Turbo Trading's Head Trader Robert Knight, MBA takes a look at stock $LCID and the S-1 registration statement announced by the company on October 28, 2021. He describes how the statement affects current and future stockholders and determines if it will have a negative or positive effect on the company. A transcript is below the video.
This is a video on $LCID lucid group. The stock took a big pop today. This is an EV stock. They just announced that they're opening a showroom or starting delivery of cars, I think in Vancouver, Canada. And we can see it made this big cup and handle pattern really and broke out through $30. And we're lucky enough to, luck being a big thing we use here to catch this move through the $30 traded, close to $40 today, $39.78 now $36.80. But one of the things that came up a question came up. They do have a registration statement, that they are, I don't think it's effective, so it's not in place yet, but it is the first or second amendment of it. So you would expect that this to become effective in the near future. So what does it mean?
The stock itself has, it's a big flow to billion share floater. So more than that, probably a couple billion. I'm not sure. We'd have to look it up. Let me just quickly look it up. So the stock has a, you know, a couple of hundred million probably in the float. Yeah, there's a couple of hundred million in the float, but you know, it has 1.5 billion shares outstanding, or so, I mean, we can look into that further as we go here, but, this is the Form S-1 registration statement for, $LCID and here's just the calculator.
This really is the easiest place to see what they're registering here. It’s just to calculate the fees that they're going to charge that the SEC is going to charge them. So we see that they're doing what's called a primary offering Class A, common stock. They're doing 85 million with a proposed maximum aggregate offering price of 986 million. Let's just call it a billion.
So this is going to provide $1 billion new capital to $LCID, but 85 million shares, 85.75 million shares. Now in effect, depending on if they do it, you know, the current market level, depending, I guess, on the appetite that, the institutions have for it.
But let's say, I mean, the stock is strong. The sector is strong. Let's say that they do it. At the current market price, you know, say maybe around 30 or 35, well, on effect, that's what we call anti-dilutive. You issue stock. If you issue stock at the same price that it's currently trading, that is anti-dilutive because even though the number of shares in the market goes up and therefore you would think you would reduce the market cap. But you are putting a billion dollars into the company. So the greater, the number of shares outstanding is offset by the cash. So increasing the book value of the company. Book value is the value of all the assets, less the liabilities divided by the number of shares.
So that gives you book value. Well, market value and book value are not necessarily quite often, not the same thing. Because stocks will trade at a premium to book value because they are anticipating growth. But this is not going to change the book value. If they do the current prices because the number of shares would increase, but so would the book value of the company.
So it offsets each other. So to anti-dilutive assuming, they do it at around the same price, if they do it at a deep discount, then that's a different story. But I wouldn't anticipate that. But what we do see here also. Is the class, a common stock, 1.33 billion shares are going to register.
So these are existing shareholders. So you see the footnote number five consists of 1.3 billion classic common shares registered for resale by the selling security holders, named in this registration statement.
So their stocks were issued in a private placement, warrants. So they're registering the underlying stock of the warrants. They're going to register the stocks that vest to employees and such under their lucid equity awards. That's like stock options or bonuses and such, you're signing bonuses to people.
So those shares may not actually be issued yet, even though it's 1.3 million, they are registering a lot of those shares may not even be, issued yet to employees or, key people. Also what they are is they are registering, they're going to allow anything that's a restricted stock to become free trading.
So if it's, you know, stock options for, for their employees, the underlying stock of the stock options will become free trading. So if these people want to exercise their options, typically what they do, if they have a hundred options. At say $20. So they would sell 50 shares and exercise a hundred options and they would end up with 50 free shares.
That's pretty typical of what, what goes on. So the point being is that there are, they're registering the underlying stock of security, so that doesn't change capitalization. That changes float. So there'll be more stock in the float, but if you have a stock that is- so there's going to be more selling there, there is the potential to have more selling pressure.
But if your company's growing and you know, this is a big company and it’s really starting to go, then it'll have a negligible effect on the price of the securities. Maybe initially you might get a bit of a pullback as sellers come into the market, but I doubt that it has much of an effect on the company. On the price of the company. Pardon me. The price of the stock.
The fact that they are registering 85 million shares of common stock, but putting a billion into the market. Well, that's, you know, that's not, I mean, that's a lot of money. That's huge, for the company, and let's see, it's traded 300 million today [October 28, 2021].
Now, that's a big volume, but let's say trades more, mostly 50 million. Well, if you're only registering 85 or 90 million, this company can easily absorb. Absorb that type of selling or, you know, that kind of pressure, not to say that everybody that's going to take that position down 85 million is going to sell because a lot of it would be institutions.
As a matter of fact, what you see today is that this looks like institutional buying. This kind of chart pattern like this. Now, this is the retail buyers coming into the market and institutions selling into it now. Or the institutions waiting for it to come back to VWAP for them to buy. But when you get this type of pattern up like this that's institutional buying, they're just, they just need to own the stock.
Now it got up to a certain, you know, above that started getting on a whack. And so they, you know, not buying anymore and as such, it comes off. But, you know, the institutions, will be coming to this company say, ‘Hey, we want to take part of that 85 million shares that you have an issue because we need this stock.’
The overall effect of this financing, I think should be negligible for the company. The market for this stock is going to be more dictated now by the overall market number one and two, the overall, sector strength. And as we saw, I mean, look at Tesla, huge. These stocks are all going to go. If it goes anything like Tesla's does.
So the registration statement, in my opinion, will not have that much of an effect, a negative effect. And as a matter of fact, I think it has a positive effect on the price of the stock.