As the first week of 2022 winds to a close, the electric vehicle (EV) sector has already seen its fair share of turbulence. The week began with plenty of sector momentum as industry leader Tesla (NASDAQ:TSLA) reported better-than-expected delivery results for the final quarter of 2021. However, since then, several EV stocks have been falling. The list of market losers today include names such as Rivian (NASDAQ:RIVN) and Fisker (NYSE:FSR). However, Lucid Motors (NASDAQ:LCID) has been been rising today and for most of the week. An important event is approaching, though, which has the potential to send LCID stock falling.
What’s Happening With LCID Stock
First thing’s first. Right now, LCID stock is performing well, especially compared to some of its EV peers. It’s risen almost 5% so far today, and even with yesterday’s decline, it is still up 0.63% for the week. While it’s down for the month, the stock’s gains for the past six are still impressive, topping 50%. Lucid is a clear beneficiary of the 2021 EV boom.
Now, onto the road ahead. Late in December, users began to speculate about an important date for Lucid stockholders — the end of the company’s lockup period. While the topic didn’t pick up much traction on social media, it is certainly worth discussion. This is because, as one user pointed out, Jan. 19, 2022, will mark the end of the next lockup period, enabling early investors to offload LCID stock shares.
A quick look into the company’s filings with the U.S. Securities and Exchange Commission (SEC) confirmed that the Twitter discussion was correct. According to Section 5.04 of the company’s Amended and Restated Bylaws, “Lock-Up Period means the period beginning on the Closing Date and ending at 11:59 p.m. Eastern Time on the date that is 180 days after the Closing Date.”
According to a Prospectus Supplement provided to investors following the company’s registration filing with the SEC, early holders of Class A Common Stock were restricted from offloading shares until Jan. 19, 2022. That is exactly 180 market days after the deal’s initial close, as outlined in the bylaw.
Why It Matters
These types of lockup provisions are common for companies such as Lucid that opted to make their public debut by way of a special purpose acquisition company (SPAC) merger. And while LCID stock’s recent performance has been good, some early investors will likely take the opportunity to offload shares, particularly as slower growth has been predicted for the EV sector in 2022.
This isn’t great news for Lucid, as investors pulling out will likely drive down share prices. Indeed, we’ve seen this before. When the company’s first lock-up period ended in early September 2021, LCID stock fell by almost 11%. With that in mind, it was quick to rebound, as the company had several exciting catalysts approaching that helped drive momentum back up. There’s still plenty of uncertainty facing markets in 2022, but investors have reason to regard Lucid through a lens of optimism. One CitiGroup analyst recently issued a $57 one-year price target on the stock with a buy rating. The company is also eyeing an expansion into European markets.
What It Means for LCID Stock
As we saw before, LCID stock will likely fall on Jan. 19 as investors pull out. Furthermore, it will likely decline before that in anticipation. That said, it will likely be quick to rebound, just as it was the first time around.
Investors should brace for turbulence as Lucid dips later this month, but they shouldn’t panic. If anything, this may prove to be an opportunity to buy the dip.
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.