Churchill Capital IV (NYSE:CCIV) has created quite a stir as shares have more than doubled in February. The bullish sentiment is based on ongoing rumors and headlines that the SPAC will merge with Lucid Motors, in the same manner that DraftKings and several other SPACs were taken public.

With shares trading near highs, is Churchill Capital IV still worth a look?

The appeal

The appeal here isn't in Churchill Capital IV. It's in Lucid Motors. Lucid's flagship car, the Lucid Air, is reportedly at the top of the pack in terms of performance, with a reported range of 519 miles per charge, and the ability to charge up 300 miles of range in 20 minutes. The company's CEO, Peter Rawlinson, is a former chief engineer for Tesla. He also worked at Lotus and Jaguar. The man knows the business of engineering cars. This has many looking at Lucid Motors as a potentially heavy competitor to Tesla.

IMAGE SOURCE: GETTY IMAGES.

Recently, Rawlinson reiterated the company's plan to focus on luxury vehicles before moving into a broader portfolio. That's the right area of the business to target at present, as electric cars still lack the utility of traditional vehicles. More affluent people have the extra resources to buy something like a Lucid vehicle.

Lucid Motors also has connections, and financial support, from the Saudi Arabian sovereign wealth fund, which invested $1.3 billion a few years ago. There is also discussion now about building a factory in Saudi Arabia.

In all, Lucid Motors seems like it's doing everything right.

The risk

Because Churchill Capital IV is just a blank-check company, any attempt to make a valuation past the cash the company has is based on the acquisition targets. But we don't know for sure what the value of Lucid Motors actually is. The company doesn't have much to show in terms of sales, with its first models of the Lucid Air expected this spring.

While the narrative certainly seems to carry the potential of a Tesla-like rise, it also carries the risks. Tesla has always had a pretty heavy price tag for its shares relative to financial performance. Rather than getting caught up in the euphoria, one has to question how many car companies can rack up valuations like Tesla. Will names like Lucid Motors garner the same market capital from investors? Or will names like Lucid Motors start to eat away at the market share that Tesla wants to control?

There's a lot of enthusiasm for the electric car industry right now, and it doesn't always add up. A primary example of this is Nikola, which has seen shares collapse 67% since June of 2020. Controversies over the firm's actual technology, along with accusations against management, led to the company losing a deal with General Motors to build its Badger pickup truck, and reservation deposits being returned.

Lucid Motors appears to have a much better foundation than Nikola, and Rawlinson's presence gives the company the background that helped Tesla get its cars going.

For a SPAC that hasn't made a deal (or at least hasn't formally announced one), it's one of the best performers in the space. Now valued at around $13.5 billion, Churchill Capital shares are worth more than six times the SPAC's $2 billion in cash. This is the key thing for investors to remember. If Churchill Capital IV doesn't actually have the Lucid deal, it is not nearly worth the price shares are trading at.

Without the deal Churchill Capital IV has to start over, looking for another deal, or end up closing shop and its capital returning to shareholders.

Is it worth a look?

It cannot be stressed enough that Churchill Capital IV shares have a lot of assumptions baked into them. Prior to the Lucid Motors rumors, the story was that Churchill Capital IV had an offer for DirecTV. That news had much less of an effect on the shares. The demand is for Lucid Motors. That's what everyone is interested in. Without the deal, this is just another blank-check company that does nothing.

Investors considering the SPAC should be aware of the situation at hand. Principally, this is not a done deal. Until there is any sort of definitive explanation given to the public by either party, everything is hearsay. Investors need to keep this in mind when looking at the stock.

I own shares in Churchill Capital IV. There's nothing wrong with wanting to get skin in the game on deals like this. There have been several SPACs that have completed a successful acquisition and investors made money. Still, one needs to be mindful of the risk. Investing in SPACs can be enticing, but make sure you're not betting it all on red. For a well balanced, thought out portfolio, these types of investments shouldn't represent a big percentage.

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