In February, CCIV confirmed preexisting speculation about its merger with EV company Lucid Motors. The stock for Churchill Capital Corp. IV (NYSE:CCIV) has been on a bumpy ride amid changes in the sector.
Should investors bet on CCIV stock before the merger finalizes or is the risk not worth the potential reward?
Market's response caused CCIV to rethink the valuation
Initially, CCIV was calling for a $65 per share price upon the debut of the merged company's stock. However, the company has since pulled back to a number in the $40–$50 range. After announcing the higher price, the shares fell a staggering 60 percent, which showed that investors didn't like the calculation. The updated price is more closely aligned with the existing CCIV stock, which opened on March 11 at $25.86. The stock hit a high of $58.05 on Feb. 18. However, it's still high above the $10 SPAC standard.
CCIV is a SPAC that has been seeking a target company to take public. Although the Lucid Motors confirmation is public knowledge, the official merger date still isn't known.
Next steps in the CCIV-Lucid merger
CCIV has pushed back the Lucid Motors merger date because they want to wait until Lucid is able to distribute their electrified models. Given the circumstances, Lucid isn't in a place to be generating revenue right now. As you can imagine, this isn't the best time to go public. So, CCIV presumably wants to wait until the company has its ducks in a row before proceeding.
It's worth noting that SPACs only have two years from the time they file their registration statement to complete the merger. The transaction will likely be completed in 2021.
CCIV stock still looks risky for investors.
CCIV stock is bound to remain volatile until Lucid starts making money. Also, sector frustrations like a bear run for NIO have impacted the acquisition company's standing.
We've seen great success with companies like Tesla, both in the consumer market and the stock market. NIO faced potential bankruptcy in 2020, but rebounded by end of the year and gained sentiment back in its favor. Since the beginning of 2021, NIO's story has been one of struggle. Stocks like CCIV are seeing the repercussions.
Taking a company public is always a risk, especially one that hasn't proved its profitability yet. The next few months will be a game-changer for CCIV and Lucid Motors, but we don't know which direction the game will go.
There's also the issue of the SPAC bubble. With hundreds of companies taking the SPAC route in the last year, have we reached a point where the pathway is tired? Probably not, but that isn't to say that we aren't in a hiccup of sorts.
Overall, betting on CCIV seems risky right now. With the next steps yet to be finalized, the path will probably be bumpy.