Lucid deal could also be a crack within the SPAC craze and a broader market warning

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A employee assembles the Lucid Air prototype electrical automobile, manufactured by Lucid Motors Inc., on the firm’s headquarters in Newark, California, on Monday, Aug. 3, 2020.

David Paul Morris | Bloomberg | Getty Pictures

The speculative fervor round Lucid’s merger with special purpose acquisition company Churchill Capital Corp IV has been a tough lesson for some SPAC traders.

Shares of Churchill Capital Corp IV plunged 38% Tuesday, following its announcement it will merge with luxurious electrical automobile firm Lucid and take it public. The California-based automobile firm has caught the flamboyant of traders who’ve excessive expectations for its electrical autos that aren’t but in manufacturing.

The deal is the biggest in a collection of mergers between electrical automobile corporations and SPACs.

A SPAC is a blank-check firm, fashioned as a substitute for an IPO. They’re firms with basically no belongings, aside from money, they usually commerce on a inventory trade earlier than merging with personal firms.

“The market cap going into the deal was $65 billion and as a substitute of being valued at that, the deal was done at $24 billion,” mentioned Peter Boockvar, chief funding officer of Bleakley International Advisors, referring to the Churchill-Lucid pairing.

“That simply reveals you, there’s cash chasers in a few of these SPACs as a substitute of individuals doing their homework,” he mentioned.