Securities and Exchange Commission Checking in on Lucid Motors

Matt Posky
by Matt Posky

Lucid Group Inc. has been subpoenaed by the U.S. Securities and Exchange Commission (SEC) which is on the prowl for any documentation relating to its merging with a special purpose acquisition company (SPAC). Known colloquially as “blank-check firms,” these organizations literally exist to be combined with existing companies as a way to pump the stock and spur investments.

But they’ve gotten a lot of negative attention following a glut of EV startups garnering impressively high valuations based on little more than a business proposal. Those seeking an example need look no further than Nikola Corp, which was outed as having grossly overpromised on its technological capabilities and production acumen after raking it in on the stock market. As a result, financial regulators have become increasingly skeptical of SPACs and want to make sure everything going on with Lucid is above board.

According to Reuters, news of the SEC’s involvement has already dampened investments. Shares in Lucid fell 8 percent in midday trading on Monday. While currently in the midst of a rebound, it’s looking dubious that they’ll be able to close on a high note.

“The investigation appears to concern the business combination between the Company (Churchill Capital Corp. IV) and Atieva Inc and certain projections and statements,” the company said via a regulatory filing from December 3rd.

From Reuters:

The deal, which was completed earlier this year, was with veteran dealmaker Michael Klein’s blank-check acquisition firm.

It was one of the biggest in a string of deals with Special Purpose Acquisition Companies (SPACs) that included EV makers such as Nikola Corp and Fisker Inc.

Market listing via SPAC route has become popular among EV makers that have a vision but no prototype in an already capital intensive industry.

“The problem is a lot of these companies that have taken this approach are not far enough along to really be considered a viable company,” said Sam Abuelsamid, an auto analyst at Guidehouse Insights.

Suggesting some of these companies aren’t far along enough to become viable is a massive understatement. However, we would be lying if we claimed the existing regulatory structure and overwhelming might of legacy manufacturers didn’t make it exceptionally difficult for new automotive startups to do anything other than shrivel up and die. All of these EV firms want to be the next Tesla because it actually survived long enough to mature into a real automaker (carbon credit sales notwithstanding) with a valuation that is high enough to embarrass industrial supergiants.

But too many of these EV startups have ended up being little more than tech-focused Ponzi schemes, whether or not that was the intention. To be honest, Lucid does seem to be in a much better position than other SPAC-back startups. Its founder, Peter Rawlinson, was Tesla’s former head of engineering and it’s already managed to produce functional prototypes where other startups never got past the concept phase. However, it’s still taking on sizable financial forfeitures — racking up $705 million in net losses in 2020, with another $3.18 billion vanishing during the first half of 2021.

Currently, Lucid is estimating “at least” $1.07 billion in revenue by the fifth anniversary of the Churchill IPO. The company is targeting 20,000 vehicles in 2022 and 50,000 in 2023. Meanwhile, the very pricy Lucid Air Dream Edition ($169,000 USD) has been certified by the EPA as being able to go 520 miles on a single charge, making it the longest-range EV currently in existence.

That doesn’t mean that Lucid will be safe from becoming another Nikola or Lordstown Motors — both of which went public through the use of a SPAC only to see share prices crater after scathing reports about them were released by Hindenburg Research. But it doesn’t preclude Lucid from underperforming either, especially considering its massively high valuation. Presumably, the SEC plans on looking into the pro-forma equity value of $24 billion resulting from the Churchill Capital (IV) merger. Though it may also take interest in previous rounds of funding made on behalf of state-owned Chinese businesses, like LeEco and BAIC Motor, or anyone else it deems as potentially suspect.

[Images: Lucid]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Dukeisduke Dukeisduke on Dec 07, 2021

    At least Lucid is actually producing vehicles. Nikola is a scam, like Twentieth Century Motors. Is the founder of Nikola related to "Elizabeth Carmichael"?

  • SoCalMikester SoCalMikester on Dec 07, 2021

    the SEC should investigate high value companies that make nothing. not too sure the saudis would even miss their investment if it went bad. at least i dont THINK they would go all khashogi on them

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