shares of Churchill Capital IV continued to plummet for a second consecutive day after announcing a deal Monday night to bring EV firm Lucid public through a reverse merger.
  • Shares were down as much as 19.6% during midday trading

Shares of Churchill Capital IV continued to plummet for a second consecutive day Wednesday after announcing a deal Monday night to bring electric vehicle firm Lucid public through a reverse merger.

Shares were down by as much as 19.6% during midday trading to $28.32, adding to a tumultuous week for the special purpose acquisition company, also known as a SPAC, from well-known investor Michael Klein. The stock was off 38.6% on Tuesday. The back-to-back drops follows 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 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 graph 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. They 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 in the second quarter of this year.

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