On July 22, Churchill Capital Corp IV (NYSE: CCIV) shareholders were scheduled to vote to approve its merger with Lucid Motors. Working under the assumption of shareholder approvals, the company expected to begin trading on July 23. This however, was held up as a result of lack of retail shareholder participation in the voting process.
After pleading to shareholders and a one-day delay for the shareholders meeting, the transaction was finally approved to proceed on Friday. The company will now begin trading on the Nasdaq under the symbol LCID on July 26, and will boast roughly $4.4 billion worth of “growth capital.”
In anticipation of the name change and new stock symbol, CCIV/Lucid made several announcements in mid-July, most of which appear to be constructive. First, Lucid reiterated the unit sales and financial projections that it released in February 2021 when it first announced its merger with SPAC sponsor Churchill Capital. Most notably, Lucid still expects to sell 20,000 electric vehicles (EVs) in 2022 and to reach a 250,000-unit annual pace by 2026. In turn, EBITDA is projected to be US$2.9 billion in 2026.
Admittedly, these figures could be optimistic, but Lucid did not back off the projections it released in February. A number of other EV makers and EV suppliers have comparatively scaled back or delayed projections they had previously made.
Second, reflecting the strong demand for Lucid Air models and its solid cash position, Lucid plans to spend US$350 million more in capital expenditures than it previously budgeted over the period 2021 – 2023. The additional spending will increase and expand its manufacturing capacity.
Third, Lucid now has more than 10,000 reservations for its vehicles, which seems robust relative to its 2022 sales forecast of 20,000 units. Lucid’s highest-end model, the Dream Edition, is fully reserved. Reservation deposits are refundable, but Dream Edition reservation payments are quite significant.
As an aside, the biggest beneficiary of the Lucid Motors-Churchill Capital merger close is likely to be the kingdom of Saudi Arabia. The Wall Street Journal reported that the Saudi Public Investment Fund owns a 60%+ stake in Lucid, which it purchased for around US$2.9 billion. The Saudis stand to make a paper profit of around US$20 billion.
Valuation Seems Elevated
Despite the positives noted above, Lucid Motors shares carry a high valuation. Upon merger close, shares outstanding will total about 1.6 billion. Factoring in CCIV’s share price of about US$24 and a net cash position of around US$4.4 billion, its enterprise value is about US$34 billion. This implies that the ratio of Lucid’s enterprise value to its 2026E EBITDA is nearly 12x, a high out-year multiple for a speculative stock.
Churchill Capital Corp IV last traded at US$24.25 on the NYSE.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
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