Electric vehicle maker Lucid Motors, a rival to Tesla, on Monday announced that it will be going public by merging with blank-check firm Churchill Capital IV Corp, backed by former Citigroup banker Michael Klein. The deal with Churchill Capital IV Corp will value the combined entity at $11.75 billion.
Lucid Motors is the latest automaker to tap the IPO market given that investors are flooding the EV sector, motivated by the expansion of Tesla and tightening noose around the traditional cars due to the emissions regulations in Europe and other parts of the world. Although Lucid Motors is in no mood to compete with Tesla, it definitely will pose a new threat to Elon Musk's company given the growing number of players entering the electric vehicle space.
Entering a New Territory
The reverse-merger represents the largest injection of capital into Lucid Motors since Saudi Arabia's Public Investment Fund invested more than $1 billion in 2018. Through this deal with Churchill Capital IV Corp, Lucid Motors will generate about $4.4 billion in cash. The transaction includes approximately $2.1 billion cash contribution by Churchill Capital IV and a $2.5 billion fully committed private placement in public equity, or PIPE.
The PIPE investment will be led by the existing investor Public Investment Fund (PIF) as well as funds managed by BlackRock, Fidelity Management & Research LLC, Franklin Templeton, Neuberger Berman, Wellington Management and Winslow Capital Management.
The placement sold at $15 a share translates into around $24 billion in pro-forma equity value, Churchill Capital IV and Lucid said in a joint statement. The combined company has a transaction equity value of $11.8 billion.
Lucid also announced that it plans to start production and deliveries of Lucid Air, its first luxury sedan, from its Arizona factory as early as in the second half of 2021. The 14-year-old company plans to deliver around 20,000 vehicles in 2022 and then ramp up production, reaching 251,000 units by 2026 by adding a series of new models.
The company has also set the price of its first vehicle. The Lucid Air electric sedan will be available at a starting price of $77,400 and is slated to be the first to achieve a 500 mile driving ran.
Tesla Gets a Competitor
The Newark, California-based company also announced that Peter Rawlinson will continue to lead Lucid as CEO and CTO. The company had initially planned to start deliveries in the spring but things got pushed because of the IPO. Needless to say, Lucid's decision to go public will only heat up the EV race given that Rawlinson is a former Tesla employee, who worked as the chief engineer on the company's flagship Model S.
Interestingly, Lucid Air electric sedan will also be the costliest to challenge Tesla and has a maximum range of around 520 miles. That said Lucid doesn't want to compete with Tesla, which so far has had a monopoly in the electric vehicle space.
Lucid's market capitalization is just a fraction of Tesla $690 billion valuation but at the same time it isn't bad for an EV marker which is yet to roll out its first vehicle. Moreover, Lucid may not pose a direct threat to Tesla but definitely heat up the race. And there are reasons behind it.
Rawlinson left Tesla to start his own company and now is producing vehicle in which his former boss enjoys monopoly. Moreover, Lucid's headquarter is just 16 kilometers from Tesla's in Palo Alto. Also, Lucid's Arizon factory built in record time much like Tesla's Shanghai gigafactory.
Musk has always been critical of Rawlinson ever since he left Tesla. In fact, during his tenure in Tesla, Musk largely downplayed Rawlinson's role in developing Model S. Instead, he once even accused him in a tweet of leaving the company "in the lurch just as things got tough" in 2012.
Interestingly, after the price announcement of the Lucid sedan, Musk lowered the price of Model S. "The gauntlet has been thrown down!" he tweeted.