Cornerstone Crumbs: Lucid's SEC Subpoena

"The Lord bless you and keep you;

The Lord make His face shine upon you,

And be gracious to you;

The Lord lift up His countenance upon you,

And give you peace."

Numbers 6: 24-26

This is yesterday's news, but it is having a profound impact on Lucid Group's (LCID) SP this week. Most everyone interested in Lucid already knows that the SEC has issued a subpoena as of December 3rd:

On December 3, Lucid Group received a subpoena from the SEC requesting the production of certain documents related to an investigation by the SEC. Although there is no assurance as to the scope or outcome of this matter, the investigation appears to concern the business combination between the company and Atieva, Inc. and certain projections and statements. The company is cooperating fully with the SEC in its review.

I find this news quite interesting. For every de-SPACed IPO, the SEC likely should be doing the same. Ironically, Lucid has been on a tear as their tangible product has been approved and has been illustrating market leading performance, albeit this still will be tested as the company scales further.

In fact, even Adam Jonas from Morgan Stanley raised his PT from $12 to $16. Most Lucid investors have Mr. Jonas to thank as his initial PT announcement at $12 allowed investors to purchase Lucid shares below the $20 level for the last time. Investors should take note of Mr. Jonas coverage:

His revised base case target of $16 per share, which equates to a $28B market cap, is based on 400,000 units being produced by2030, which Jonas said "is still below management's target of nearly 550k units that year."

Investors need to understand that Mr. Jonas is saying that Lucid is worth $16 based on delivering 400,000 units by 2030. The company's estimates assume north of 250,000 units by 2026, more than doubling to 550,000 by 2030. By 2026, Lucid is estimated to generate just below $23 billion in Revenue. So Mr. Jonas is assuming that Lucid is worth 1.2 times EV/Revenue in 2026. Put another way, Lucid is trading at a 174% premium to its 2026 valuation.

Ironically, Mr. Jonas has set a PT for Rivian Automotive, Inc. (RIVN) near $150 as the clearest challenger against Tesla, Inc. (TSLA). Mr. Jonas also has drank the cool aid and is bullish on Tesla with a $1,200 PT after being a naysayer years earlier.

So how can Lucid's SP be negatively impacted as they have arguably the top battery technology out there? SEC subpoena. This is a waste of time in my opinion as Lucid has merged, and the company is already reporting on a combined basis. Comments regarding projections and statements are interesting as well. I'm sure there will be no scrutiny on the litany of de-SPACed IPOs that will be bankrupt over the next five years - don't worry, I've got them covered.

The fact of the matter is the only thing that could change the positive stance of Lucid's SP was an SEC subpoena. The reality is that Lucid may be headed towards $35 by year-end in a worst-case outcome, unless buy-the-dip traders target it. Today's action and after-hours immediate moves is a clear indication of how the market has soured.

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