Editor’s note: This article was updated on Aug. 31 to correct the year-to-date gains of Lucid Motors.
After a small selloff at the end of last week, shares of Lucid Motors (NASDAQ:LCID) stock continue to fall on Monday afternoon.
As InvestorPlace contributor Chris MacDonald said during the LCID stock tumble this past Friday, Wall Street “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.” While shares are up 103% year to date, LCID stock is down 13% over the past month.
Now, a drop like this is concerning for any stock. But what makes this even more important for Lucid Motors and LCID stock investors is the upcoming lock-up provisions quoted in Lucid’s original special purpose acquisition company (SPAC) merger announcement.
What does this mean exactly? According to the 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 billion fully 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.”
In turn, this is likely a reason for the massive selloff of LCID stock. However, as MacDonald also pointed out, “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.” Overall, though, this is a big date for anyone interested in or involved with LCID stock.
LCID stock was down a little more than 2% as of Monday afternoon.
On the date of publication, Nick Clarkson did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nick Clarkson is a web editor at InvestorPlace.
