Investors seem to be having a lucid moment as shares of Churchill Capital IV (NYSE:CCIV) are set to open higher for second day. CCIV stock is up almost 6% in pre-market trading after closing 7.17% higher on Monday.
Puns aside, there’s momentum around the special purpose acquisition company’s (SPAC) planned merger with Lucid Motors. To date, CCIV stock is still up dramatically since the SPAC went public. Still, even with the up moves this week, shares of CCIV stock are down more than 50% from their 52-week highs touched a month ago.
The reasons for the gains could be both fundamental and macro. On the fundamental side, CCIV stock watchers are anticipating tomorrow’s update on the electric vehicle’s in-car entertainment system. Lucid’s collaboration with Dolby has audiophiles and techies excited, and the debut has all the trappings of an Apple (NASDAQ:AAPL) new product reveal.
Also, Churchill’s 10-K was just filed, providing investors with more depth into the proposed Lucid transaction.
Meanwhile, Lucid CEO Peter Rawlinson is set to discuss the firm’s production progress and the CCIV stock merger with the bullish Jim Cramer on CNBC’s “Mad Money” later today. The often-lucid Cramer seems to like the merger — primarily as a vote for EV growth — while acknowledging concerns about SPACs.
Valuation Has Recently Been Holding Down CCIV Stock
Valuation of late has been the main factor depressing CCIV stock. Lucid is still a pre-commercial company, expected to launch its Lucid Air all-electric sedan later this year. This EV launch is one of the most hotly anticipated right now, as evidenced by the move we’ve seen in CCIV stock since its recent IPO. However, even the best companies can appear overvalued from time to time.
As InvestorPlace contributor Chris MacDonald noted earlier this month, the $2.5 billion PIPE financing done for this deal was done at $15 per share, a 50% premium to CCIV’s net asset value. “At the current price of more than $25, the market is pricing in a premium of well over 100% of NAV right now. This had previously been much higher before the selloff. However, some investors seem to be taken aback by the valuations various EV players are demanding in the market today.”
Along the lines of Jim Cramer’s critique, a broader EV selloff in recent weeks appears to be cause for higher volatility drops for SPACs like CCIV stock right now. MacDonald, meanwhile, wrote that “this is a high-risk, high-reward play for long-term EV investors looking to get into the next Tesla at the ground floor.”
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups.