CCIV Stock seems fragile before the merger with Lucid Motors

Churchill Capital IV (CCIV) stock has fallen sharply since the announcement of a reverse merger with Lucid Motors. The SPAC (Société d’Acquisition Spéciale) promises to be fragile in the face of the merger.

CCIV shares once traded at a premium of almost 550% over the IPO price of $ 10. None of the other big PSPCs were trading at such a massive premium even before the merger was officially announced.

CCIV’s stock is declining

During this time, it turned out to be the typical case of “buy the rumor and sell the news”. CCIV stock appeared weak after confirming the merger with Lucid Motors. The deal valued the electric car startup at $ 24 billion.

The merger transaction involved a PIPE (private investment in public capital) of $ 2.5 billion. To be fair to the CCIV sponsors, they set the price of the PIPE at $ 15 or a 50% premium over the CCIV’s IPO price of $ 10. The usual convention is to price the PIPE at the IPO price which is $ 10 in almost all cases. Bill Ackman’s Pershing Square Tontine Holdings is an exception as it priced SPAC’s IPO at $ 20.

Lucid engines

That said, CCIV’s stock price at the time of the Lucid Motors merger announcement was valued at nearly $ 65 billion. It was a huge assessment for a company that has yet to deliver its first car. In addition, the valuation was higher than that of Li Auto and XPeng Motors. These two companies manufacture and deliver cars.

What has contributed to the decline in the stock of CCIV?

Several factors have contributed to the decline in CCIV stock. For starters, the EV euphoria we saw in 2020 has faded and almost all EV inventories are trading with losses in 2021. On the contrary, traditional automakers have rebounded and Ford, General Motors and Volkswagen is trading with massive gains. in 2021.

From growth to change in value

In addition, the shift from growth stocks to value stocks contributed to the decline of stocks like CCIV. Rising bond yields make companies like Lucid Motors that are not generating current income less attractive. Investors fear speculative growth companies that are expected to generate good income and earnings in the future, but currently generate little or no income.

Finally, EV stocks have started to look overvalued now, especially as mainstream automakers have unveiled aggressive electrification plans to protect their territory. With an extensive dealer and service network and decades of manufacturing expertise, traditional automakers look like formidable competitors for pure electric vehicle companies.

What to expect from CCIV stock now?

CCIV stock may not recover much before the merger with Lucid Motors. Plus, if you look at the PSPC mergers in the EV ecosystem, almost all stocks fell after the merger. While that doesn’t mean that Lucid Motors shares would also fall after its merger with CCIV, markets would question the high valuations and compare them to the company’s execution on its aggressive plans.

Lucid air

Lucid is expected to start shipping its Lucid Air model later this year. The model has good specifications on battery and range. Also, the model looks good and looks set to offer some good competition to the existing models. Meanwhile, with the intensification of competition, Lucid Air would face several models including the revamped You’re here Model S and Mercedes EQS.

All electric EQS model is expected to cost over $ 100,000 and analysts see it as a worthy competitor in the premium electric car market that Lucid Motors wants to target.

Merger CCIV-Lucid Motors

“The EQS is designed to exceed the expectations of our most demanding customers,” said Ola Kaellenius, CEO of Mercedes-Benz and Daimler. He added: “This is exactly what a Mercedes has to do to earn the letter ‘S’ in its name. Because we do not attribute this letter lightly.

Jessica Caldwell, executive director of insights at Edmunds.com, said EQS “will have to have a brand to stand out. I think giving people that very futuristic feeling that you’re actually driving something different will be appealing to some buyers. She added: “But I think Tesla’s simplistic design made a lot of people very happy.”

Brian Moody, editor at Autotrader, is also optimistic about Mercedes’ success in the electric car industry and said, “I think Mercedes Benz is going to do a great job on electric vehicles (EVs).

NIO vs. CCIV

In addition, NIO would also start delivering its cars to the United States in the future and give Lucid Motors stiff competition. Lucid Motors and NIO both target the premium electric vehicle market.

Meanwhile, after the merger with CCIV, Lucid Motors would get $ 4.4 billion in cash, which would help it increase its manufacturing capacity. NIO has also raised a lot of money through multiple capital increases over the past year. NIO generated positive free cash flow in the first quarter and ended the quarter with cash and cash equivalents of $ 7.3 billion.

As for CCIV and Lucid Motors, raising capital should not be a problem even in the future since it is backed by the Saudi PIF (public investment fund). It is one of the richest sovereign wealth funds in the world and also participated in PIPE’s investment in the CCIV-Lucid merger.

How to buy CCIV shares

You can invest in CCIV shares through any of the reputable online brokers. An alternative approach to investing in the green energy ecosystem could be to invest in ETFs that invest in producers of electric vehicles.

With a clean energy ETF, you can diversify your risk across many companies instead of investing in just a few companies.

You can also choose from ETFs that invest in IPOs of newly listed companies. The Renaissance IPO ETF significantly outperformed the S&P 500 in 2020, reflecting the strong performance of IPOs. However, it is underperforming in 2021 as the newly listed IPOs have not performed well.


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About Irene J. O'Donnell

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