Will the market debut of luxury electric car maker Lucid Motors be enough to revive the fortunes of special purpose acquisition company Churchill Capital Corp. IV (NYSE:CCIV) stock and investor sentiment towards SPAC deals?
That’s the multi-billion dollar question that investors are trying to figure out on both Wall Street and Main Street. However, given the souring sentiment towards SPAC deals, as well as a move away from electric vehicle stocks and problems afflicting the entire automotive industry due to a shortage of semiconductors and microchips, the environment is not great for Lucid Motors to debut on the New York Stock Exchange via a reverse merger with Churchill Capital IV.
Plummeting Share Price
Lucid has said that it plans to begin trading under the ticker symbol “LCID” by the end of June. The sooner the better given the depressed level of CCIV stock.
After peaking at $64.86 per share in mid-February, CCIV stock has fallen 70% to less than $20 and has been trading sideways since mid-April. Churchill Capital IV’s stock has crumpled ever since it publicly announced that it will bring luxury electric Lucid Motors to market.
The deal with Lucid Motors could not have come at a worse time. It coincides with a sudden and sharp downturn in investor sentiment towards SPAC deals. After surpassing $83.5 billion in the first quarter of this year, enthusiasm for SPAC deals went cold when the U.S. Securities and Exchange Commission (SEC) announced plans to provide greater oversight of the reverse mergers involving shell companies.
The music stopped as more than 400 SPAC companies with $130 billion of cash to spend were left standing around looking for companies to form a partnership.
Automotive Turmoil
Further hurting Lucid’s chances for a successful stock market listing has been the turmoil gripping the global automotive industry. An ongoing shortage of semiconductors used in everything from infotainment systems to safety features is affecting EV production. Ford Motor (NYSE:F) has announced that it is halting production of popular vehicles ranging from the iconic Mustang muscle car to the F-150 pickup because of the semiconductor shortage. Congress is considering spending $52 billion to help boost U.S. semiconductor manufacturing.
And, on top of it all, investors all seem to have turned away from once high-flying electric vehicle stocks. The two largest electric vehicle manufacturers in the world, Tesla (NASDAQ:TSLA) and Nio (NASDAQ:NIO) have seen their share prices fall dramatically from 52-week highs reached at the beginning of this year.
Stocks of unproven start-up electric vehicle companies have been all but abandoned by investors as they focus on the reopening of the global economy coming out of the Covid-19 pandemic.
Niche Market
The last nail in Lucid’s coffin might be the niche market that the company is targeting with its fully electric luxury sedan called the Air. The Newark, California-based company that is run by Peter Rawlinson, the former vice president of engineering at Tesla, has set pricing for the Lucid Air at between $70,000 for the base model to $161,500 for the fully loaded high-end edition.
Will consumers spend that much money for an electric sedan when they can get a well-equipped one from established automakers such as General Motors (NYSE:GM) for half the price?
The Air sedan is already in production at Lucid’s factory in Casa Grande, Arizona. Deliveries are scheduled to begin in June. Lucid is also producing an electric sport utility vehicle (SUV) called the Gravity that should enter production later this summer. The company has announced plans to produce 400,000 vehicles a year beginning in 2022.
Whether the company can meet the aggressive production schedule it has set for itself is unclear. Particularly considering the aforementioned semiconductor shortage and price point for the Air sedan.
However, the company remains extremely bullish on its prospects, forecasting that its annual revenues will grow nearly 200% to $22.8 billion by 2026.
Wait On CCIV Stock
While Lucid Motors appears to have a good product and long-term potential, the market that the company is making its stock market debut in is terrible. As a result, Lucid stock is not guaranteed to rise when shares begin trading on the NYSE next month.
Taking a position in CCIV stock ahead of its reverse merger with Lucid Motors is largely speculative. Investors would be wise to take a wait-and-see approach with Churchill Capital Corp. stock. Hold off from making an investment until this SPAC deal has concluded.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
