Lucid loses suit claiming it defrauded SPAC Investors about production outlook

Jonathan Stempel

Jan 11, (Reuters) – Lucid Group Inc has won dismissal of a lawsuit claiming that luxury electric car manufacturer Lucid Group Inc defrauded investors. The suit was brought against Lucid Group Inc by special-purpose acquisition company. Lucid Group Inc helped to take the company public by greatly overstating its production outlook.

U.S. District Judge Yvonne Gonzalez Rogers, Oakland, California, stated that, despite media speculations, Churchill Capital Corp IV shareholders had no reason not to know that in early 2021, the SPAC would merge into Lucid.

She stated that Lucid Chief executive Peter Rawlinson’s alleged misleading statements of February 5, 2021, on CNBC’s “Squawk in the Street”, could not have been relevant to their decision to invest at the SPAC.

“The court cannot imagine how plaintiffs could reasonably believe a merge was possible, when Lucid & CCIV had never publicly acknowledged that a merging was being considered,” wrote the judge.

Rawlinson, a Newark-based California company, told CNBC that it expected to produce 6,000-7,000 Air vehicle units in 2021. The factory had been “already built.”

Churchill shares plunged 50% within two days of the February 22, 2021 merger announcement. This wipes out an estimated $7.4B in value. Lucid had said that it would produce 577 units, and the factory wasn’t built.

Rogers claimed that Churchill shareholders were entitled to sue Lucid over statements made by another company. Lucid had alleged a “discernible” loss due to “specific alleged misconduct.”

However, she stated that pre-merger changes to Churchill’s stock market, including reactions to Rawlinson, reflect “the public perception of the likelihood and not the actual likelihood.” This is what is important.

Lucid was able to raise approximately $4.4 billion through the merger.

Lucid was subpoenaed by the U.S. Securities and Exchange Commission in December 2021 for documents related to its merger. It said that it was cooperating. In Oct. 2021, the company began shipping the Air.

Lawyers representing Churchill shareholders have not responded to comment requests. Lucid and its attorneys did not respond immediately to similar requests.

The case is In Re CCIV/Lucid Motors Securities Litigation. U.S. District Court Northern District of California, No. 21-09323. (Reporting by Jonathan Stempel from New York; editing done by Diane Craft