A Lucid Motors car in a showroom
Source: Lucid Motors

The Deadline for Lucid Motors Cashless Warrant Redemption Is Oct. 29

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Oct. 28 2021, Published 6:45 p.m. ET

The deadline is drawing near for Lucid Motors (LCID) investors to redeem public warrants. Earlier this month, the company announced that it was extending the date for cashless redemption of Lucid Motors stock warrants to Oct. 29, 2021. What does that mean? Here’s the Lucid cashless warrants redemption explained further.

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Electric vehicle company Lucid Motors went public in July 2021 through a merger with special purpose acquisition company (SPAC) Churchill Capital IV. As part of the merger, the company issued public warrants to investors, giving them the right to purchase common stock at a certain strike price in the future. That strike price was $11.50 per share.

“Purchasing warrants allows investors to potentially acquire more shares for less money,” reports InvestorPlace. It adds that buying warrants can be risky because warrant holders could lose their investment if the SPAC merger fails.

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lucid motors
Source: Lucid Motors

About 41.4 million public warrants were issued on July 29, 2020, as part of Churchill Capital Corp. IV’s IPO. The warrants were listed on the Nasdaq under the ticker symbol “LCIDW”. In Sept. 2021, Lucid Motors announced the cashless redemption of all of its outstanding public warrants to purchase Class A common stock shares. The initial redemption date was scheduled for Oct. 8, 2021.

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What's a cashless redemption?

The company chose to do a cashless redemption of public warrants, which means that the warrants would automatically convert to stock without requiring the warrant holder to come up with any cash.

“Lucid has chosen in part to require cashless exercise of the Public Warrants to enable warrant holders, including our retail investors, to hold shares in Lucid without cash exercise. We also expect this action will minimize dilution from these public warrants," said Peter Rawlinson, CEO and CTO of Lucid Group.

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"This is an important milestone in streamlining our capital structure to eliminate outstanding public warrants at the same time as we see growing confidence in Lucid's ground-breaking, in-house developed electric vehicle technology, which will soon arrive into the market in Lucid Air,” Rawlinson said.

Source: Twitter
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There are pros and cons to cashless redemption of warrants for both warrant holders and the company that issued the warrants. Warrant holders benefit because they don’t have to come up with any cash, but their returns may not be as large. Companies can benefit from a cashless conversion because there's less dilution of shares, however, it can also mean less revenue.

What will Lucid Motors warrant holders receive?

Under the Lucid Motors cashless warrant redemption, each warrant has a redemption price of $0.01, and warrant holders will receive 0.4458 shares of Lucid Motors Class A common stock.

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The public warrants were delisted from the Nasdaq on Oct. 13, 2021. A day later, Lucid Motors announced it was extending the redemption date to Oct. 29, 2021, primarily to help retail investors who may have been unaware of the initial redemption notice or terms of the warrant agreement.

Any public warrants that aren’t redeemed by 5 pm ET on Oct. 29, 2021, will be delisted, void, and no longer exercisable, and their holders will have no rights to those public warrants, the company said in a statement.

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