Lucid Motors, the company that reaches the market through the merger of SPAC with Churchill Capital IV (NYSE:CCIV), is an action with a lot of publicity at the moment. To date, CCIV shares continue to rise dramatically since the SPAC went public. However, CCIV shares are down more than 60% from their 52-week highs a few weeks ago. Today, stocks are down more than 6% at the time of writing amid what appears to be strong downside momentum.
Here’s why SPAC investors may be drawn to this drop as a buying opportunity right now.
The news is on the way
TO tweet today From Lucid Motors that a new in-vehicle entertainment system will be announced on March 17 at the SXSW conference has apparently bypassed investors. This “LucidAir x Dolby Atmos experience” is being billed as a “world first” and it certainly is intriguing.
Introducing the #LucidaAire X @Dolby Atmos Experience – A new and immersive way to imagine in-vehicle entertainment. Learn more about our next world first on March 17 at @sxsw. #Lucidx pic.twitter.com/Rv9u5TC51V
– Lucid Motors (@LucidMotors) March 3, 2021
The fact that this announcement is made at the SXSW conference is also interesting. It seems that companies that are still in the early stages of product and market development are relying more on innovative platforms to spread their message. The SXSW conference features “a variety of topics that allow attendees to explore what’s next in the worlds of film, culture, music and technology. SXSW shows that the most unexpected discoveries occur when diverse subjects and people come together. “
This conference offers a digital experience as part of the company’s offerings this year. It’s an interesting platform for Lucid to attract new eyes from investors interested in “unexpected discoveries,” adding to the intrigue of this veiled announcement.
Valuation concerns weighing on CCIV shares
It appears that the main factor depressing CCIV shares at the moment is the current valuation of the company.
Lucid remains a pre-commercial company and is expected to launch its all-electric Lucid Air sedan later this year. This EV launch is one of the most anticipated at the moment, as evidenced by the movement we have seen in CCIV shares since its recent IPO. However, even the best companies can seem overvalued from time to time.
The $ 2.5 billion PIPE financing made for this deal was made at $ 15 per share, a premium of 50% of CCIV’s net asset value. At the current price of over $ 25, the market is pricing a premium of over 100% NAV right now. Previously this had been much higher before the sell off. However, some investors appear to be baffled by the valuations that various EV players are demanding in today’s market.
A sell off of EVs in recent weeks appears to be the cause of further volatility drops for SPACs like CCIV stocks at the moment. That said, those bullish on EV growth might want to consider CCIV’s actions at these levels. This is a high-risk, high-reward game for long-term EV investors looking to get into the “next Tesla” on the ground floor.
At the time of publication, Chris MacDonald did not hold (directly or indirectly) any position in the securities mentioned in this article.