Churchill Capital IV’s (CCIV) merger with electric vehicle startup company Lucid Motors is the most talked-about SPAC merger in 2021. SoFi, which was another popular SPAC merger has already listed and spiked after the merger. What’s the merger date for Lucid Motors (LCID) and does the stock have a positive forecast after the merger?
SoFi, which now trades under the ticker symbol “SOFI,” spiked after the merger vote announcement as well after the merger completion. It was a welcome break for investors since a lot of SPACs had tumbled after the merger completion. Reddit group WallStreetBets also picked up SOFI stock and helped trigger a rally.
CCIV-Lucid Motors merger voting date
In its SEC filing, CCIV presumed July 23 as the merger voting date. While announcing the merger, CCIV said that the merger will be completed in the second half of 2021. Meanwhile, the company hasn’t announced the merger voting date yet. As part of the process, the CCIV-Lucid Motors merger needs to be approved by CCIV stockholders. However, with CCIV stock trading at over twice the IPO price, the merger voting should easily sail through.
Lucid Motors versus Tesla
There are multiple similarities between Tesla and Lucid Motors. Both of the companies are targeting the premium EV segment to begin with. The Tesla versus Lucid debate has been ignited more by the fact that Lucid is led by a former Tesla executive Peter Rawlinson. Like Tesla, Lucid is going to produce the cars at its own facility. Many other startups are tied up with third parties.
Also, like Tesla, Lucid intends to target the broader green energy and autonomous driving ecosystem and not limit itself only to EVs. Lucid also intends to offer budget EVs in the future. However, one notable difference is in the charging infrastructure. While Tesla is building its own charging network, Lucid has partnered with Electrify America.
Lucid Motors versus Tesla valuation
While announcing the merger with CCIV, Lucid compared itself to Tesla on several aspects, especially on the valuation part. The merger with CCIV valued Lucid Motors at a proforma equity value of $24 billion based on the PIPE (private investment in public equity) of $15 per share. CCIV priced the PIPE at a 50 percent premium to the IPO price.
Looking at the current CCIV stock price of around $23, we get a proforma market cap of around $37 billion. Now, there are two ways to look at the valuation. The first one is looking at the absolutes where a startup EV company that is in the pre-revenue stage, is commanding a market cap of $37 billion.
Lucid Motors stock forecast
In contrast, General Motors which plans to sell 1 million EVs by 2025 has a market cap of around $85 billion. To put that in perspective, Lucid Motors expects to sell around 135,000 EVs in 2025. Based on the absolute valuation, I would expect Lucid Motors to trade around $15 after the merger.
Lucid Motors relative valuation
Another aspect to look at Lucid Motors’ valuation will be to compare it with Tesla, which has a market capitalization of around $600 billion. The company sold almost half a million cars in 2020 and expects the deliveries to rise 50 percent annually in the near future. If you find Tesla stock fairly valued at these levels, you will find CCIV stock attractive. Let’s put it this way, Lucid Motors is a “cheaper” alternative to play the EV story.
Key risks for LCID stock after the merger
After the merger euphoria dies down, Lucid Motors will have to deliver on the production timelines. Some of the EV startups, especially Lordstown Motors, have already faltered on production highlighting the fact that producing an EV is a complex exercise. Also, Lucid Motors is going to make the cars themselves.
While I find that to be a competitive advantage over companies using third-party facilities, it might also lead to production bottlenecks that even Tesla faced multiple times. However, one soothing aspect about Lucid Motors is the backing from the Saudi wealth fund whose deep pockets would ensure that Lucid has a steady flow of capital.