The day is finally here, but retail investor interest has soured. Lucid Motors and Churchill Capital IV (NYSE:CCIV) confirmed their plans to merge, and CCIV stock is now down more than 30% in pre-market trading. So what is responsible for the plunge? And what else do you need to know about the Lucid Motors SPAC merger?
After great anticipation, the two companies finally confirmed the merger rumors on Monday. This follows a popular Bloomberg article that promised a deal would come soon, likely early this week. And while the deal will now bring the Tesla (NASDAQ:TSLA) competitor to the public markets, CCIV stock is in a slump. It seems valuation and production concerns, as well as the general hype surrounding the merger, are weighing on shares.
With that in mind, here is what you need to know about the Lucid Motors SPAC merger now:
- According to the press release, the two companies are coming public at a combined equity value of $11.75 billion.
- However, it also outlines how Lucid Motors has a pro forma equity value of $24 billion.
- This factors in a $2.1 cash from Churchill Capital and $2.5 billion in a private investment in public equity (PIPE) deal.
- Lucid and CCIV note that the PIPE deal comes with an investor lock-up provision.
- They also outline how the PIPE is priced at $15 per share. This comes in at a “50% premium to CCIV’s net asset value.”
- PIPE investors include the Public Investment Fund of Saudi Arabia (a major Lucid backer), BlackRock, Fidelity and and Franklin Templeton.
- Investors should note that this is the largest-ever PIPE deal associated with SPACs.
- Lucid also shared some updates about its business.
- It said that right now, it employs nearly 2,000 people.
- The company plans to launch its all-electric sedan, the Lucid Air, later in 2021.
CCIV Stock and Lucid Motors: What Comes Next?
In the last few weeks, retail investors and social media users have become detectives, digging into every detail they can find on the rumored deal. Today, Lucid Motors gave us a little bit more insight into its future path. We learned that it hopes to go from nearly 2,000 employees now to 3,000 employees at the end of 2022. It also plans to follow up its Lucid Air with a performance Gravity SUV in 2023. And lastly, scaling up its production facility in Arizona, it hopes to ultimately produce 365,000 vehicles per year.
Those are all good things. However, CCIV stock is plunging. It looks like valuation concerns — namely that Lucid Motors will come public at an equity value of $24 billion — are spooking the market. In reports leading up to this announcement, Reuters and Bloomberg cited figures between $12 billion and $15 billion for the public value of Lucid.
So what do you next? Is the drop this morning a sign to panic and run? Maybe not. In fact, InvestorPlace analyst Luke Lango sees Lucid Motors as the next 10x opportunity. He wrote that CCIV stock is worth $70 today… and that by 2040, Lucid could be worth $600 billion. The hype, mismatched valuations and leaked deal may have caused an upset this morning. But overall, keep the Lucid Motors SPAC merger on your radar.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.