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Wanted to share my thoughts on the LCID lockup expiry.
As growth tech and the broader market has been selling off for the last few days, LCID has held up surprisingly well for a mostly pre-production EV company. While RIVN, which is for all intents and purposes a similar company is down 22% YTD, LCID is up 3% after a strong recovery from last weeks bottom. I've use this recovery to load up on puts 2 weeks out for the share lockup expiry.
Share lockup expiry:
Wednesday, January 19th marks 180 days after the initial business combination Lucidand a cash shell company on July 23rd to form LCID. This is when 1.2 billion Lucid shares are unlocked to be sold on the open market, many of which belong to early Lucid investors who have thousands of % in paper gains. Lockup expiries can create substantial selling pressure. When the lockup for LCID pipe investors expired in September and 166 million pipe shares were released on the open market, LCID trended down nearly 40% in the two weeks preceding the lockup expiry on September 1st. The stock ended up recovering fairly quickly but still created a great opportunity to take profits on shorts and puts.
The Saudis won't sell!
Yes, chances are the Saudis won't sell. But they only own 1 billion out of the 1.2 billion shares that will be unlocked. That still leaves 200 million shares owned by others that can be unlocked, which is more than the unlock in September that created such a substantial drop. At an average daily volume of 74 million, this would create substantial selling pressure. Keep in mind many of the early Lucid investors have thousands of % in unrealised gains. As the music is beginning to slow for unprofitable growth companies in 2022 and with ate hikes on the horizon, many may be tempted to take profit, especially as LCID continues to trade at lofty valuations.
Also - the Saudis own 1 billion shares. A simple majority of 51% ownership in the company would be 840 million shares. So hypothetically speaking, they could also sell a substantial amount of shares (for the purposes of profit taking or portfolio rebalancing/derisking) and still retain majority ownership of the company. IMO it's not certain that they won't sell - the Saudis are here to take money and taking some profits may be a smart move.
I think LCID share price will decline significantly in the next 2 weeks leading up to the unlock date. I think ITM puts or shorts are a good idea if you want more conservative risk management. I have some profits to play with from the random VCRA spike so I went from some OTM puts, specifically the 1/21 35p. Proof of positions is attached below.
As usual: I am literally clinically retarded. My mother drank and smoked cigarettes during pregnancy. This piece is intended for entertainment use only and not as financial or investment advice. For financial advice, please contact a certified financial advisor, which I am not. Options are extremely risky and volatile investment and there is a high chance you may lose all or most of your initial investment. Please conduct your own research/due diligence and learn the fundamentals of options before entering this trade.
Disclosure: I own puts on Lucid stock, meaning I would profit from a decrease in the share price.
Positions: 25x 1/21 at 1.08 avg cost