When it comes to momentum investing, timing is everything. A prime example is the Churchill Capital Corp. IV (NYSE:CCIV) stock SPAC, which plans to merge with electric-vehicle maker Lucid Motors. It would have been much better had the deal been done more quickly!
Since late February, CCIV stock has plunged from $57 to $25. Of course, the whole EV (electric vehicle) sector has come under extreme pressure on Wall Street, as shown by the selloffs of stocks like Tesla (NASDAQ:TSLA) and Nio (NYSE:NIO). The reversal has actually been quite stunning.
Now keep in mind that the dealmaker behind CCIV stock — Michael Klein — is one of the most prolific players in the SPAC space. Among the companies he’s taken public through SPACs are MultiPlan (NYSE:MPLN), Clarivate Analytics, and Skillsoft.
Yet the combination with Lucid Motors, which is going public through Churchill Capital Corp. IV, will be the biggest merger deal for Klein.
After all, a hefty $4.4 billion will be used to finance the deal. About $2.1 billion will come from the Churchill SPAC, while the the rest will be from investors like the Saudi Arabia sovereign wealth fund, Fidelity and BlackRock (NYSE:BLK). Lucid will start trading sometime in the second quarter on the NYSE under the symbol LCID.
So with CCIV stock well off its highs, could this be a good time to consider buying it?
Let’s take a look.
Lucid was launched back in 2007. Initially, the company focused on the development of EV battery systems. But Lucid eventually became a car manufacturer.
A key part of its strategy was recruiting Peter Rawlinson as its CEO. Before joining Lucid, he had been the Vice President of Vehicle Engineering and the Chief Engineer at Tesla. Consider that he was instrumental in the development of the Model S.
At Lucid, Rawlinson has been developing an EV called the Lucid Air, which is expected to have a range of 500+ miles per charge (a Model S has a range of 400+ miles) and horsepower of 1,080. Its price tag will be close to $70,000. The company has 403 patents that have been issued or are pending for its core technologies.
Turning to the market opportunity, the global luxury auto category is expected to have a compound annual growth rate of about 5% annually from 2018 to 2026, reaching $733.2 billion in the latter year, according to research cited by Lucid. And the EV sector is likely to get an outsized portion of this opportunity as more people will look to buy cleaner vehicles and more sophisticated systems.
The production of the Lucid Air is supposed to start this summer. By next year, deliveries of the EV are expected to hit about 20,000, translating into $2.2 billion of revenue. The company’s goal is to reach over 500,000 deliveries by the end of the decade.
The firm’s production facility is based in Case Grande, Arizona, which is the first factory in North America that was built to specifically make EVs. It only took about a year to complete.
The factory’s current capacity is 30,000 units per year. But that number is ultimately supposed to increase to 400,000.
The Bottom Line on CCIV Stock
Lucid is an impressive organization, with experienced managers. And the company appears to be nicely positioned to become one of the winners of the EV sector.
But investors should still be cautious about the stock. The EV market has really gotten frothy, and now it looks like some of the air is coming out of the bubble. As a result, it may take some time for the sector’s stock prices to stabilize.
Besides, whenever companies launch new, advanced vehicles, they usually have minor problems producing them initially. Such a situation could make CCIV stock more volatile. Thus, for the time being, it might be best to wait for a lower price before buying the shares.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the author of courses on topics like the Python language and COBOL.