One of the most promising electric vehicle start-ups, Lucid Motors, will soon go public. After weeks of speculation, the company confirmed on Monday night that it will merge with a special purpose acquisition company (SPAC), Churchill Capital IV (NYSE:CCIV), in a deal that will take it public by the end of June.
As SPAC deals go, this is a very big one. Lucid is one of the most promising new companies in the space, and -- as you'd expect -- the amount of money here is quite substantial.
Let's take a closer look.
The key points of the deal
If you've followed other recent SPAC deals, you probably know that they follow a somewhat standard form. The SPAC brings its own money, raised via its initial public offering, as well as a so-called "PIPE" funded by third-party investors.
("PIPE" is short for "private investment in public equity." PIPE investors tend to be big investment funds, and they generally get a favorable share price in exchange for a commitment to hold for a set period after the deal closes.)
Here's how this deal breaks down:
- Churchill Capital IV is contributing $2.1 billion in cash.
- The PIPE, which is claimed to be the largest ever in a SPAC deal, will add another $2.5 billion. PIPE investors are paying $15 per share, a 50% premium over the SPAC's net asset value.
- The PIPE investors include Saudi Arabia's Public Investment Fund, a Lucid investor since 2018, as well as funds and accounts managed by BlackRock, Fidelity Investments, Franklin Templeton, and several other prominent names.
- The post-merger company's value is expected to be $24 billion. It will retain the Lucid Motors name, will trade under the ticker "LCID," and will continue to be led by current CEO Peter Rawlinson and the existing senior team.
Shareholders of Churchill Capital IV will collectively own 16.1% of post-merger Lucid. The SPAC investors will own an additional 10.4%, and existing Lucid shareholders will own the remaining 73.5%.
Why is Lucid worth so much?
Many start-up electric vehicle companies are talked about as having the potential to be "the next Tesla." But Lucid is different: It has a fully developed product (and a pipeline of other products in the works), a nearly completed factory, lots of preorders, an impressive management team, genuinely advanced technology, and on and on.
Among the key points:
- Lucid already has a factory. Lucid's Arizona factory is being built in stages. It'll expand over the next couple of years, but the first stage is nearly done: Production of Lucid's first model, the Air luxury sedan, will begin later this year.
- Lucid's race-bred EV tech is genuinely innovative. Lucid has been supplying batteries and technology to teams in the Formula E electric vehicle racing series for several years. That experience has contributed to the design of an innovative battery module, which is optimized for mass production on a huge scale, as well as its impressive fast-charging technology: Top-line Lucid Airs will be able to add 300 miles of range in just 20 minutes. Lucid also has its own unique motors, inverters, and software.
- Lucid has a product pipeline. The Air will be followed in 2023 by a large electric luxury SUV. More -- and more affordable -- Lucids will follow over the next few years.
- Lucid has a spectacular management team. CEO Peter Rawlinson has what must be the ultimate EV resume credential: He was chief engineer of Tesla's Model S. Other senior executives bring deep experience from companies like Apple, Ford Motor Company, Audi, Mazda Motor, and Ferrari.
And the brand? Lucid is positioning itself as a "post-luxury" company, which seems to mean more luxurious than Tesla, but in a modern-and-elegant California way, not an opulent German-luxury-brand way.
The Air sedan will start at $69,900, after a $7,500 U.S. government tax credit. Top-line models (think $160,000) will have up to 517 miles of EPA-rated range and up to 1,080 horsepower.
I sat in an early Air prototype a few years ago, and I can attest that it was roomy and very comfortable inside, with a spacious and soothing feel. The production version appears to be a bit more refined, but it's very similar. I also spent some time talking to Rawlinson, and I can attest that he is an extremely knowledgable and impressive leader.
So is Lucid stock a buy?
As I pointed out not long ago, Churchill Capital IV's stock price was unrealistically high before the deal was announced. (It's down significantly as I write this on Tuesday morning, and I won't be surprised if it falls further in the near term.)
But that said, for auto investors who think electric vehicles are the future (I do), and who think a new company can compete with the global auto giants (Tesla has done well so far), Lucid Motors should be at or near the top of your watch list.