Lucid Motors SPAC Merger Approved - Shareholder Vote Confirmed

Lucid Motors Merger Approved After Voting Extension

The merger between EV startup Lucid Motors and special purpose acquisition company Churchill Capital IV received shareholder approval on Friday. This followed an extension of the voting deadline by one day, necessitated by insufficient participation from retail investors.

Unusual Voting Challenges

This situation represents an atypical occurrence, but it may become increasingly common as companies favor merging with SPACs over traditional initial public offerings (IPOs). The process encountered a snag on Thursday when shareholders approved all proposals except one crucial to the merger.

Specifically, proposal two – concerning revisions to the company’s charter to enable key financing – required a higher vote threshold. Its failure to achieve the necessary support initially stalled the entire merger process.

Reasons for Low Turnout

The low shareholder participation was attributed to a lack of familiarity with the SPAC process among retail investors. Surprisingly, issues with spam filters also played a role.

Churchill Capital IV Chairman Michael Klein suggested that emails containing voting instructions may have been mistakenly directed to spam folders. It seems improbable that a simple spam filter could disrupt a multi-billion dollar merger, but evidence suggests this was a contributing factor.

Calls to Action from Leadership

“We simply need more votes,” Klein stated during an investor call on Thursday. Lucid Motors CEO Peter Rawlinson directly appealed to shareholders, stating, “I need you to vote for proposal two.”

Klein acknowledged the novelty of the voting process for many investors and thanked those who had already participated. He specifically urged those using newer trading platforms and applications to ensure their votes were properly submitted, as these platforms may not clearly direct users to the voting service.

The Rise of Retail Investors

The number of individual, or “retail,” traders has significantly increased since the pandemic’s onset, largely due to the popularity of apps like Robinhood. These apps employ gamification techniques to encourage stock trading.

The surge in prices of stocks like GameStop and AMC Entertainment, driven by a collective of retail traders on the r/wallstreetbets subreddit, exemplifies this phenomenon. Currently, retail investors account for approximately 10% of U.S. equity trading volume, a decrease from a peak of 15% last September, according to Morgan Stanley.

Retail Investor Preferences

However, the impact of retail traders remains substantial. A Morgan Stanley report indicates that these investors tend to favor companies in sectors they understand as consumers, including Consumer Discretionary, Communication Services, and Technology. This preference likely contributed to the high level of retail interest in the Churchill SPAC.

Reddit Community Encourages Participation

A popular post on the r/SPACs subreddit urged new retail shareholders to vote, emphasizing the unusual nature of the situation. The post highlighted that a non-vote is not equivalent to a “yes” vote and simply doesn’t contribute to the outcome.

A Changing Market Landscape

While Lucid’s merger delay differs from the meme stock trading events, it serves as another reminder of the growing influence of retail investors in shaping the financial markets.