Lucid Group won the lawsuit which claimed that the automaker is defrauding investors in the special-purpose acquisition company that helped take it public. It was claiming that the company is overstating its production outlook.
U.S. District Judge Yvonne Gonzalez Rogers in Oakland, California said that despite media speculation, Churchill Capital Corp IV shareholders who brought the proposed class action had no reason to know in early 2021 that the SPAC would merge with Lucid. As a result, she said Lucid Chief Executive Peter Rawlinson’s allegedly misleading statements on Feb. 5, 2021, on CNBC’s “Squawk on the Street” could not have been material to their decisions to invest in the SPAC. “The court cannot conceive of how plaintiffs could reasonably think a merger was likely when Lucid and CCIV had not even publicly acknowledged that a merger was being considered,” the judge wrote.
Rawlinson had told CNBC that his Newark, California-based company expected to produce 6,000 to 7,000 units of its Air vehicle in 2021, and had “already built” a factory. Churchill shares fell 50% in the two days following the Feb. 22, 2021 merger announcement, wiping out an estimated $7.4 billion in value, after Lucid said it expected to produce only 577 units and the factory was not built.
Hit the stock
Rogers said the Churchill shareholders had standing to sue over statements made by a different company, Lucid because they alleged a “discernible” loss from “specific alleged misconduct.” But she said the pre-merger changes in Churchill’s stock price, including reaction to Rawlinson’s statements, reflected “the public’s perception of the likelihood of the merger, not its actual likelihood. The latter is what matters.”
The merger raised about $4.4 billion for Lucid. In December 2021, Lucid received a U.S. Securities and Exchange Commission subpoena for documents related to the merger. It has said it has been cooperating. The company began delivering the Air in Oct. 2021. Lawyers for Churchill shareholders did not immediately respond to requests for comment. Lucid and its lawyers did not immediately respond to similar requests.
Following this lawsuit dismissal and the announcement of its upcoming SUV, Lucid’s stock has been one of very few which has begun to recover from the lows of late last year. The stock has rocketed upwards by more than 4% today and more than 30% this week. While it remains far from its peak one year ago, down over 80%, it is finally making strides toward recovery. Lucid is by no means on stable ground, and the company likely still faces a substantial uphill battle in the near future. But with this hurdle now behind the company, it can continue to focus on product development, manufacturing improvement, and production in the new year.
