Last week, U.S.-based SPAC (special purpose acquisition company), Churchill Capital Corp IV (NYSE: CCIV), saw its stock price jump more than 80% in just a week. In fact, so rapid was its growth that, last Friday, it triggered a circuit breaker to halt trading, before resuming later in the day and rising a further 9%.
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As usual on Wall Street, there’s a reason for this, and in an event that is becoming more and more common, it’s about the electric vehicle (EV) market.
What is Churchill Capital Corp IV?
Churchill Capital IV is a blank-check company formed by Wall Street veteran Michael Klein, one of the most prominent figures in the SPAC game alongside Chamath Palihapitiya and Bill Foley.
In Klein’s own words, Churchill Capital’s strategy is: “to identify and complete our initial business combinations with a company in an industry that complements the experience and expertise of our management team, Board of Directors and Operating and Strategic Partners who are comprised of a group of individuals from leading Fortune 500 Companies.”
Churchill Capital Corp I was originally founded in 2018 and merged with Clarivate Analytics Plc, before Klein opted to sponsor 3 more SPAC’s. Churchill Capital II is not yet affiliated with any merger, while Churchill Capital Corp III announced a definitive agreement to merge with MultiPlan, Inc. last year. That brings us to number IV.
Why is Churchill Capital Corp IV stock up?
The SPAC is rising off the back of rumors that it is going to put Tesla in the ground — ok, probably not, but the rumor mill thinks it is going to try and take on Elon Musk et al. through a possible merger with California-based Lucid Motors.
However, for now, these rumors are just that — rumors! Nothing has been confirmed, though it is appearing increasingly likely that we will have confirmation one way or another soon. At an event early last week, Churchill Capital head, Michael Klein, acknowledged the rumors but refrained from sharing anything more.
Of course, following the year that the stock market has had, we all know that such rumors alone are more than enough to send share prices skyrocketing. After all, this is the same month where a single misunderstood Elon Musk tweet can send the wrong company up 6,000%.
Churchill Capital is not showing any signs of slowing down, despite a lack of confirmation, with its stock rising 6% on Friday.
What does a Lucid Motors merger mean?
Realistically, Tesla has not had any real pure-play EV competition in the U.S. since its inception. While the likes of NIO in China could prove to be eventual competitors, they are not quite at Tesla’s level, while at home, Nikola has all-but been laughed off the stage.
In comes Lucid Motors, another California-based EV pure-play that has just finished completion of a $700 million factory, and is on schedule to start production of its first vehicle, the luxury Lucid Air sedan, by spring 2021. Initially, its new factory will have the capacity to produce 30,000 vehicles a year, with the goal of eventually getting to an annual capacity of 400,000 vehicles by 2027.
Of course, EV investors will still be wary following the aforementioned ‘laughing-off-the-stage’ of Nikola Motors, so if the rumors prove to be true that Churchill Capital wishes to merge with Lucid Motors, it will have a long road ahead to building an EV empire as worshipped as Tesla. Without even a car on the shop floor, Lucid Motors is no threat to Tesla yet, SPAC or not, but it’s definitely one for investors to watch should the deal go through.
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