Why SPAC CCIV Is Getting Crushed

CCIV Lucid

Shares of special-purpose acquisition company Churchill Capital IV (CCIV) were trading sharply lower on Tuesday morning after the company announced a deal to merge with electric-vehicle start-up Lucid Motors.

Churchill Capital IV was down about 26.5% from Monday’s closing price.

This might be an extreme case of “buy the rumor, sell the news.” Churchill’s stock price had soared since Jan. 11, when Bloomberg reported that the SPAC was in negotiations with Lucid.

Lucid, in case you’ve missed it, is one of the biggest fish in the electric-vehicle start-up pond. Led by Peter Rawlinson, who previously was the chief engineer of Tesla groundbreaking Model S, the company has a nearly completed factory in Arizona, more than 400 patents on its next-generation EV technology, and plenty of reservations for its first model, the Air luxury sedan. The Air is expected to begin shipping later this year.

Given the intense investor interest in electric-vehicle stocks over the past year, it wasn’t surprising that the market bid up Churchill’s stock price on the idea of its potential deal with Lucid.

But why is it down so much now that the deal is officially happening?

The details of the deal offer a clue: Churchill’s shareholders will collectively own 16.1% of the post-merger company. As of 11 a.m. EST, Churchill’s market cap was about $10.9 billion. That implies a market cap for the post-merger company of around $68 billion.

Even in this market, that’s pretty high for a company that has yet to deliver a car. There’s a lot to like about Lucid, but there are also 68 billion reasons to tread carefully right now.

( If you are looking for smart investing ideas and Top stocks, look no more, click here and check out our investments page )

Want to receive the latest stock and cryptocurrency news and investing ideas that can help you make money ?! Subscribe to our newsletter. Enter your email below and hit the subscribe button.

New to investing world? Learn more on how to start investing by clicking on the following link: Detailed Tutorial of how to start investing in 10 minutes.

If you want professional consultation regarding stock or cryptocurrency investing leave your information below and experts from our trusted partners will reach out to you

Subscribe

* indicates required
Start Investing With Etoro