Lucid Motors (NASDAQ:LCID) may be popular, but its shares are not feeling so hot on Wednesday. In fact, as of this writing, LCID stock is down more than 11% in intraday trading. So what is responsible for the selling? And what else do investors need to know?
Investors likely know that Lucid Motors came public through a merger with Churchill Capital IV, a special purpose acquisition company from Michael Klein. These blank-check companies include certain provisions that keep insiders from selling right away. And in the case of Lucid Motors, it seems there are three key dates.
The first group of insiders are those who invested in the PIPE, or private investment in public equity. These investors are part of deals that help private companies raise money, and have become an integral part of the SPAC world.
But when PIPE investors start selling, panic for other investors seems inevitable. This is what we are seeing today. As InvestorPlace contributor Chris MacDonald and InvestorPlace Financial News Writer Samuel O’Brient have highlighted, today marks the end of the first lock-up period. As of Sept. 1, at least some PIPE investors are able to sell their shares. Other insiders must wait until six or 18 months after they received their shares to sell.
While the tiered system should help provide a sense of calm, LCID stock is sinking. More than 1.2 million shares have already traded hands compared to an average volume of 579,000 shares.
What Is the Bottom Line on LCID Stock?
So what else do you need to know? And what should you do with LCID stock?
Importantly, Lucid Motors is far from alone. Investors have seen this post-merger action in a handful of popular companies. In fact, just earlier this week, MacDonald wrote about REE Automotive (NASDAQ:REE), another electric vehicle startup. After the company disclosed share sales by insiders, REE stock plunged more than 30%. While this reality is certainly turning some retail investors off the SPAC space, it may be reassuring to know Lucid is not unique here.
It is also worth noting, as O’Brient highlights, that there is another catalyst coming with Lucid Motors. Later this month, the company will be opening the doors of its manufacturing facility to give fans a closer look. The company has also promised test drives and a closer look at its hotly anticipated Air EV. For investors waiting on a manufacturing timeline and the official launch of the Air, this could be a good sign.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Sarah Smith is the Editor of Today’s Market with InvestorPlace.com
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