The Saudi PIF Will Not Sell Its Lucid Shares After Lockup Expires
Today, January 19th 2021, marks the end of the lockup period for Lucid's earliest investors who got in around the time of the SPAC merger with Churchill Capital. The Saudi PIF owns a huge amount of Lucid shares, and a mass unloading by the fund could have disastrous effects for Lucid's share price. This is causing investors no small amount of worry, but in reality the Fund is highly unlikely to unload any significant portion of its holdings.
What Is a Lockup?
Lockups are intended to limit volatility in a company's early days of public trading by forcing investors to hold on to their shares for a set period of time. These periods vary, but in this case the lockup lasted for 180 days after the merger with Churchill was finalized.
Investors have been experiencing plenty of FUD (fear, uncertainty, doubt) around the potential that the PIF could sell off a large portion of its 62.7% stake in Lucid but they really needn't worry. This is due to a number of factors. Let's examine them.
Long-Term Investment and Growth Potential
The Saudi PIF usually invests on a long-term basis and they haven't been involved with Lucid for long enough to think about getting out. Additionally, Lucid has excellent technology and is poised for some fairly explosive growth over the next few years and the PIF will want to be along for the ride when that happens. With such a large stake in Lucid, the PIF may be able to guide the company in directions that will be beneficial to both parties, realizing huge success for Lucid and huge (huger, the PIF's stake is now worth $46 billion from its investment of $1.3 billion) returns for the Fund.
Lucid Factory and Home Auto Industry
Another factor that will keep the PIF with Lucid is the manufacturer's plan to build a factory in the Kingdom by 2026. Lucid is in advanced talks with the Saudi government to get this project off the ground, and it would likely mean further investment, and further returns, for the Fund. Saudi Arabia is the region's largest importer of vehicles (around $12 billion worth each year) and the Kingdom wants to localize half of these to vehicles produced in Saudi factories by 2030. Lucid has a first-mover advantage in this thanks to its ties with the PIF as well as the oil-rich nation's plans to move away from fossil fuels and towards renewable energy solutions.
We've Been Here Before
Lucid's stock price has been sliding recently, but this isn't the first time we've seen this pattern. Share prices fell sharply prior to the end of the PIPE shares lockup period in September 2021, but were storming ahead just a month later. The same thing has been happening this time around, with all signs pointing to a repeat of history and better days ahead for Lucid's shareholders.
James Walker is an automotive journalist at Torque News focusing on Lucid Motors. If it's got wheels he's interested in it, and he's very excited to see what kind of cars the EV revolution brings us. Whether it's fast, slow, new, or old, James wants to have a look around it and share it in print and on video, ideally with some twisty roads involved. You can connect with James on Twitter, Instagram, and LinkedIn.