Lucid Motors Stock Forecast: Will LCID PIPE Investors Cash Out?

Mohit Oberoi, CFA - Author

Aug. 31 2021, Published 9:51 a.m. ET

Lucid Motors (LCID) stock has looked weak and is down 13 percent over the last month. The stock fell below the $20 price level on Aug. 30 but managed to close above the psychologically crucial price level. What’s the forecast for LCID stock amid fears that PIPE (private investment in public equity) investors might cash out once the lockup period expires?

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Lucid Motors received a PIPE investment of $2.5 billion, which was the largest for a SPAC. While the usual norm is to price the PIPE at the SPAC IPO price, CCIV priced the PIPE transaction at $15, which was a 50 percent premium to the IPO price.

Who are Lucid Motors’ PIPE investors?

The PIPE investment in Lucid Motors was anchored by Saudi Arabia’s sovereign wealth fund PIF (Public Investment Fund), which is also the majority stockholder of the EV (electric vehicle) startup company.

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Funds and accounts managed by Fidelity Management & Research, BlackRock, Neuberger Berman, Wellington Management, Franklin Templeton, and Winslow Capital Management also participated in the PIPE investment.

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In a bid to align the sponsors’ interests with the long-term performance of Lucid Motors, CCIV put an 18-month lock-in period for the sponsor shares. As for PIPE investors, the lock-up period would end on Sept. 1.

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We’ve seen a sell-off in SPACs when the lockup period ends. SoFi, which is among the other popular SPAC mergers of 2021, also fell amid the lockup expiry.

Will Lucid Motors’ PIPE investors sell shares?

The possibility of PIF selling any shares isn't likely considering that Saudi Arabia sees EVs as a strategic industry. There are also rumors that Lucid Motors might set up a facility in Saudi Arabia. As for other PIPE investors, they're still sitting on decent gains despite the steep fall in LCID stock. We could see some selling after the PIPE lockup period expires. However, I wouldn’t expect much selling from PIPE investors.

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LCID stock forecast

The long-term forecast for LCID stock looks positive. The pivot towards electric cars is among the biggest generational transformation. Lucid Motor’s first model, Lucid Air, has good specifications.

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Earlier this month, Lucid Motors drove two Dream Edition Range cars between Los Angeles and San Francisco and back across the Bay area to Lucid Motors’ global headquarters. The cars traveled 445 miles on a single charge, and on arrival showed a remaining charge of 30 and 72 miles. At the upper end, this gives us a range of 517 miles.

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The range is higher than that of the Tesla Model S. Elon Musk dropped plans for a higher range Model S Plaid+ at the last moment. He thinks that the Plaid model has a high enough range. Tesla has generally led the range game but LCID seems to challenge the narrative. NIO also plans to have a higher range in the upcoming sedan ET7.

What’s the outlook for LCID stock?

There are several catalysts that Lucid Motors investors need to watch out for, including the lock-up expiry. Beyond that, the commencement of deliveries would be a key driver. Several EV companies have faltered near the delivery dates.

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EV startups like Lucid Motors could enjoy a quality premium considering the troubles at some of the other EV startup companies like Lordstown Motors. While LCID stock might look overvalued in absolute terms, it would appear reasonably valued considering the valuations of other EV companies.


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