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Without a Deal in Place, Churchill Capital Corp IV Is Just Way Too Frothy Here

Just one month ago, Churchill Capital Corp IV (NYSE:CCIV) was a special purpose acquisition stock (SPAC) trading around $10. As of this writing, CCIV stock is trading at around $33 a share and the stock jumped more than 35%.

A photo of the Lucid Motors Air EV from 2018.

Source: ggTravelDiary / Shutterstock.com

However, within that gain was a one-day loss of around 18%. This just serves as a reminder of the risk premium that investors are paying with CCIV stock at this moment.

The investment community is abuzz about the likelihood (although not a guarantee) that Churchill is bringing Lucid Motors public. Lucid is a luxury electric vehicle manufacturer that is thought to be a competitor to Tesla (NASDAQ:TSLA).

During Lucid CEO Peter Rawlinson’s recent appearance on CNBC, he neither confirmed nor denied the merger talk. In analyst terms that’s as good as an announcement. Or so it seemed. CCIV stock charged over 10% higher on that day alone.

Then it gave most of it back before climbing again. This is a stock that has no end to the guessing-game volatility without announcing a plan.

However, with a SPAC stock that is now trading at a robust premium, the question investors need to ask is are they too late?

Reddit Investors and CCIV Stock

You should take a moment to read Sarah Smith’s article about how the Reddit phenomenon may be spilling over onto CCIV stock. Simply put, retail investors may be shifting their sights from the “meme stocks” to SPAC stocks.

SPAC stocks tend to move higher when a merger target is named and then again right before the merger closes. So in this case it makes sense that CCIV stock is being bid up. But as Smith notes in her article, right now, any proof that Reddit investors are behind this price action is anecdotal.

The Tesla Killer Is a Year Away

The Lucid Air luxury sedan looks awesome and this is coming from someone who isn’t a “car guy.” You just have to be impressed with the design. So you can imagine the buzz the Lucid Air is receiving from those “in the know.”

And with the momentum that is in the electric vehicle sector right now, a $300 refundable deposit is literally nothing. I expect that the company will have a large backorder of customers looking to take possession of one of these vehicles.

With all that said, the $69,000 Lucid Air won’t be available until 2022. And I would be remiss if I didn’t throw out this caveat: If all goes according to plan. This doesn’t mean I think anything will go wrong; it’s just that things happen.

In the meantime, the company is releasing three higher-priced variants of the Lucid Air this year. The Air Dream Edition and Air Grand Touring are projected to be available in the second quarter at a price tag of $169,000 and $139,000 respectively. The $95,000 Air Touring is slated for availability in the fourth quarter.

None of this is meant to throw cold water on Lucid Motors or CCIV stock. Many EV companies went public via a SPAC in 2020 and many won’t have cars available until 2022 at the earliest. The difference is that many of those SPACs didn’t get this overheated.

Betting on the Jockey

With that cautionary note in place, I would also suggest you read what Will Ashworth had to say about the opportunity with CCIV stock. Ashworth is a fan of Michael Klein, the ex-Citibank executive who is the founder of Churchill Capital IV.

In investing parlance, one way to look at a SPAC is a bet on the jockey rather than the horse. This is the same logic being used with Bill Ackman’s Pershing Square Tontine Holdings (NYSE:PSTH) SPAC. And that is another example of a stock that’s moving higher without a target being named.

Does it appear to me that CCIV stock looks a little frothy? Yes. Does that mean that it can’t or won’t go higher? Absolutely not, particularly if there is an announcement from Lucid as expected. Once that announcement is made, though, the real evaluation begins. This is still a very speculative investment. Invest accordingly.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.


Article printed from InvestorPlace Media, https://investorplace.com/2021/02/without-deal-cciv-stock-too-frothy/.

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