Churchill Capital Corp IV, a blank-check company, saw its stock price surge amid rumors that it was planning to merge with Lucid Motors. Lucid Motors is an electric vehicle startup targeting the high-end luxury market. The value of the transaction could be up to $15 billion.
Lucid Motors has received a lot of buzz lately. The electric vehicle startup has received large investments from Saudi Arabia’s sovereign wealth fund and has drawn comparisons to Tesla. Lucid asserts that Tesla is not really a direct competitor because Lucid targets higher-end customers. The Lucid Air sedan ranges from $70,000 to $160,000. CEO Peter Rawlinson, a former Tesla engineer, states that they consider their main competitors to be traditional luxury automakers like Mercedes Benz.
Users on Redditt, Twitter, and other social media platforms helped disseminate the news about the SPAC deal. One user posted evidence of a private jet going on a multi-leg trip from San Francisco to Phoenix to an airport near New York City. These locations have operations affiliated with either Lucid or Churchill which drives speculation that the travel resulted from deal discussions.
The electric vehicle speculation helped propel Churchill’s stock price above $34 per share in late January 2021. Earlier in the month, the stock had been trading at around $13 per share. The Churchill SPAC’s market capitalization has soared to nearly $9 billion as a result of the Lucid hype.
Churchill Capital Corp IV: A Standout Among Blank-Check Companies
Michael Klein, the CEO of Churchill Capital Corp IV, is a former star banker at Citigroup. Klein has debuted a number of SPACs recently, with Churchill Capital Corp IV being the largest. Churchill currently has more than $2 billion in cash ready to deploy to effectuate a business combination. The leadership team is composed of a former Boeing CEO, a Harvard Business School professor, the former CEO of Saks Fifth Avenue’s parent company, and others with robust management experience.
Churchill Capital Corp IV is a SPAC, or special purpose acquisition company. Investors form a SPAC for the purpose of raising money to merge with a private company and take it public, such as an electric vehicle startup. For this reason, investors often refer to SPACs as blank-check companies. The first step involves taking the SPAC public via an initial public offering (IPO). At the time of its IPO, the SPAC cannot have identified a merger target. Only after the IPO does the management team of the blank-check company select a target business. The business combination process constitutes a reverse merger.
The news that Churchill Capital Corp IV was in reverse merger talks with Lucid caused the stock price to triple. The Churchill SPAC went public on the New York Stock Exchange (NYSE) in July 2020. It was one of the biggest SPAC IPOs at the time, raising $2 billion. Prior to the Lucid Motors speculation emerging, the SPAC made an offer to acquire a stake in DirecTV. That news had little impact on the stock price. The talks with DirecTV stalled in December 2020. The recent rumors about a reverse merger with an electric car company have sparked investor excitement, as evidenced by the rising stock price.
Electric Vehicle Startups Riding the SPAC Boom
Electric vehicle companies have been the subject of significant SPAC merger buzz. The shift toward electrification has made a number of electric vehicle startups, such as Fisker, Lordstown Motors, Canoo, and XL Fleet Corp, prime SPAC targets for a reverse merger.
Faraday & Future Inc. announced that it would be going public through a reverse merger with Property Solutions Acquisition Corp, a blank-check company. The deal would value the combined entity at $3.4 billion.
Nikola Corp went public in mid-2020 through a business combination with VectorIQ Acquisition Corp., a publicly-traded SPAC. Known for its electric-hydrogen trucks, Nikola became the subject of scrutiny after fraud allegations surfaced. A research firm alleged that the company made a number of false statements about its technology and the state of its progress.
Fisker Automotive, an electric vehicle company that counts Leonardo DiCaprio as an investor, combined with Spartan Energy Acquisition in a reverse merger. The transaction added more than $1 billion of cash onto Fisker’s balance sheet. The company’s post-combination name is Fisker Inc. and its shares jumped 13% on its first day trading on the NYSE.
The Lucid Air electric sedan is set to start deliveries to U.S. customers in mid-2021. The Lucid Air EV is able to do about 500 miles on a single charge. It also boasts 480 horsepower. “The Lucid Air is a vehicle that thrills me personally because it delivers a level of performance, efficiency, and luxury that is currently unseen in today’s EVs,” remarked CEO Peter Rawlinson. With a factory based in Arizona, the company plans to sell 6,000 to 7,000 vehicles this year. Similar to Tesla’s business strategy, it intends to debut more affordable models of the Lucid Air in the next few years.