Why Churchill Capital Stock Soared 34% Last Month

What happened

Shares of Churchill Capital (NYSE: CCIV) jumped 34.4% in February, according to data provided by S&P Global Market Intelligence, as investors anticipated Churchill Capital’s merger with electric vehicle company Lucid Motors.

So what

Churchill Capital is a special purpose acquisition company (SPAC). SPACs are publicly traded companies that exist specifically to eventually merge with private companies that want to go public. In January, rumors surfaced that Churchill Capital would merge with Lucid Motors, an automaker specializing in electric cars, and the company’s stock price began to climb rapidly.

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Rumors of a merger with Lucid caused Churchill Capital’s share price to skyrocket by 487% between October 2020 and February 18.

But Churchill Capital’s share price actually fell significantly once the official merger was announced on February 22. The reason for the drop could be that investors were expecting a $15 billion valuation for Lucid, but when the details of the merger were announced, Lucid was valued at $24 billion.

Even with this drop in share price after the announcement, Churchill Capital stock was still up 34% at the end of February.

Now what

Churchill Capital and Lucid Motors will officially close their merger agreement in the second quarter of this year. Investors appear to have calmed down a bit since the announcement, and Churchill Capital stock is down just 1% so far this month. But investors should keep in mind that SPAC trades can lead to high volatility and more stock price fluctuations could occur.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

Sallie R. Loera