August 4, 2021

The stocks of a mega SPAC plummeted after revealing their merger with Lucid electric car company

2 min read

An acquisition agreement between Lucid Motors and Churchill Capital Corp IV resulted in the special purpose acquisition company’s shares falling unexpectedly after the announcement. Michael Klein, who invested heavily in the SPAC, pointed that the prices of the stock halved the initial value a few days after divulging details of the merger.

Initially, the shares of Churchill had grown by 470% when the merger was first dated in January. The formal declaration of the merger on Monday and a delay in the supply of the Air sedan by the company are some of the moves that might have accelerated this drop. The chief executive of Lucid Motors, Peter Rawlinson, defected from such conclusions stating that the decline is because of the media reporting the value of the company at $15 billion. He added that this move angered the investors who misinterpreted the deal, causing a decline in their stock prices.

Rawlinson explained that the market had not understood the merger’s meaning, which is why it is shifting its stand from the merger. He added that the merger is the best announcement that the company has made in years and will propel the two companies to great success.

The deal’s face value appears to surpass $16.3 billion, meaning that the Lucid investors would receive $11.75 billion. Moreover, the contract will increase the value of Lucid to $24 billion, creating new opportunities for research development and the expansion of their business activities. Rawlinson reiterated that the initial increase in the company’s shares’ value was an understanding that investors had about the deal.

Rawlinson explained that investors contemplated that the $24 billion value means their stock is below $12 billion when they have a bargaining power of $11.5 billion in a real sense. An investor’s presentation demonstrated that the company requires $600 million in additional financing, after which the deal will outline its benefits to the company.

Rawlinson corrected the delay narrative explaining that this was a problem brought by the coronavirus pandemic’s strict conditions. This deal between Newark of Lucid and Churchill is the most valuable among the other acquisition contracts like for Nikola, Lordstown Motors, and Fisker, which are below $4 billion. Therefore, it is understandable for investors to be misled by unguided elements. This contract will provide $4.4 billion to Lucid Motors to widen its operations and develop more utilities. The company can now venture into the production of the electric SUVs and sedans that it had initially sidelined due to funding problems.

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