When it comes to special purpose acquisition company Churchill Capital IV (NYSE: CCIV) stock and electric vehicle maker Lucid Motors, it’s a question of will they or won’t they?
Since the start of this year, CCIV stock has risen 450%, from $10.03 to $55 a share. The sharp run-up in the stock price has been fueled entirely by rumors that Churchill Capital is going to buy, merge with and then bring public Lucid Motors, a luxury electric vehicle manufacturer that investors are extremely excited to see come to market. A deal between Churchill Capital IV and Lucid Motors could be worth $15 billion.
There have been reports that Venrock Associates, one of Lucid Motors biggest shareholders, is interested in selling to Churchill Capital IV. Venrock Associates, a venture capital firm, first bought into Lucid Motors in 2009 in a Series B financing round. That was Lucid was a battery manufacturer.
So far, the Lucid Motors SPAC deal remains speculative as neither the automaker nor Churchill Capital IV have confirmed that they are in negotiations. Is this a case of “buy the rumor, sell the fact,” or should investors wait for confirmation that the Lucid Motors SPAC deal is real before investing in CCIV stock?
Wall Street Pedigree
There’s a debate raging about whether or not the SPAC market is overheated and in the midst of a bubble. More SPAC deals have been announced so far this year than during the first nine months of 2020. With a number of celebrities announcing SPACs in recent weeks, including Hall of Fame basketball player Shaquille O’Neal and tennis star Serena Williams, many professional traders, analysts and market commentators are wondering aloud if the entire industry has jumped the shark.
However, Churchill Capital IV is a different type of SPAC, as it comes with an impressive Wall Street pedigree. This is because Churchill Capital IV is run by ex-Citigroup banker Michael Klein, a veteran dealmaker who made his name as the lead adviser to Dow Chemical on its $130 billion merger with the DuPont (NYSE:DD) chemical company.
Since leaving Citigroup, Michael Klein has opened SPAC-focused Churchill Capital Corp. and investment firm “M. Klein & Co.” With no online presence or even a listed telephone number, M. Klein & Co. has earned a reputation for secrecy.
Yet, M. Klein & Co. has offices in New York, London and Beijing and has some impressive names on its payroll, including Mike Eck, former global head of retail investment banking at Morgan Stanley (NYSE:MS) and former U.S. Treasury Secretary Larry Summers. Churchill Capital IV counts former Apple (NASDAQ:APPL) design head Jony Ive and former Ford Motor Co. (NYSE:F) Chief Executive Officer Alan Mulally on its board of directors.
With its bullpen of heavy hitters, many people feel confident investing in CCIV stock. People are betting that it’s only a matter of time before Churchill Capital IV announces a major deal. If it’s not Lucid Motors, it’s likely to be another significant company.
Lucid Motors stands out amid the current glut of electric vehicle manufacturers. The Newark, California-based company is focused on making luxury electric cars for a niche base of high-net-worth consumers. Lucid Motors recently opened a new factory in Casa Grande, Arizona. It plans to build its luxury electric sedan called the “Lucid Air,” which ranges in price from $70,000 for the base model to $160,000 for the top end trim line. The Lucid Air can travel 500 miles on a single battery charge and its engine can crank out 480 horsepower. Deliveries in the U.S. are expected begin by June of this year.
Lucid Motors also has an electric sport utility vehicle (SUV) ready to enter production called the “Gravity.” It plans to ramp up production at its Arizona factory to 400,000 vehicles a year in short order.
The fact that Lucid Motors is in the production stage distinguishes it from other electric vehicle makers, most of which are in early stage development or the concept phase. While some analysts have compared Lucid Motors’ Air sedan to Tesla’s (NASDAQ:TSLA) Model S electric car, executives at Lucid Motors scoff at such comparisons, claiming that they target much higher-end customers than Tesla.
A Lucid Air prototype beat a Tesla Model S in a quarter-mile race held last fall. Lucid has announced plans to begin selling its Air sedan in Europe in 2022.
Buy CCIV Stock
It might be a cliché, but it remains a truism that where there’s smoke, there’s fire. There are enough legitimate media stories about Churchill Capital IV in reverse merger talks with Lucid Motors that it’s worth buying this rumor and investing in CCIV stock.
The caliber of the people behind the Churchill Capital IV SPAC is impressive enough that investors can be reasonably sure of its competence, and Lucid Motors is heading into production with a luxury electric vehicle that is targeted at a niche demographic of wealthy clients.
Should a deal between Churchill Capital IV and Lucid Motors come together it would be a slam-dunk. Investors would be smart to get in early on this potential deal.
On the date of publication, Joel Baglole held long positions in APPL and TSLA. He did not hold (either directly or indirectly) any positions in the other securities mentioned in this article.