SEC probes electric-car maker Lucid over Spac deal

Lucid Motors, an electric-car group taken public in one of the largest Spac deals in history, is being probed by US regulators over disclosures and forecasts it made when it listed, casting a cloud over one of Wall Street’s hottest investment trends.

Lucid said on Monday that the Securities and Exchange Commission sent a subpoena on December 3 requesting documents related to projections and statements it made when merging with Churchill Capital Corp IV, the special purpose acquisition company managed by former Citigroup investment banker Michael Klein.

Shares of Lucid tumbled more than 10 per cent on Monday, wiping out billions of dollars in its market capitalisation. Lucid’s Spac merger, which was announced in February and closed in late July, gave the electric-car company an equity value of $24bn and raised $4.4bn by way of Klein’s Spac and a private placement.

The private placement drew investment from Saudi Arabia’s Public Investment Fund, and US-based asset managers BlackRock, Fidelity, Franklin Templeton and Winslow Capital Management, all of which remain large investors, according to data compiled by Sentieo. The Spac sponsor, Churchill Capital, owns shares worth almost $1.3bn as of Friday’s close, the data show.

“Although there is no assurance as to the scope or outcome of this matter, the investigation appears to concern the business combination between the Company (f/k/a Churchill Capital Corp. IV) and Atieva, Inc and certain projections and statements,” said Lucid in the securities filing, which noted it was fully co-operating with the SEC.

The California-based company is the latest electric-vehicle maker that went public via a Spac to come under scrutiny, as US regulators worry that companies listed via blank cheque vehicles have skirted the kind of standard oversight for groups that go down the traditional initial public offering process.

Nikola, an electric truckmaker, has recently set aside $125m to settle an SEC probe. Its founder, Trevor Milton, has been charged with allegedly misleading investors, while rival Lordstown has also come under investigation by the SEC and federal prosecutors in relation to information it published about pre-orders of its pick-up vehicle.

Increased SEC enforcement this year had a chilling effect on Spac dealmaking, according to bankers, with some companies that had been considering a Spac merger to go public opting instead to pursue other routes.

In July, the SEC fined Stable Road Acquisition Company and its sponsor Brian Kabot in connection with its merger with Momentus, a space infrastructure company, due to characterisations that it had “successfully tested” its propulsion technology in space, when in reality the company’s only test had allegedly failed.

“This case illustrates risks inherent to Spac transactions, as those who stand to earn significant profits from a Spac merger may conduct inadequate due diligence and mislead investors,” said SEC chair Gary Gensler when announcing the case in July.

After Lucid’s listing, its shares soared, and it briefly overtook Ford last month in valuation, despite having little revenue and still booking heavy losses.

Despite its early stage, investors have bet that the company led by former Tesla engineer Peter Rawlinson will follow the success of Elon Musk’s carmaker.

Shares of other electric-focused automotive start-ups such as Amazon-backed Rivian have also risen this year, far above gains seen among established carmakers.

The SEC and Lucid declined to comment.

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