Tesla Killer Lucid's SPAC Up 76%

Jan. 14, 2021 10:15 AM ETLucid Group, Inc. (LCID)BFTU, CLVT, SKIL, CPRJ, CS, CSGKF, MPLN, PSTH, WPF, WPFU225 Comments

Summary

  • SPAC Action this Day - my biggest and best SPAC position.
  • Risking (2) pennies to make (7) dollars.
  • The most asymmetric bet of the past year.
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2021 Lucid Air: What We Know So FarChurchill Capital Corp. IV

$2 billion and change ($70 million is change at this scale) Churchill IV (CCIVU) is my biggest and best SPAC position and my second biggest overall position. Here’s why.

The Bigger the better

First of all, SPAC Size Matters. I like big SPACs and I cannot lie. They get better deal flow and there is less competition from other SPACs of their size. Churchill IV is the second largest live SPAC, one of only five members of the billion-dollar SPAC club and the second overall behind only Pershing (PSTH). When you buy a unit, you get a share of equity, free upside in the form of a fifth of a warrant that you can exercise later for $11.50 and free downside protection in the form of $10 of trust value. There is a great likelihood that they find a deal within their two-year time window that ends on August 3, 2022 and a good shot that they find one in much less time than that. They didn’t specify a sector which is my preference; it is best to be able to be opportunistic.

Who are those guys?

The sponsor team is led by Michael Klein, the axe in SPACs.

Michael Klein Strikes Gold From Canada to Saudi Arabia - BloombergHe has held various senior positions at Credit Suisse (CS) and Citi (C) but mostly he just consumes SPAC promotes like hot dogs at an eating contest.

What have you done for me lately?

The first Churchill SPAC bought Clarivate (CCC). Churchill II (CCX) announced a deal with Skillsoft and Global Knowledge. Churchill III (CCXX) bought MultiPlan (MPLN).

So far, the score is one win, one tie, and one loss.

Worth risking $0.02 and that’s my $0.02

If they fail to find a deal, it will cost the sponsors $43 million. Outside passive minority investors will recover their $10 capital

Please contact me with any questions or interest in Sifting the World.

It’s not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it – who look and sift the world for a mispriced bet – that they can occasionally find one.

— Charlie Munger

This article was written by

Chris DeMuth Jr. profile picture
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Chris DeMuth Jr (ccdemuth@rangeleycapital.com) founded event driven hedge fund Rangeley Capital LLC and research service Sifting the World


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Disclosure: I am/we are long BFTU, CCIVU, CCXU, MPLN, PSTH, WPFU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: First, if you’d like to put together a portfolio of these opportunities yourself, be careful: they have terrific risk/rewards, but you have to execute the strategy perfectly. One errant failure to keep track of a redemption deadline could easily wipe out the upside of the rest of a portfolio.

Second, our firm manages a discretionary strategy focused on SPACs, and while we disclose positions that are discussed in this article, we may buy or sell positions at any time on behalf of our investors. If you have questions or would like to understand more about the strategy, please contact my colleague Rob Sterner at rsterner@rangeleycapital.com.

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