What happened
Shares of CIIG Merger (CIIC) were up by 15% as of 12:30 p.m. EST Tuesday. But that's par for the course lately, as the stock has nearly tripled in the past week.
On Nov. 18, the company announced its plans to combine with U.K.-based electric-vehicle maker Arrival, and the stock hasn't looked back since.
So what
Arrival is a 5-year-old company with plans for four electric vehicle designs that it intends to bring to market by 2023. The merger with CIIG will result in a company with an enterprise value of $5.4 billion. The company says the potential market for its vans and buses will be $430 billion by 2025. Investors are betting the company's "new method" of manufacturing will succeed.
Arrival bus. Image source: Arrival.
Now what
While its first vehicles aren't scheduled to be produced until the fourth quarter of 2021, Arrival says it already has about $1.2 billion in orders. The majority of them are from United Parcel Service (UPS -1.51%), and can be canceled or modified.
The company touts its "microfactories," which it says give it more flexibility and require less invested capital than traditional manufacturing facilities. Large-cap companies including Blackrock (BLK -0.50%), Kia Motors, Hyundai Motor, and UPS have already invested over $300 million in Arrival to support its growth, and management points to those backers' involvement as a validation of its plans.
Retail investors should consider this a speculative stock. Its potential market may be huge, but there will be competition, and Arrival still has to prove its manufacturing model will allow it to price its vehicles competitively.
