Shares in US-based electric vehicle (EV) company Lucid Motors have had a volatile first few days of trading. The company went public on the Nasdaq on 26 July.
Rather than taking the traditional route of an initial public offering (IPO), Lucid merged with special purpose acquisition company (SPAC) Churchill Capital Corp IV in a $4bn deal announced in February. The Lucid Motors stock ticker is LCID, replacing the SPAC’s CCIV ticker.
How has the stock performed in the first sessions since the Lucid Motors DPO via SPAC? What are the details of the merger?
This article offers an overview of the EV startup and recaps the recent Lucid Motors DPO news.
Lucid Motors pivots from batteries to vehicles
Lucid Motors launched in 2007 as Atieva, building electric vehicle batteries and powertrains for other vehicle manufacturers. Its founders were Sam Weng, who was previously co-founder and vice president (VP) of sales and marketing at Astoria Networks, former Tesla (TSLA) VP Bernard Tse, and Sheaupyng Lin. Peter Rawlinson, previously an engineer at Tesla, joined the company in 2013 as chief technology officer (CTO) and has been chief executive officer (CEO) since 2016.
Atieva switched to developing its own high-performance luxury EV, launching its Lucid Motors brand in October 2016. The company is developing Lucid Air, an electric luxury sedan model, and Gravity, a high-performance luxury SUV.
Saudi Arabia's Public Investment Fund (PIF) invested more than $1bn in the company in 2018 for a majority stake. The investment was intended to provide funding for the company to develop, test and begin production of the Lucid Air, build a manufacturing facility in Arizona, and launch its retail strategy in North America. The company has a direct-to-consumer business model, and plans to sell its vehicles through 20 showrooms in North America by the end of 2021.
Lucid started construction of the Arizona facility in December 2019, investing $300m in the first phase, with plans to invest over $700m by the mid-2020s.
Lucid Motors DPO: taking the SPAC route to market
Merging with SPACs to access stock markets through a direct public offering (DPO) took off in 2020. Around 65% of the 587 IPOs in the US so far this year have been SPAC IPOs, up from 55% in 2020 and 28% in 2019, according to SPAC Analytics.
SPACs are known as blank-check companies, going public to raise funds from investors for an undetermined merger or acquisition. Churchill Capital Corp IV is the fourth SPAC launched by investment banker Michael Klein, founder and managing partner of M. Klein and Company and a former Citigroup executive.
Churchill Capital Corp IV went public on the New York Stock Exchange (NYSE) in July 2020. The $1.8bn IPO offered 180,000,000 units priced at $10.00 a unit. Each unit comprised one share of common stock and one-fifth of one warrant. One warrant entitled the holder to purchase one share at $11.50 a share. The stock was listed under the ticker symbol CCIV, with warrants listed separately under the ticker CCIV WS.
The CCIV share price was stable between $9.60-$10.18 for the remainder of last year, as investors awaited news of an investment target. The stock then rallied in January and February in response to reports that CCIV was in talks with Lucid Motors, reaching an intraday high of $64.86 a share on 18 February.
On 22 February, Churchill Capital Corp IV and Lucid Motors confirmed their intention to merge in a transaction with an equity value of $11.75bn. The transaction comprised a $2.1bn cash injection from CCIV and a $2.5bn private investment in public equity (PIPE) priced at a discount to the market at $15 a share, valuing the company at $24bn.
The funding will accelerate the launch of the Lucid Air and Gravity, and support expansion of the Arizona plant, which is operational for pre-production builds of the Lucid Air, the company said. The plant, which can produce 34,000 vehicles a year, is scheduled to scale up in the coming years to reach a capacity of 365,000 units annually.
On 23 July, Lucid’s shareholders voted to approve the merger and CCIV delisted from the NYSE. The merged company, Lucid Group, Inc., listed on the Nasdaq on 26 July, with the Lucid Motors stock ticker LCID for the stock and LCIDW for warrants.
The Lucid Motors stock price opened at $25.24 a share on 26 July. The stock traded up to an intraday high of $29.03 a share in its first session – a rise of 19.71%. LCID ended the session at $26.83 a share, for a 10.64% gain, putting the Lucid Motors valuation at $43bn.
The share price closed down at $25.18 on 27 July, in line with a broader market fall and a drop in the Tesla share price after it reported mixed quarterly results. Lucid stock slipped further to close at $24.08 on 28 July, giving up the gains made since the listing.
Production delays raise investor concerns
Lucid Motors has delayed production of the Lucid Air from plans to bring it to market in late 2020 and then spring 2021. With more than 11,000 paid reservations for the vehicle on the books, the company expects to start customer deliveries in the second half of 2021, with its Gravity model to follow in 2023.
Rawlinson said in an update to coincide with the listing: “We are on track to meet our projected customer deliveries this year, the next, and into the future. But with the $4.4bn in funding we now have in the bank, we’re able to significantly accelerate our trajectory while also mitigating our risks.
Investors in Lucid Motors hope the company will start selling its EVs this year and benefit from any shift in the automotive industry towards electrification in the coming years. But it’s a high-risk proposition. With the company yet to sell any cars, it has not generated substantial revenues.
Lucid reported first-quarter revenue of $313,000 and a net loss of $747.95m, according to a filing with the Securities and Exchange Commission (SEC). In 2020, the company reported revenue of $3.98m and a net loss of $705.6m.
Lucid faces strong competition in the EV market from specialist manufacturers such as Tesla and Plug Power (PLUG), as well as the traditional automakers like Ford (F), General Motors (GM) and Volkswagen (VOW3), which are each making a big push into electrification.
Some investors who bought CCIV stock ahead of the merger announcement with Lucid have raised concerns about the delay in starting commercial production and the impact on the share price, which plunged by more than 50% to below $30 a share in the days following the announcement and has yet to recover.
On 24 July, law firm Kessler Topaz Meltzer & Check announced that it filed a securities fraud class action lawsuit against Churchill Capital Corp IV on behalf of investors who bought or acquired CCIV securities between 11 January 2021 and 22 February 2021 when the share price rallied ahead of the deal with Lucid.
The law firm said: “Mr. Rawlinson announced that production of its debut car will be delayed until at least the second half of 2021, with no definite date for set for actual delivery of an actual vehicle. Following this news, CCIV’s stock price fell from a close of $57.37 a share on February 22, 2021, to a close of $35.21 a share on February 23, 2021. The complaint alleges that throughout the Class Period, the defendants failed to disclose a true and accurate picture of CCIV’s business, operations and financial condition.”
As with any other investment, if you are interested in trading Lucid Motors stock, you should do your own research and take into account your financial situation, risk tolerance and portfolio diversification.
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