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Why Churchill Capital Stock Skyrocketed 34% Last Month

By Chris Neiger - Mar 3, 2021 at 10:16AM

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Investors were excited about the potential deal between the company and Lucid Motors.

What happened

Shares of Churchill Capital (CCIV) popped 34.4% in February, according to data provided by S&P Global Market Intelligence, as investors anticipated the merger of Churchill Capital with the 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 be merging with Lucid Motors, an automaker specializing in electric cars, and the company's share price began climbing rapidly. 

Multicolored arrows pointing up.

Image source: Getty Images.

The rumors of the merger with Lucid caused Churchill Capital's share price to skyrocket 487% between Oct. 2020 and Feb. 18. 

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

Even with that share price decline after the announcement, Churchill Capital's stock was still up 34% at the end of February. 

Now what 

Churchill Capital and Lucid Motors will officially close their merger deal in the second quarter of this year. Investors appear to have calmed down a bit since the announcement, and Churchill Captital's stock is down just 1% so far this month. But investors should keep in mind that SPAC deals can cause a lot of volatility and that more share price swings could happen.

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