Shareholders of special purpose acquisition company Churchill Capital Corp. IV (NYSE:CCIV) is set to vote July 22 on its merger with Lucid Motors, the luxury electric vehicle maker. However, before investors buy CCIV stock, you might want to consider Michael Klein’s volume of work.
It could provide some clues as to Churchill Capital Corp. IV’s ultimate success.
Here’s why.
Churchill Capital’s First SPAC
Churchill Sponsor LLC, an affiliate of M. Klein and Company, raised $690 million in September 2018. It was the former Citi investment banker’s first SPAC. He did it in partnership with Jerre Stead; a corporate hired gun if there ever was one.
Over Stead’s career, he has served on 37 corporate boards and been chief executive officer of 10 public companies.
While the SPAC left its options open as to the type of company it would combine with, ultimately, it focused on companies in the information services industry, an area of expertise for Stead.
In May 2019, Churchill Capital merged with Clarivate (NYSE:CLVT) in a transaction valued at $4.2 billion. Stead moved from executive chairman of Churchill into the CEO’s job at the ripe old age of 77.
In July 2020, Clarivate announced that it would merge with CPA Global, a management software company. The all-stock deal valued the company at $6.8 billion. Once completed in October 2020, CPA Global’s shareholders owned 35% of the combined entity, with Clarivate shareholders owning the rest.
How well has Stead done from his participation in Churchill Capital’s first SPAC?
As of June 30, the CEO owned 12.46 million shares. As I write this, they are worth almost $306 million. Klein’s 17.45 million shares are worth substantially more. Moreover, all of the shares were acquired at bargain-basement prices.
As for the stock, it’s up 9% over the past 52 weeks and 80% since CCIV was de-SPAC’d in May 2019.
If you’re still holding from Day 1 of the SPAC, you’ve done just fine. However, Stead and Klein have done better.
CCIV Stock and the Rest of the SPACs
CCIV was the fourth SPAC from Klein. It raised $1.8 billion in July 2020. As mentioned initially, CCIV shareholders are set to vote on the merger with Lucid on July 22.
The companies held an Investor Day presentation on July 13 to get investors up to speed on Lucid’s progress. Highlights included reservations for Lucid Air piercing the 10,000-mark with the Lucid Air Dream Edition fully reserved. Further, it reiterated 20,000 vehicles in its production plans for 2022. Lastly, it produced 89 pre-production vehicles by its June target.
I’d be shocked if shareholders rejected the deal. Original SPAC shareholders are up 142% over the past year, a better return than Churchill Capital.
Churchill Capital II raised $600 million in June 2019. It merged with Skillsoft (NYSE:SKIL) in June. That deal was worth $1.5 billion and created a platform for Skillsoft to continue growing its digital learning solutions.
The original SPAC shareholders, if still holding, have lost approximately 7% over a 24-month hold. That’s not good.
Klein’s third SPAC was Churchill Capital Corp. III. It raised $1 billion in February 2020, merging with Multiplan (NASDAQ:MPLN) in October 2020. The combination, which valued the merged entity at $11 billion, has been an unmitigated disaster.
In November 2020, short-seller Muddy Waters Research came out with a report suggesting UnitedHealth Group (NYSE:UNH) was going to drop Multiplan as a customer because it introduced Naviguard, a competitive product.
MPLN stock dropped by 20% on the news. It has yet to recover those losses. Investors in the SPAC are down 30% over the past 17 months. Also, not good.
Finally, Churchill Capital Corp. V (NYSE:CCV) raised $450 million in December 2020, Churchill Capital Corp. VI (NYSE:CCVI) raised $480 million in February 2021, and Churchill Capital Corp. VII (NYSE:CVII) raised $1.2 billion in February 2011.
All three have yet to make a merger announcement. All three are trading at or below their IPO unit price of $10.
The Bottom Line
In January, I was enthusiastic about CCIV stock. That’s because, with the over-allotment, the fourth of Klein’s SPAC deals raised $2.1 billion in cash, making it one of the largest IPOs of its kind.
“What I do know is that Michael Klein’s long-term track record for SPACs is still to be written. Further, I think it’s way too early to write him off,” I wrote on Jan. 31. “As jockeys go, I still believe he’s worth betting on, with or without Lucid.”
Approximately a month later, after announcing its merger with Lucid, my opinion of CCIV had soured.
With more time to evaluate Klein’s volume of work, only Clarivate seems to be headed on the right track. Perhaps it will produce enough profits for Klein that the success of the other six won’t matter.
Frankly, you’re better off buying seven innovation ETFs on an equal-weighted basis. The risk is lower and the payoffs likely higher.
But go ahead and own CCIV-Lucid for the long haul.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
