What happened
Sometimes what the market gives, the market takes away. At least that's how the last two months have gone for shares of Lucid Group (LCID 0.41%). Lucid stock got hammered in December, dropping 28.2% for the month, according to data provided by S&P Global Market Intelligence. But back up one more month and the return over the past two months is a less exciting 2.9% move higher.
So what
November was a big month for both Lucid the stock and Lucid the company. But after that excitement wore off, investors took profits over the last four weeks. Lucid wasn't the only electric vehicle (EV) name to take a hit in the month of December.
But after Lucid stock soared more than 43% in the prior month, it experienced one of the larger corrections in December.
Now what
Several things occurred to drive shares higher before the December drop. Lucid delivered its much-anticipated first vehicles on Oct. 30, 2021. The Lucid Air was also given MotorTrend's 2022 Car of the Year award soon after its initial commercial deliveries. Lucid was also able to highlight its in-house technology advantage with a certified battery range of up to 520 miles, giving investors more reason to buy in.
Image source: Lucid Group.
But in December, Lucid spooked investors when it announced it was raising more capital. With $4.8 billion in cash on its balance sheet as of Sept. 30, 2021, the company presumably was capitalized well enough to satisfy its growth plans through at least 2022. So the debt offering came as somewhat of a surprise, and likely contributed to the month's downward move in shares.
The company also revealed that the Securities and Exchange Commission (SEC) has issued a subpoena to the company related to unspecified projections and statements related to the company's public debut through a special purpose acquisition company (SPAC) merger last year.
While it remains unclear whether the SEC investigation will amount to anything substantive, it's an added risk and investors don't like uncertainty. The capital raise, however, gives the company about $7 billion to help drive growth going forward. The macro picture involved a drop for the entire EV sector. But some of that negative sentiment has already reversed course. Lucid shares had jumped as much as 7.5% to start January before paring about half of that jump.
December proved that it doesn't take much to see large swings in the stock of Lucid and other EV companies. It's a good reminder to investors in the sector that they should expect volatile share prices.
