Shares of Churchill Capital IV (NYSE:CCIV) have had more of a wild ride in 2021 than most other special purpose acquisition companies (SPACs). The stock soared more than 450% as investors anticipated a merger announcement with promising electric vehicle (EV) company Lucid Motors. Then shares crashed after details of the transaction were announced in February 2021. But after a merger date was set, the stock jumped once again. All told, shares of the SPAC were 188% higher in the first half of the year.
Churchill Capital IV was worth more than $15 billion at its peak as investors speculated the blank check company would bring Lucid Motors public early in the year. That’s quite a valuation for a company that had no assets, and no guarantee of how a merger with Lucid would look, if it even came to fruition.
When it finally was confirmed that it would merge with Lucid, investors sold heavily on the news, with shares crashing 50% in just two days in February. The terms of the deal were favorable to Lucid, and didn’t impress Churchill shareholders on Lucid’s implied equity valuation.
But as details of the deal were absorbed, and a meeting date of July 22 was announced for a vote to close the transaction, shares rallied once again. Churchill stock jumped almost 50% in the month of June alone.
The excitement with Lucid stems from its comparisons to — and perceived ability to compete with — Tesla (NASDAQ:TSLA). Peter Rawlinson, who was a lead engineer on Tesla’s Model S project, will remain as CEO of Lucid as a public company. It expects its initial product, the luxury Air sedan, to be the first EV to have a battery range of over 500 miles. Reservations for the Air’s Dream edition are sold out, even with a sale price of $161,500 after expected tax credits.
Lucid has said demand for the Air has compelled it to accelerate its pace of investment over the next several years. The added investment in its initial Arizona factory will increase planned capacity by up to about 53,000 vehicles annually, and will include a dedicated production line for a previously announced Lucid Gravity luxury SUV expected to launch in 2023.
Investors have high hopes for Lucid Motors. The rally in the shares year to date hasn’t been in a straight line, and investors shouldn’t expect a smooth ride as the start-up enters the manufacturing phase. But those who have bid up the shares this year expect the company to eventually be an elite EV maker.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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