Lucid Air
Source: Lucid Facebook

CCIV SPAC Stock Is in a Free Fall, Blame It on TSLA and NIO

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Mar. 9 2021, Published 9:25 a.m. ET

Churchill Capital IV (CCIV) SPAC (special purpose acquisition company) stock fell over 9 percent on March 8. The stock is down 66 percent from its 52-week highs. What’s the forecast for CCIV stock before it merges with Lucid Motors? Will CCIV rise or fall more before the merger happens?

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It’s been quite an anti-climax for the CCIV-Lucid Motors merger. Usually, SPACs spike after they formally announce the merger. However, CCIV stock has been in a literal free fall since it announced the merger.

Electric vehicle stocks are falling

To be sure, let’s not single out CCIV stock. There has been a bloodbath in all EV stocks. Tesla (TSLA), whose CEO Elon Musk justified the company’s valuation in the earnings call for the fourth quarter of 2020, is now down 37 percent from its 52-week highs. Chinese EV maker NIO, which survived a bankruptcy threat in 2020 and rose over 1,100 percent in the year, is now trading at almost half of what it traded at during its peak.

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ev stocks are falling
Source: Koyfin

EV stocks have tumbled

After the sharp rally in 2020, markets are getting apprehensive about EV stocks' valuations, especially given the increased competition from legacy automakers like Ford and General Motors (GM). 

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Add the sell-off in tech stocks that we’re witnessing and we get a perfect recipe for a bloodbath in EV stocks. Interestingly, both Ford and GM have looked strong in 2021, even as EV stocks are falling.

CCIV is set to merge with Lucid Motors

CCIV is set to merge with Lucid Motors in the most hyped SPAC merger so far in 2021. Given the fall in EV stocks like TSLA and NIO, markets have also rerated CCIV stock. Talking of valuations in the EV space, we’ve been working on the derivative model where the valuations of other EV stocks are benchmarked to TSLA. 

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lucid motors car assembly

CCIV generously compared Lucid Motors' business and valuation to TSLA in its investor presentation. The thought is that in 10 years Lucid Motors will be where TSLA stands currently. However, there are a few things that we need to consider.

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TSLA stock looked overvalued

First, TSLA stock was way too overvalued, which makes all of the assets benchmarked to it susceptible to a crash. This is what we’re witnessing right now. Second, all EV companies face execution risks like TSLA faced when it was ramping up its production. Finally, in assigning a premium valuation to EV stocks, markets forgot the literal “elephant in the room” or legacy automakers.

lucid air car getting charged
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As legacy automakers ramp up their EV plans and move up the curve on autonomous driving, the future of mobility looks open for grabs. While automakers are competing on the road, there are companies like Archer Aviation and Joby Aviation aiming for the skies with their air taxis.

CCIV's stock forecast

CCIV's stock forecast depends on Lucid Motors. Looking at CCIV’s current stock price, markets are valuing Lucid Motors at a proforma market capitalization of $35 billion.

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NIO has a market capitalization of $55 billion, while XPeng (XPEV) is valued at a little above $21 billion. While CCIV stock has fallen sharply from its peaks, even the $35 billion valuation looks difficult to justify for a company that hasn't delivered its first car yet.

Overall, I would expect CCIV stock to fall more even from these levels. Both EVs and SPACs were red hot earlier this year. Before the merger between CCIV and Lucid Motors was announced, it seemed to have the best of both worlds and investors bid up CCIV stock over 550 percent from the IPO price. Since the bubble in EVs and SPACs is unraveling, CCIV and Lucid Motors seem to have the worst of both worlds.

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