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Bloomberg Was Wrong About Lucid Motors and Churchill Capital IV

By Evan Niu, CFA - Mar 23, 2021 at 9:00AM

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The media report that set off a dramatic chain of events was inaccurate, but still contributed to a deal getting done.

Lucid Motors and its upcoming merger with special-purpose acquisition company (SPAC) Churchill Capital IV (CCIV) has been an epic saga over the past couple of months. It all started when Bloomberg published a report on Jan. 11 that said the two companies were in talks for a potential deal to take Lucid public.

Lucid has been one of the most promising private electric vehicle (EV) start-ups in recent years, and the report immediately sparked massive investor interest, particularly compared to the previous rumor that Churchill Capital IV was interested in buying a piece of DIRECTV from AT&T.

CCIV Chart

CCIV data by YCharts.

Here's the thing: Bloomberg got it wrong.

Lucid and Churchill weren't talking...yet

This week, Churchill Capital IV filed its S-4 form related to the Lucid deal with the SEC. The form generally provides additional information regarding proposed mergers and acquisitions. That often includes background information, such as a timeline of events leading up to a definitive agreement.

Exterior of a Lucid studio

Image source: Lucid Motors.

Lucid tapped Citigroup as a financial advisor in September 2020 to explore the possibility of raising capital, according to the filing. That could have entailed a private placement, a traditional IPO, or a SPAC merger. In December 2020, Lucid CEO Peter Rawlinson started meeting with various SPACs to discuss potential merger deals. Churchill Capital IV was not one of them.

When Bloomberg published its fateful report, Lucid and Churchill had not had any talks whatsoever, according to the filing (emphasis added):

On January 11, 2021, Bloomberg published an article stating that Churchill was in discussions to acquire Lucid. However, at the time the article was published, Churchill and Lucid had not had any discussions with respect to a potential business combination. Subsequent to the Bloomberg article, Churchill began exploring a possible business combination with Lucid due to its interest in the electric vehicle industry, as well as Churchill's familiarity with Lucid's Chairman, Andrew Liveris, who is an operating partner of the Sponsor.

Between December 2020 and Jan. 22, Lucid had direct discussions with five SPACs, none of which were Churchill Capital IV. Lucid only started talking with Churchill Capital IV after the initial report was published. In fact, the talks between Churchill and Lucid's financial advisors started later that very day. Due to obvious conflicts of interest from serving on both Lucid's board and Churchill's operating team, Liveris recused himself from all of the negotiations.

In the weeks that followed, Lucid and Churchill continued to negotiate terms around valuation (the initial enterprise value range was $9 billion to $11 billion) and board structure while Churchill continued to do its due diligence to vet the nascent EV maker's core technology. A definitive agreement was finalized, and the rest is now history.

Bloomberg's report may have been wrong, but it ended up catalyzing the talks that led to the deal.

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