Stock market investors valued electric vehicle maker Lucid Motors at $62 billion on Tuesday after a deal to merge with blank check firm Churchill Capital IV, sparking some concerns about the real worth of the company which has yet to start regular production.
In comparison, General Motors was worth about $72.5 billion at midday Tuesday, while China's leading electric carmaker, Nio Inc., was valued at $72 billion.
Shares in Elon Musk's Tesla, which have surged more than 10 times in value over the past year to around $900, fell for a second day Tuesday, closing down 2.2 percent at $698.84.
Lucid's first electric car, the luxury Air, won't go into production until late 2021, later than the spring 2021 launch initially planned, the company said in a filing. Officials on Tuesday said they do not expect Lucid to be cash-flow positive until 2025.
Shares of Churchill Capital IV Corp. fell more than 40 percent, a day after it agreed to the merger with Lucid. CCIV shares closed down 40 percent at $34.39.
The Lucid-CCIV deal includes new private investment that valued the company at $24 billion, just a fraction of Tesla, but still the biggest ever involving so-called special-purpose acquisition companies.
"We're bringing the world's best technology to the market this year," CEO Peter Rawlinson told CNBC on Tuesday when asked whether Lucid's valuation made him nervous. "Here in the U.S. I think the valuation is a reflection of our technology."
Rawlinson told investors on a call that its Lucid Air Dream edition is virtually sold out, while former Citigroup banker Michael Klein, head of Churchill Capital, said the company has sufficient funding for its first three models.
Rawlinson said the carmaker expects production of a less expensive, sub-$70,000 version of the luxury sedan in 2022, followed by a new model code-named Project Gravity in 2023.
The recent run-up in valuations of several EV startups, including Nikola Corp. and Lordstown Motors, that have yet to produce saleable vehicles or meaningful revenue, has drawn comparisons to the dotcom bubble of 1999-2000, with analysts and investors expecting a near-term correction.
"The EV sector feels like it’s going through a correction. Lucid’s SPAC-IPO probably (is) driving circular negative reinforcement," said Roth Capital Partners analyst Craig Irwin.
Lucid, run by ex-Tesla engineer Rawlinson, is the latest EV maker to tap U.S. capital markets, with investors rushing into the sector as tougher emission norms drive a switch to electric vehicles.
With its roster of deep-pocketed financial backers, it is one of the strongest of the flock of startups challenging Tesla's dominance.
After Lucid priced its Air sedan, starting at $77,400, Musk announced a price cut to its flagship Model S sedan. "The gauntlet has been thrown down!" he tweeted.
However, Lucid's five-year timeline to get to production of 250,000 vehicles a year is a reminder of the challenges of scaling up mass production in the auto industry.
Tesla, founded in 2003, produced about 500,000 electric vehicles last year.
The reverse-merger represents the largest injection of capital into Lucid since Saudi Arabia’s Public Investment Fund invested more than $1 billion in 2018. The agreement included a $2.5 billion private placement in public equity, or PIPE, the largest of its kind on record for a deal with a special-purpose acquisition company. It was led by existing investor PIF as well as BlackRock, Fidelity Management, Franklin Templeton, Neuberger Berman, Wellington Management and Winslow Capital, according to a joint statement from Lucid and Churchill Capital Corp IV, the acquisition company.
The SPAC is the largest run by Michael Klein, a former Citigroup Inc. investment banker who has played a prominent role in guiding the Kingdom of Saudi Arabia’s investments, serving as an adviser to the PIF. Among other deals, he advised on the Saudi Aramco initial public offering.
The Lucid transaction is expected to close in the second quarter.
Reuters and Bloomberg contributed to this report.
