Lucid Group (NASDAQ:LCID) stock rose 20% on Jan. 11 after an investor lawsuit was dismissed.
The class action suit claimed Licid defrauded investors by overstating its production outlook as it came public through a Special Purpose Acquisition Company (SPAC) called Churchill Capital IV, which traded as CCIV. A California judge found the media speculation was not material to its investor case.
Lucid opened on Jan. 12 at about $8/share, with a market capitalization of about $15 billion. The firm had sales of $195 million in its most recent quarter, shipping 2,272 electric cars. Results for the fourth quarter are due on Feb. 27.
SPAC Buyers Beware
The lawsuit offers an important lesson for investors.
Results and expectations for a company going public, even through a SPAC, are solely contained in its Securities and Exchange Commission (SEC) filings. In this case, CCIV said all it needed to say in its merger agreement with Lucid. Lucid has been making filings of its financial condition every quarter since.
Lucid came public in 2021, at a time when speculation about electric cars was at its height. Shares traded in February of that year for as much as $52 each. A second speculative wave in November sent them to $55.
They have fallen steadily since. The same can be said of the entire sector. Since Lucid’s merger was announced both Lucid and Tesla (NASDAQ:TSLA) are down 54%. Other electric car stocks, like Rivian (NASDAQ:RIVN), have been hit even harder.
The dismissal is the latest in a string of positive developments for Lucid. The company raised $1.5 billion in cash that will fund production through 2024. Lucid Air Pure sedans are shipping. The company claims 100,000 orders. An effort by Illinois car dealers to make Lucid sell through distribution also failed.
LCID Stock: What Happens Next?
Lucid must now prove it can produce vehicles profitably. Investors will need to look at the February earnings release carefully for signs that can happen. Investors are no longer buying promises.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
