By Jonathan Stempel
(Reuters) – Lucid Group Inc on Wednesday won the dismissal of a lawsuit accusing the luxury electric car maker of defrauding investors in the special-purpose acquisition company that helped take it public, by significantly overstating its production outlook.
U.S. District Judge Yvonne Gonzalez Rogers in Oakland, California said that despite media speculation, Churchill Capital Corp IV shareholders who brought the proposed class action had no reason to know in early 2021 that the SPAC would merge with Lucid.
As a result, she said Lucid Chief Executive Peter Rawlinson’s alleged misleading statements on Feb. 5, 2021 on CNBC’s “Squawk on the Street” could not have been material to their decisions to invest in the SPAC.
“The court cannot conceive of how plaintiffs could reasonably think a merger was likely when Lucid and CCIV had not even publicly acknowledged that a merger was being considered,” the judge wrote.
Rawlinson had told CNBC that his Newark, California-based company expected to produce 6,000 to 7,000 units of its Air vehicle in 2021, and had “already built” a factory.
Churchill shares fell 50% in the two days following the Feb. 22, 2021 merger announcement, wiping out an estimated $7.4 billion in value, after Lucid said it expected to produce only 577 units and the factory was not built.
Rogers said the Churchill shareholders had standing to sue over statements made by a different company, Lucid, because they alleged a “discernible” loss from “specific alleged misconduct.”
But she said the pre-merger changes in Churchill’s stock price, including reaction to Rawlinson’s statements, reflected “the public’s perception of the likelihood of the merger, not its actual likelihood. The latter is what matters.”
The merger raised about $4.4 billion for Lucid.
In Dec. 2021, Lucid received a U.S. Securities and Exchange Commission subpoena for documents related to the merger. It has said it has been cooperating. The company began delivering the Air in Oct. 2021.
Lawyers for Churchill shareholders did not immediately respond to requests for comment. Lucid and its lawyers did not immediately respond 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 in New York; editing by Diane Craft)
