Electric vehicle innovator Lucid Motors (NYSE:LCID) has had plenty of big news lately. While early buyers are getting ready for Oct. 30 when they’ll finally start to receive their Lucid Air EVs, investors should be ready for an important deadline taking place on the day before. Oct. 29 marks the extended redemption date for LCID stock public warrants. The cashless redemption of public warrants was announced in early September, with Lucid initially setting the deadline for Oct. 8, one month later. Two extensions later, Lucid is finally getting ready for redemption day.
The Why Behind the Warrants
The initial issuing of these warrants was part of Lucid’s SPAC merger that enabled its public debut.
As I reported at the time, “Holding a warrant grants the investor the right to purchase an amount of the company’s common stock at a set exercise or strike price. Purchasing warrants allows investors to potentially acquire more shares for less money. That said, if the merger fails and results in the liquidation of the SPAC, those who hold warrants essentially lose their entire investment.”
This investment alternative can also be prone to volatility, sometimes spooking investors. There are also benefits to such a process, though. When all warrants are converted into common stock, companies are typically able to avoid share dilution. When the warrants are redeemed, the company will also be in for a cash influx, coming at a time when opportunities to expand are abundant.
What It Means for LCID Stock
While this season has been turbulent for LCID stock, no major declines have occurred following the announcement of a warrant extension deadline. Indeed, shares rose on Oct. 15th following the most recent warrant statement from the company. This week hasn’t been any different. Although shares have declined from their early spike, they are still up more than 2% for the day and almost 11% for the week.
We aren’t likely to see any serious declines as the next one approaches, either. While it may mean some turbulence, Lucid has had enough good news lately to counteract any uncertainty that may stem from the final warrant redemption day. As noted, the company is about to begin delivering the first editions of the highly-anticipated Lucid Air. InvestorPlace contributor Joel Baglole recently named LCID stock to a list of three companies that could “win the green revolution” putting it alongside industry leader Tesla (NASDAQ:TSLA) and fellow innovator Nio (NYSE:NIO).
Start Your Engines
At the time of the first warrant announcement, I predicted that when redemption day arrived, it wouldn’t pose any consequences that should worry investors too much. Nothing has changed since other than that the company has seen a lot of good news that should quiet any serious worry. The warrant deadline should be viewed as a cash influx that will fuel further expansion efforts as Lucid helps fuel the EV boom by generating innovative fuel alternatives.
The term redemption day may not sound positive, but there’s no reason to panic now.
On the date of publication, Samuel O’Brient 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.
