Shares of electric vehicle maker Lucid Group (NASDAQ:LCID) are down 17% in early trading today after the company said it has received a subpoena from the U.S. Securities and Exchange Commission (SEC) seeking documents related to its public debut.
LCID stock has been a high flyer this year prior to today’s move lower, up 370% year to date at $47.27 per share as of Dec. 6.
Lucid Group went public via a reverse merger with special purpose acquisition company (SPAC) Churchill Capital IV. Shares of the automaker officially started trading on July 26 of this year.
What Happened With LCID Stock
In a regulatory filing, Lucid Group said that it had been hit with a subpoena for documents by the SEC. It stated that “The investigation appears to concern the business combination… and certain projections and statements.” News of the SEC probe was enough to send LCID stock sharply lower in pre-market trading.
The SPAC deal that led to LCID stock listing on the Nasdaq was completed with veteran dealmaker Michael Klein’s blank-check firm Churchill Capital IV. In a year marked by dazzling electric vehicle makers coming public, Lucid’s merger with CCIV was one of the largest. Other companies that came public during this time include Nikola (NASDAQ:NKLA) and Fisker (NYSE:FSR).
Why It Matters
Since its founding in 2007 by Bernard Tse and Sam Weng, Lucid Group has quickly become a top electric vehicle manufacturer in the U.S. One reason for this, in addition to its rivalry with Tesla (NASDAQ:TSLA), is that its Lucid Air sedan is already in production. The company has set a production target of 20,000 vehicles in 2022 and 50,000 in 2023.
More broadly, today’s news could lead to a further cooling of EV stocks after they saw a big rally following the Nov. 10 IPO of Rivian Automotive (NASDAQ:RIVN). The SEC probe could be a sign that the entire sector has become overheated.
On that note, shares of Tesla (NASDAQ:TSLA) have fallen nearly 10% in the past week.
What’s Next for Lucid Motors
The uncertainty caused by news of the SEC investigation is going to hurt LCID stock in the near term. More long term, investors will need to determine just how extensive the regulators’ investigation is and if it is focused on financial statements made by Lucid Group ahead of its IPO, or focused instead on Churchill Capital that Lucid merged with to go public.
On the date of publication, Joel Baglole 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.