Lucid Motors, the company coming to market via a SPAC merger with Churchill Capital IV (NYSE:CCIV), is a stock with a ton of hype right now. To date, CCIV stock is still up dramatically since the SPAC went public. However, shares of CCIV stock are down more than 60% from their 52-week highs a few weeks ago. Today, shares are down more than 6% at the time of writing amid what appears to be strong downside momentum.
Here’s why SPAC investors may be enticed by this drop as a buying opportunity right now.
News Is On Its Way
A tweet today from Lucid Motors that a new in-vehicle entertainment system will be announced on March 17 at the SXSW conference has apparently missed investors. This “LucidAir x Dolby Atmos experience” is being dubbed as a “world first” and is certainly intriguing.
Introducing the #LucidAir x @Dolby Atmos experience – a new, immersive way to imagine in-vehicle entertainment. Learn more about our next world's first on March 17th at @sxsw. #LucidxDolby pic.twitter.com/Rv9u5TC51V
— Lucid Motors (@LucidMotors) March 3, 2021
The fact that this announcement will be made at the SXSW conference is an interesting one as well. It appears companies still in the early stages of product and market development are relying more on innovative platforms to get their message out. The SXSW conference features “a variety of tracks that allow attendees to explore what’s next in the worlds of film, culture, music, and technology. SXSW proves that the most unexpected discoveries happen when diverse topics and people come together.”
This conference is offering a digital experience as part of the company’s offerings this year. It’s an interesting platform for Lucid to attract new eyeballs from investors interested in “unexpected discoveries,” adding to the intrigue of this veiled announcement.
Valuation Concerns Weighing on CCIV Stock
It appears the main factor depressing CCIV shares right now is the company’s current valuation.
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.
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.
A broader EV selloff in recent weeks appears to be cause for higher volatility drops for SPACs like CCIV stock right now. That said, those bullish on EV growth might want to consider CCIV stock at these levels. 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, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.
