Lucid dreaming deal turns Klein’s $ 43 million investment into $ 3.3 billion windfall

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In this news, we discuss the Lucid dreaming deal turns Klein’s $ 43 million investment into $ 3.3 billion windfall

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(Reuters) – Veteran trader Michael Klein and his partners turned their personal investment of $ 43 million in the blank check acquisition company they are merging with luxury electric vehicle start-up Lucid Motors Inc into a paper gain of nearly $ 3.3 billion, according to Reuters calculations.

The gain, in just a few weeks, came from the dramatic rise in shares of Klein’s special purpose acquiring company, SPAC Churchill Capital IV Corp. This is by far the most vivid example of a Wall insider. Street benefiting from the frenzy of amateur trading, in stocks such as GameStop Corp, sweeping the world of PSPCs.

Many mom-and-pop investors bought shares of Churchill Capital IV in hopes of a quick gain, pushing Lucid’s implicit valuation from $ 11.75 billion from the deal’s face price to $ 64 billion. of dollars Tuesday afternoon.

But while the luckiest investors might have scored a gain a few times, Klein and his partners are sitting on a paper gain of nearly 9,000%, based on the shares of PSPC to which they are entitled.

They can’t cash for up to 18 months, and inventory could drop significantly during that time, especially if Lucid, who has yet to sell a single car, fails to meet his ambitious production targets.

A representative for Churchill Capital IV declined to comment on Tuesday.

SPAC sponsors are often awarded large stakes in companies they help publicize, a form of compensation known on Wall Street as “promotion.” But Klein’s SPAC stock gains made his payout potential unprecedented.

Klein and his partners received 42.85 million warrants in the SPAC that can be exercised at $ 1 each, according to regulatory filings. They also received 51.75 million shares from so-called founders in PSPC.

Churchill Capital IV stock closed at $ 35, valuing the founders’ stock at $ 1.8 billion. The shares available for purchase through the warrants would also represent approximately $ 1.5 billion.

It’s a home run for Klein in his second act on Wall Street. He worked at Citigroup Inc for 23 years and led the bank’s institutional client business, where he oversaw its advisory and financing activities.

Klein was once seen as a potential successor to former Citigroup CEO Sandy Weill, but quit in 2008. He went on to set up a New York-based specialist consulting firm, Mr. Klein & Co, and embarked on SPAC by investing in 2018.

The Lucid deal is helping Klein regain some luster with investors who backed his previous PSPC deal for U.S. health services company MultiPlan Corp, which is trading more than 20% since the deal was signed.

Shares of its first SPAC contract, a 2019 merger with analytics firm Clarivate Plc, have more than doubled since closing.

Joshua Franklin reporting in Miami; Edited by Richard Chang

Original © Thomson Reuters

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