Lucid Falls on $2.5B PIPE Lock-up Expiry

Lucid Group's stock fell nearly 11% as 166.7M PIPE shares became eligible for sale. Concord II priced its IPO, and no more M&A deals until next week?
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The SPAC story of the day was Lucid Motors' price drop on its PIPE shares becoming eligible for sale (more on that below). It feels as if the market is officially going to take a few days off to round out summer on the M&A front as we're stuck on just 1 deal announcement for the week. Genesis Park (GNPK) and Chardan Healthcare 2 (CHAQ) both passed their merger votes, and Concord Acquisition II priced an IPO. 

Lucid Shares Fall ~11% on PIPE Lock-up Expiry

The popular EV manufacturer's shares fell nearly 19% at its peak intraday as 166.7M PIPE shares became eligible for sale. The lock-up provision in its subscription agreement held PIPE investors from selling until the later of 1) September 1st and 2) PIPE shares being registered (the registration occurred last week.)

See the prospectus here

LCID is down ~19% over the last week in anticipation of profit taking on the PIPE. 

LCID is down ~19% over the last week in anticipation of profit taking on the PIPE. 

The $2.5B PIPE is among the largest ever put together for a SPAC transaction, and its pricing at $15/share was, and still is, largely unprecedented vs. the more typical $10. It represents a stark contrast in the difference of SPAC sentiment from then vs. now:

  • Then 😀: SPAC euphoria, pre-deal CCIV was trading at 3x NAV and the $2.5B PIPE was priced at $15/share
  • Now 😬: SPAC sentiment is as low as its been, pre-deal SPACs are averaging below NAV at $9.74, and PIPE financing is extremely hard to come by  

That being said, LCID is still a major win for many, including original IPO shareholders. As for the PIPE investors, if they sold today, still turned a profit, also in contrast to many recent de-spac deals trading below PIPE price. 

Lastly, if you hold warrants, which allow you to buy shares of LCID at $11.50, you are also in the money. Bloomberg has a nice writeup on the implications of the warrants, so pay attention if you own as the company can force your hand now!

Merger Votes

Genesis Park Acquisition Corp (GNPK) merger with Redwire is approved and will trade as RDW on 9/3. Shares closed at $10.03.

Chardan Healthcare Acquisition 2 Corp. (CHAQ) merger with Renovacor is also approved and will trade as RCOR on 9/3. Shares closed down at $9.36.

No mention of redemptions yet for either, however GNPK notes in its press release that "subject to the satisfaction or waiver of certain other closing conditions" its transaction will close tomorrow. 

Given what we've seen from others recently, that might point to its minimum cash requirement not being met. 

SPAC IPOs

CNDA/U was the lone SPAC IPO of the day. Its units closed down 1.4% to $9.86. 

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report.)

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