![]() Retail investors may know that Lucid is a hot electric car company, but probably don’t know much at all about how the pending SPAC deal is structured. Several of the earlier EV SPACs have nearly doubled in price. If it goes higher than the option stock price, often set at $11.50, they profit more. ![]() If the public markets take the stock higher, they profit. Those shares often come with warrants, which are future options on the stock. Whether on the SPAC side or the private company side, they can buy shares in the SPAC at the typical price of $10 a share. In a bull market, this arrangement can yield a bonanza for insiders. Quick explainer: A SPAC goes public with no assets but with a plan to acquire, at some point, at least one private company. Yet the deal itself, and the details of its owners’ financial relationships and strategic goals, could well affect the company’s performance. ![]() “Currently, our focus continues to be on bringing Lucid Air to production in spring of this year, with the strong support of key investors and our partners at the Public Investment Fund.” “Lucid Motors has always been clear about its intent to go public at some point in order to accelerate the adoption and global availability of Lucid’s exclusive electric vehicle and sustainability technologies,” the company said in an emailed statement. The car’s stylish interior and exterior and its electric-drive innovations have drawn widespread approval. There’s no indication that the company is anything but the real deal, with its luxury Lucid Air automobile ready to roll out of the company’s new Arizona factory in coming months. He was speaking generally, but elements of the Lucid deal merit a closer look. “When you combine with Robinhood investing, the gamification of finance, fractional share ownership and novice investors, there’s a lot of opportunity for opportunistic behavior,” Kirsch said. The SPAC phenomenon specifically has Kirsch and many others worried because the markets are being driven higher now in large part by unsophisticated retail investors. Electric-vehicle manufacturing is a capital-intensive undertaking, so companies are likely to strike when the market offers what they expect to be top dollar. It’s a phenomenon he thinks has all the hallmarks of a bubble, with Tesla’s mind-blowing $800-billion valuation stoking imaginations. “EV entrepreneurs have figured out they can ride the Tesla wave,” said David Kirsch, business professor at the University of Maryland and coauthor of the recently published book “Bubbles and Crashes.” Fuel-cell truck company Nikola, electric-car maker Fisker, electric-bus company Proterra, electric-truck maker Lordstown, electric-robotaxi company Canoo and many more have completed or announced SPAC deals. For the first time last year, the volume of SPAC deals outpaced that of traditional IPOs, which came in at only $67 billion.Įlectric-vehicle and related companies are driving a lot of that activity. Last year, $73 billion was raised in SPAC deals, up from $13 billion in 2019, according to Goldman Sachs. Once considered a sketchy alternative, in the high-momentum markets of 2020 into 2021, SPACs have become very popular. Through a sale to a blank-check entity, a company that wants its shares traded on public markets can get there much faster - typically several months versus up to a year for an IPO - with much less disclosure of its inner workings and the associated red tape. SPACs offer a quicker, easier, more secretive way to take a private company public versus the conventional initial public offering, or IPO. In a bull market that the word “frothy” hardly does justice to, increasing numbers of private companies are looking to cash out through special purpose acquisition companies - SPACs. If the deal goes off without a hitch, Lucid executives and board members - including Chairman Andrew Liveris, a former Dow Chemical chief executive with deep financial ties to Saudi Arabia - would get a shot at a big payday. In a deal that is near completion, according to a source familiar with the negotiations, the company would draw a hefty but as-yet undetermined amount of cash to fund its operations.
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