CIIG Merger (NASDAQ:CIIC) is situated in the red-hot special acquisition company (SPAC) space. It’s also an electric vehicle (EV) company. Those are the only two terms I need to mention — SPAC and EV — for you to know that CIIC stock has been a big winner.
At its high on Dec. 7, shares were up 118% from the Dec. 2 lows. And even after a volatile session on Dec. 9 — where the daily trading range saw the stock fluctuate almost 25% from low to high — shares are now up 182% year-to-date (YTD).
Enough of the track records, though. What you really want to know is if this stock is a buy. The short answer? No.
However, the short answer isn’t easy to arrive at when it comes too CIIC stock. Why? Both the problem and the reason it’s doing so well right now are the same catalyst: it’s a SPAC.
SPACs are an alternative method to going public. They do not have to play by the same rules as a typical initial public offering (IPO). As such, some are currently calling for a bubble in the SPAC space and, given some of the data points, it’s not hard to see why. This will be a problem for CIIC stock eventually.
What’s the SPAC Problem with CIIC Stock?
SPACs themselves are not necessarily a problem. But when there is a huge influx of capital into one group regardless of fundamentals, then yes, many people start to throw around the term bubble.
Now, I’m a big fan of growth, growth stocks and secular themes. I love EVs, for instance. But this space has been a bit too hot for such a short period of time. Consider the following from Marker:
“More than 175 SPACs have gone public already in 2020, raising $65 billion in capital… That’s more than the amount of money raised by SPACs in the last decade. […]
“Signs of frothiness in the market are easy to see, with everyone trying to cash in on the boom […] And with retail investors rushing to jump on the bandwagon, the first-ever SPAC ETF has already been launched.”
A lot of these recent SPAC plays are in the EV space and it’s great to see momentum growing there. But at the same time, many of these companies are without revenue, without facilities and in many cases, only have a plan. Yet, somehow they are snagging valuations that are through the roof.
Even though CIIG Merger has some attractive qualities — set to merge with commercial EV maker Arrival — its stock will likely get pulled down when the SPAC space eventually unravels and loses air.
CIIG Merge May Be a Winner
So what about CIIG Merger — known from this point on as CIIC stock or Arrival — is so potentially attractive?
Until a few days ago, this name was flying below the radar, which is good when we’re combing for value (whatever that is in SPAC-land). But it’s really the business potential that is jumping out with this firm.
Arrival is taking a different route to what is typically an expensive, asset-heavy approach to vehicle production. Instead, it’s taking an asset-light, “microfactory” approach.
The company — which is based in the U.K. — is hoping to build electric buses and vans and begin doing so in the fourth quarter of 2021. While some are critical of that start day, it’s much closer than many of its peers, assuming the company can execute.
However, because of its microfactory approach, building and transporting these vehicles may be less of a costly chore than expected. Essentially, the company plans to be able to set up operations almost anywhere in the world. This will allow for regional operations and easier deployment.
Further, Arrival also benefits from its corporate investors — one postal company has already put in an order for 10,000 electric delivery vans with an option for another 10,000 more. Overall, Arrival has already secured $1.2 billion in initial orders.
I like CIIC stock for that handful of reasons — it already has pre-orders, solid partners and production less than a year away. Plus, management is thinking about the bottom-line. That is, they do not plan to raise billions of dollars with no concern over cash burn. They are focused and have a plan.
But the SPAC space has been super hot. So, we need to see it cool off a bit before buying CIIC stock.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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