Today, investors in Lucid Motors(NASDAQ:LCID) and LCID stock are seeing declines of approximately 4.5%. This move comes on an otherwise positive day for equities, with most indices closing at record highs.
The stock market appears to have taken a risk-on attitude toward growth stocks once again in recent weeks. However, Lucid is one company that has not kept up with the crowd. Over the past month, LCID stock has lost more than 20% of its value as investors rotate into other electric vehicle (EV) plays.
This early stage EV maker has impressed investors with its Lucid Air specs. However, what’s intriguing about today’s decline is it comes on the same day Lucidannounced updated specson its Dream Edition Performance and Dream Edition Range models. According to the company’s press release, “Dream Edition Performance will feature a powertrain optimized for speed and acceleration, with 1,111 horsepower. Dream Edition Range will deliver 933 horsepower while embodying Lucid’s exacting focus on maximizing range.”
For investors intrigued by the luxury styling and performance specifications of these vehicles, this release certainly is intriguing. However, it appears today investors are focused more on another looming catalyst. Let’s dive into what investors are watching with LCID stock today.
LCID Stock Down Ahead of PIPE Lock-up Provision
As per Lucid’s original special purpose acquisition company (SPAC)merger announcement, a number of lock-up provisions are stipulated. This can make assessing these lock-up periods, in which insiders are restricted from selling shares, difficult to understand.
Taken straight from the merger release:
“None of Lucid’s existing investors will sell stock in the transaction and are subject to a six-month lock up for the shares they receive in the transaction. All proceeds will be used as growth capital for the company to execute on its strategic and operational initiatives. Lucid currently has no indebtedness.”“The transaction includes a$2.5 billionfully committed, common stock PIPE with a unique investor lock-up provision that runs until the later of (i)September 1, 2021, and (ii) the date the PIPE shares are registered.”“In connection with the transaction, Churchill’s sponsor has entered into an agreement to amend the terms of its founder equity to align with the long-term value creation and performance of Lucid. Churchill’s sponsor has agreed not to transfer its founder equity for 18 months after the closing of the transaction.”
Accordingly, many investors have focused on the Sept. 1 lock-up expiration as reason to sell LCID stock. However, this relates to PIPE (private investment in public equity) investors only. Other insiders will not be able to sell their shares until six and 18 months after they received their shares.
This makes for rather convoluted math for investors to do. However, the reality is that more shares are about to hit the market. Accordingly, some investors don’t seem keen on sticking around to see what this stock does in the short term.
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