This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
Lucid Group (NASDAQ:LCID), the third-largest EV player in the US by market cap, saw its share price hammered over the past week amid back-to-back adverse developments. Yet, the tech-heavy Nasdaq exchange has now emerged as an unlikely source of enthusiasm for Lucid Group bulls.
To wit, as a part of the annual reconstitution of the Nasdaq-100 index, Lucid Group and five other companies would be incorporated into the benchmark index next year. The official press release notes:
“The following six companies will be added to the Index: Airbnb, Inc. (NASDAQ: ABNB), Fortinet, Inc. (NASDAQ: FTNT), Palo Alto Networks, Inc. (NASDAQ: PANW), Lucid Group, Inc. (NASDAQ: LCID), Zscaler, Inc. (NASDAQ: ZS), Datadog, Inc. (NASDAQ: DDOG).”
Bear in mind that the Nasdaq-100 index is composed of the 100 largest non-financial companies listed on the Nasdaq stock exchange. While the inclusion does not necessarily result in additional bids for a stock, it does provide material ancillary benefits, including additional liquidity and the attendant lowering of the average bid/ask spreads, as well as increased coverage from financial analysts (source).
As we noted in a previous post, an amalgamation of perceived bearish developments has hammered Lucid Group shares over the past few days. These include the specter of a full-fledged SEC investigation now that the company has received a subpoena for additional documents pertaining to certain commitments and financial projections that Lucid Group had made in its pre-merger phase. The probe likely centers around Lucid Group’s inability to initiate deliveries of the Air EV by the spring of 2021 and a full-year delivery target that has plunged from 6,000 units earlier this year to just 520 units today.
Additionally, Lucid Group’s convertible note offering to raise between $1.75 billion and $2.0125 billion was erroneously perceived as a bearish impulse by some shareholders. As we’ve noted previously, this development is, in fact, quite bullish given that there would be no immediate dilution in Lucid Group’s ownership, and the company would gain a sizable buffer to its present cash balance of $4.8 billion (as of Q3 2021) in order to finance manufacturing capacity expansion related to its electric vehicles and energy storage systems, increase R&D, and expand its retail and service network footprint.
Finally, some investors were also fazed by the sale of 466,749 shares by the CEO and CTO of Lucid Group, Peter Rawlinson, given that the liquidation, which netted $29.751 million, had materialized just hours before the SEC subpoena disclosure. However, we’ve already clarified that the share sale was likely intended to meet the tax obligations related to the options that vested on the 5th of December for Mr. Rawlinson.
Against this backdrop, the inclusion of Lucid Group shares in the Nasdaq-100 index comes as a welcome bullish development for the company’s investors.