News: Lucid Motors’ $24 billion blank-check deal sparks bubble concerns.
(Reuters) – Electric vehicle sensation Lucid Motors set the market on fire this week with a $ 24 billion blank check in New York, but it also sparked concerns among some investors about a short circuit in the valuation of electric vehicle manufacturers.
Churchill Capital IV Corp. shares fell more than 40% Tuesday, the day after they agreed to merge with Lucid, which makes luxury electric vehicles but has not yet officially started producing cars or generating significant revenues .
The deal valued the combined company with a pro forma equity value of $ 24 billion, just a fraction of Elon Musk’s Tesla but still the largest to ever have held so-called Special Purpose Acquisition Companies (SPACs).
“We’re bringing the world’s best technology to market this year. Here in the US, I think the rating is a reflection of our technology,” Peter Rawlinson, chief executive officer, told CNBC on Tuesday when asked if Lucids Rating made him nervous.
The massive surge in valuations of a number of EV startups barely having significant headcount, launch product, or revenue has drawn comparisons to the dot-com bubble of 1999-2000 with analysts and investors expecting a near-term correction.
“The EV sector appears to be going through a correction. Lucid’s SPAC IPO is likely to result in a circular negative gain, ”said Craig Irwin, analyst at Roth Capital Partners.
“We believe Tesla was valued for teleportation, so correcting it is likely a very healthy thing. That way, investors can look for potential entry points in names that they may have overlooked, ”he added.
Lucid, led by a former Tesla engineer, is the youngest EV company to enter the US capital markets. Investors are rushing into the sector as tighter emissions standards drive the move to electric vehicles.
Lucid is one of the strongest startups to challenge Tesla’s dominance with its roster of deeply pocketed funders.
After Lucid valued its sedan starting at $ 77,400, Musk announced a price cut for its flagship Model S sedan. “The glove was thrown off!” he tweeted.
However, Lucid’s five-year period to produce 251,000 vehicles per year is a reminder of the challenges of increasing mass production in the auto industry.
Lucid said it is on track to begin production and delivery in North America of Lucid Air, its first luxury sedan, in the second half of this year. The company had previously announced that it would start deliveries in spring 2021.
CCIV’s publicly traded shares, backed by former Citigroup banker Michael Klein, fell nearly 44% to $ 32.35 in early trading, giving the merged company a market cap of around $ 52 billion.
By comparison, General Motors Co was valued at around $ 76 billion at the close of trading on Monday, while China’s electric car maker Nio was valued at $ 79 billion in pre-market trading on Tuesday.
Stocks of Tesla, which rose more than ten-fold over the past year to around $ 900, fell another 4.5% in morning trading after falling 9% on Monday.
Reporting by Noor Zainab Hussain and Akanksha Rana in Bengaluru; Adaptation by Patrick Graham
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