What happened
Actions of Churchill Capital IV (NYSE: CCIV) plunged 18.5% on Wednesday after the company’s special-purpose acquisition deal with electric vehicle maker Lucid Motors.
And
Churchill’s stock price rose to $ 64.86 on February 18, after reports that SPAC was in talks to merge with Lucid. However, since the two companies formalized their merger agreement on Monday, Churchill’s shares have lost about half their value.
Churchill Capital IV’s share price has dropped dramatically since the announcement of its deal with Lucid Motors. Image source: Getty Images.
Many investors were excited about the prospect of owning a stake in Lucid through their investment in Churchill. The company’s luxury electric vehicles must compete with those of the Tesla (NASDAQ: TSLA). Lucid is led by Peter Rawlinson, who previously served as Tesla’s chief engineer for his popular model S sedan.
Unfortunately, Churchill’s shareholders were not so happy when they were informed of the terms of their merger with Lucid.
What now
The deal values Lucid at $ 24 billion. Churchill’s shareholders will hold 16.1% of Lucid after the merger. So what’s the problem? Well, investors had offered Churchill’s market capitalization at about $ 15 billion before the merger was announced.
The stock market can be irrational at times, but it eventually corrects your mistakes. The market appears to be doing just that, lowering Churchill’s stock price.