Securities and Exchange Commission registering on Lucid Motors

Lucid Group Inc. has been subpoenaed by the United States Securities and Exchange Commission (SEC), which is on the lookout for any documents relating to its merger with a Special Purpose Acquisition Company (SPAC). Known colloquially as “blank check companies,” these organizations literally exist to be combined with existing companies in order to pump stocks and stimulate investment.

But they’ve garnered a lot of negative attention following an overabundance of EV startups generating insanely high valuations based on little more than a business proposition. Those looking for an example need look no further than Nikola Corp, which has been accused of grossly over-overshadowing its technological capabilities and production acumen after combing it on the stock market. As a result, financial regulators have grown increasingly skeptical of PSPCs and want to make sure everything that happens with Lucid is flawless.

According to Reuters, the announcement of the involvement of the SEC has already slowed down investment. Lucid shares fell 8% on Monday at noon. While they are currently in the midst of a rebound, it seems questionable whether they can close on a high note.

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

From Reuters:

The deal, which was struck earlier this year, was with veteran Michael Klein’s blank check acquisition company.

It was one of the largest in a series of deals with Special Purpose Acquisition Companies (SPACs) that included electric vehicle makers such as Nikola Corp and Fisker Inc.

Entering the market via the SPAC route has become popular among electric vehicle manufacturers who 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 be truly considered a viable business,” said Sam Abuelsamid, automotive analyst at Guidehouse Insights.

To suggest that some of these companies are not advanced enough to become viable is a massive understatement. However, we would be lying if we claimed that the existing regulatory structure and the overwhelming power of traditional manufacturers did not make it exceptionally difficult for new auto startups to do anything but shrivel up and die. All of these EV companies want to be the next Tesla because it has actually survived long enough to become a real automaker (despite sales of carbon credits) with a valuation high enough to embarrass industrial supergiants.

But too many of these EV startups have ended up being little more than tech-driven Ponzi schemes, whether or not that is the intention. To be fair, Lucid seems to be in a much better position than the other startups in PSPC. Its founder, Peter Rawlinson, was the former chief engineering officer of Tesla and he has already managed to produce working prototypes where other startups have never made it past the concept stage. However, it still suffers from significant financial confiscations – racking up $ 705 million in net losses in 2020, with an additional $ 3.18 billion missing in the first half of 2021.

Currently, Lucid estimates “at least” $ 1.07 billion in revenue by the fifth anniversary of Churchill’s IPO. The company is targeting 20,000 vehicles in 2022 and 50,000 in 2023. Meanwhile, the very expensive Lucid Air Dream Edition ($ 169,000) has been certified by the EPA to be able to travel 520 miles on a single charge, making it makes the longest range. EV currently existing.

This does not mean that Lucid will be immune to becoming another Nikola or Lordstown Motors – both of which have been made public through the use of a SPAC only to see stock prices plummet after reports. scathing about them have been published by Hindenburg Research. But that doesn’t stop Lucid from underperforming either, especially given its massively high valuation. Presumably, the SEC plans to examine the pro forma equity value of $ 24 billion resulting from the Churchill Capital (IV) merger. Although he may also be interested in previous rounds of funding carried out on behalf of Chinese state-owned companies, such as LeEco and BAIC Motor, or anyone else he deems potentially suspicious.

[Images: Lucid]

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Aurora J. William