Churchill Capital Stock Is Likely to Rally in the Short-Term, Sink in the Longer Term

Churchill Capital (NYSE:CCIV) stock has a good chance of rising through July 23, as indicators suggest that investors are optimistic about the automaker. The company is slated to  bring Lucid Motors public via its SPAC on July 23. 

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While CCIV stock should be strong in the next few days,  as September approaches, it could hit a wall. 

The Pessimism Towards Lucid Is Trending Downwards 

The  bearishness towards Lucid and CCI stock is easing. Perhaps a better way of saying this is to note that bullishness towards them is increasing. That is apparent from the amount of the stock’s current short interest. 

Short interest roughly represents the amount of pessimism about the stock. CCIV stock maintained relatively low levels of short interest through mid-March. Short interest had increased notably through that time, but not alarmingly so, coming in  at a modest 6.7% on March 15. 

Two weeks later, that percentage had rapidly increased to above 15%, before approaching 20% at the end of May. That trend helped push down the stock’s price  from $31 to $21 during the same period. 

Since then, CCIV stock has climbed above its May lows, and yesterday the shares closed at $24.28. The stock’s climb was partially caused by the decline in the number of shares being shorted. 

Indeed, the stock’s short interest has decreased by 15% since the end of May and recently stood at 16.58%

While it’s easy to trace the amount of short interest the stock is attracting, it’s much more difficult to pinpoint the precise causes of the improvement in the market’s mood about Lucid and CCIV stock. 

Positive Near-Term Catalysts

In fact, it’s simply impossible to know exactly what causes investors’ overall opinion about any stock to change. EV SPACs like Churchill Capital were incredibly hot for a time, but that suddenly changed. 

Nevertheless, several catalysts are poised to lift Churchill Capital/Lucid Motors higher in the coming days. 

Remember, CCIV stock traded as high as $58 per share in late February. Investors will probably rush into the shares this week regardless of any of the bearish narratives surrounding EV SPACs and Lucid Motors itself. 

My guess is that enthusiasm about the merger and the automaker will trump all else until that date. And Lucid does deserve credit for designing a range of Lucid Air vehicles with impressive specifications. Their ranges, horsepower and prices do compare favorably with those of Tesla’s (NASDAQ:TSLA) Model S

Within the next few years, Lucid Air may usurp Tesla’s dominant position. But before that happens,  downward forces will affect LCID stock. 

PIPE Problems 

Many investors know that, soon after Lucid starts trading under its own name,  it may face negative catalysts. Specifically, the PIPE investors’ lock-in deal ends on Sept. 1. As a result, the investors will be able to buy at least a meaningful portion of about  200 million shares of LCID stock for $15 each starting on that date. 

One can easily imagine that many such holders will look to spend $15 to get a share of LCID stock if the name trades at $30, $40, or higher on Sept. 1. Those redemptions, whenever they occur,  will place significant downward pressure on the shares. 

So-called “sweetheart deals’ for PIPE investors often disadvantage main street investors. 

The Verdict on CCIV Stock

It seems that Churchill’s shares are rising as July 23  approaches. Short interest is down, and general optimism about Lucid Air’s vehicles is up. The risks are obvious as September approaches, but there is money to be made now.

On the date of publication, Alex Sirois 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 Publishing Guidelines.