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What happened
Actions of Churchill Capital IV (NYSE: CCIV) plunged 18.5% on Wednesday, following the special-purpose acquisition company’s deal with electric vehicle maker Lucid Motors.
So what
Churchill’s share price peaked at $ 64.86 on February 18 following reports that PSPC was in talks to merge with Lucid. Yet since the two companies formalized their merger deal on Monday, Churchill shares have lost about half of their value.
Churchill Capital IV’s share price has fallen sharply since the announcement of its agreement with Lucid Motors. Image source: Getty Images.
Many investors were excited about the prospect of owning a piece of Lucid through their investment in Churchill. The company’s luxury electric vehicles are expected to compete with those of You’re here (NASDAQ: TSLA). Lucid is led by Peter Rawlinson, who was previously Tesla’s chief engineer for his popular Model S sedan.
Sadly, Churchill’s shareholders weren’t so happy when they learned about the terms of its merger with Lucid.
Now what
The deal values Lucid at $ 24 billion. Churchill shareholders will own 16.1% of Lucid after the merger. So what is the problem? Well, investors had offered Churchill’s market cap at around $ 15 billion before the announcement of its merger.
The stock market can be irrational at times, but eventually it corrects its mistakes. The market appears to be doing just that by driving down the price of Churchill shares.
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