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Why SPAC Churchill Capital IV's Stock Is Higher Today

What happened

Shares of Churchill Capital IV (NYSE: CCIV.U) were having a wild ride on Friday, amid rumors that the special purpose acquisition company (SPAC) was close to announcing a deal to merge with electric-vehicle maker Lucid Motors.

As of 1:15 p.m. EST, Churchill's shares were up about 8% from Thursday's closing price. They had been up as much as 21% -- and at one point, down over 6% -- earlier in the session.

So what

Churchill Capital IV has drawn intense interest since Bloomberg reported on Monday that it could be close to a merger with Lucid. The interest isn't hard to understand: Electric-vehicle stocks have had huge gains over the last year, and -- unlike some of the companies that have gone public in that time -- Lucid is close to shipping its first vehicle, the innovative Air luxury sedan.

Lucid's electric Air luxury sedan, a direct rival to the Tesla Model S, starts at $80,000. Shipments will begin this spring. Image source: Lucid Motors.

In fact, it will be a bit surprising if Lucid agrees to a deal with Churchill -- or with any other SPAC, for that matter. The company raised $1 billion from Saudi Arabia's sovereign wealth fund in September of 2018, using that money to build a factory in Arizona and to complete development of the Air.

Why are investors so excited? Because Lucid has a strong order book for the Air and a second model (a luxury SUV) in the pipeline, and it expects to begin shipping the Air this spring.

Now what

It's possible that the deal will be announced very soon -- maybe as soon as Friday afternoon. If so, auto investors should listen carefully to CEO Peter Rawlinson's reasoning for doing the deal before diving in -- but that said, Lucid's track record to date inspires some confidence.

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John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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