A Breakdown of the Biggest SPAC of the Year!

October 28, 2022
Information Technology Investing Strategies

For those of you unaware, CCIV has been one of the hottest SPAC’s (Special Purpose Acquisition Vehicle) this year. They’ve attracted a lot of attention ever since the rumors of a potential merger with Lucid Motors (potential real competitor to Tesla) in early 2021. However, after touching uncharted highs of ~$65 in mid-February, the prices have plunged to the mid-$20’s. Are you wondering what a SPAC is, why CCIV has been hogging so much limelight, and why we find this stock to be a mouth-watering deal at the moment? Let’s break it down below:

 


 

A SPAC Explained:

Before we break down CCIV, let’s explain what a SPAC is. In layman’s terms a SPAC is a shell, or a ‘blank check’ entity, whose prime objective is to get listed on a stock exchange and then merge with or acquire a private company. In its simplest form, this enables the private company to go public without having to go through the cumbersome process of a public issue!

 

The Birth of CCIV:

The concept of SPAC has been earning popularity since the last decade, but it experienced a huge boom in 2020. CCIV has been in the center stage, having raised $1.80 billion in September 2020 through an Initial Public Offering (IPO). While the stock hid in the background for the first few months, its imminent merger with an exciting upcoming EV manufacturer, Lucid Motors, has kept the stock ticker busy since then.

 

What’s so exciting about CCIV?

If you know how much we love undervalued stocks, our recommendation for CCIV should not come as a surprise. But how does a blank check company with no concrete business look undervalued, though? Read further to learn more:

  1. Though most SPACs have underperformed historically, you can still earn outsized returns if you time your stock purchases right and hold it long. But when is the best time? Well, it is the period shortly before SPACs formally finalize the merger. Luckily, CCIV has just entered this phase – the merger with Lucid Motors is all but finalized, and is expected to close by July 23rd.
  2. The hopes from the newbie automaker which it will acquire are very high. Though it is entering the hotly contested EV market already spearheaded by the innovative Tesla, with legacy producers fighting for their share, Lucid Motors promise to make their prominent place, thanks to their high-end, ultra-luxurious, state-of-the-art offerings. Add to that the fact that the overall EV market is poised to grow to $733 billion by 2026, and is expected to maintain a CAGR of 29% over the next decade, (i.e. the market will grow by 29% cumulatively every year) and we have a really nice back drop for a growth story across the sector.
  3. The key to success in the race to EV dominance has been innovation – Tesla, with a 13-year history of selling cars, has thrashed the oldest carmakers thanks to its revolutionary technology. With that context it is not surprising that Lucid has been dubbed “The Next Tesla”, considering what it has managed so far. Take its first car, Lucid Air, for instance – it is the only EV currently that will be capable of an EPA range of over 500 miles. Its 1050 HP engine and a 2.5-second 0-60 acceleration time are simply earth-shattering.
  4. Yes, the stock of CCIV was clearly overpriced in February, valuing the acquisition at $57 billion. However, the subsequent fall and the resulting discounted prices look affordable. At a valuation of close to $40 billion, Lucid Motors is still steeply-priced, yet offers significant upside potential.
  5. Coming to the estimated sales and revenue figures, Lucid Motors expects to scale up its production exponentially in the coming years – 20,000 EV’s in 2022, generating revenue north of $2 billion; 49,000 units in 2023 and over 250,000 units ($22.7 billion) by 2026! While these numbers do sound a bit too optimistic, even getting close to them will be enough to justify the current valuations.

 

Conclusion:

The justification of the valuations of EV companies has been the talk of the town in recent days. While we don’t recommend buying the stocks at sky-high prices, we do enjoy being opportune on the corrected rates! Churchill Capital Corporation may embark upon a bull run similar to Tesla soon, and it seems like a second chance for all of us who missed the first run earlier this year!

 


 

Price Target: $40 (48% upside)

Current Price: $27

Rating: Overweight

Target Date: 8 Months

Ticker: CCIV

Start your investment journey

Scan to download Moby

Scan to download Moby

Annual

Want the full Moby experience? Our annual premium offers news, alerts, earnings, IPO calendars and more, including the Ultimate Investing Course (at a value of $99.99USD) to help you invest smarter. Save 45% with our Annual Premium – billed at $199.95 USD/year.

$0 / 7days

$16.66 USD/month

Download for Free

Monthly

Ready to start making better investment decisions? Join our monthly premium today with access to research, reports, and more for only $29.95USD.

$29.95 / month

+ processing fees

Try Monthly