Stock market news live updates: Stocks fall, Nasdaq drops 2% as …
The S&P 500 was on track to fall for a sixth straight day for its longest losing streak since February 2020. The Nasdaq added to steep losses and dropped 2%, as …
Stock market news live updates: Stocks fall as tech shares extend rout to view your mail Finance Watchlists My Portfolio Screeners Premium Markets News Personal Finance Videos Industries Tech Contact Us MoreMore
U.S. markets close in 4 hours 1 minuteS&P 5003,848.14-28.36 (-0.73%)Dow 3031,388.83-132.86 (-0.42%)Nasdaq13,270.00-263.05 (-1.94%)Russell 20002,202.96-48.11 (-2.14%)Crude Oil61.59-0.11 (-0.18%)Gold1,805.80-2.60 (-0.14%)Silver27.61-0.47 (-1.69%)EUR/USD1.2149-0.0018 (-0.15%)10-Yr Bond1.3520-0.0180 (-1.31%)GBP/USD1.4095+0.0031 (+0.22%)USD/JPY105.1950+0.1420 (+0.14%)BTC-USD47,460.21-6,063.79 (-11.33%)CMC Crypto 200948.80-43.55 (-4.39%)FTSE 1006,625.94+13.70 (+0.21%)Nikkei 22530,156.03+138.11 (+0.46%)Oops!Something went wrong.Please try again later.More content belowOops!Something went wrong.Please try again later.More content belowOops!Something went wrong.Please try again later.More content belowOops!Something went wrong.Please try again later.More content belowOops!Something went wrong.Please try again later.More content belowStock market news live updates: Stocks fall, Nasdaq drops 2% as tech shares extend rout·ReporterFebruary 23, 2021, 10:35 AM·9 min readOops!Something went wrong.Please try again later.More content belowOops!Something went wrong.Please try again later.More content belowOops!Something went wrong.Please try again later.More content belowOops!Something went wrong.Please try again later.More content belowOops!Something went wrong.Please try again later.More content below
Stocks sank on Tuesday as tech stocks extended their declines.
The S&P 500 was on track to fall for a sixth straight day for its longest losing streak since February 2020. The Nasdaq added to steep losses and dropped 2%, as investors rotated away from growth and tech shares. Shares of airlines, cruise lines, lodging companies and other service-based added to Monday's gains, and cyclical sectors including energy and financials were poised to outperform anew.
Optimism over another round of fiscal stimulus to help support the economy has helped boost shares of companies levered to a strong economic reopening. The U.S. House of Representatives Budget Committee voted to advance bringing it a step closer to passage ahead of a mid-March cliff, after which federal
Investors this week have been eyeing a sharp move higher in Treasury yields, raising concerns of an unbridled surge in rates and borrowing costs for companies and inflationary pressure across the economy. The benchmark 10-year yield hovered around 1.36% for its highest level in a year, after wallowing below 1% for most of 2020.
That said, rising government bond yields and a steepening yield curve — with longer-dated yields increasing faster than those on the shorter-end of the curve — are also typical features of an economic recovery.
“I think the push up in bond yields is overdue because we have the prospect of very strong economic growth in the U.S. You have seen other indicators of economic activity be very strong, for example commodities have been on a real tear since last summer. Bond yields are reflecting stronger economic growth,”
“The consensus is estimating maybe 6-7% [GDP] growth for 2021. You see the rollout of the vaccine improving a lot and really starting to hit and make a difference. So a lot of signs of reopening are there, and the economic growth will reflect that and therefore bond yields have to reflect stronger economic growth, and that’s why they’ve moved up,” he added. “They’ve moved up pretty quickly, but they really started moving up since July from 60 basis points all the way up to where we are today at 135.”
Still, however, that hasn't eased some investors' concerns of a higher-rate environment.
“We're coming off a very strong 3-month run for U.S. stocks … and will now face the less-welcomed headlines of a typical economic recovery. This includes rising long-term interest rates and oil prices,” DataTrek co-founder Nicholas Colas wrote in a recent note. “Yes, it's entirely natural to see these move higher but that doesn't mean stocks get a free pass while they do.”
On Tuesday, Federal Reserve Chair Jerome Powell began delivering his semiannual monetary policy testimony before the Senate Banking Committee, offering another update on his view for the path forward for monetary policy during and after the pandemic.Powell reaffirmed that the Fed was looking to maintain its current accommodative policy posturing for the time being, keeping benchmark rates near zero and asset purchases at the current pace of $120 billion per month.
“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” Powell said. “We will continue to clearly communicate our assessment of progress toward our goals well in advance of any change in the pace of purchases.”
10:32 a.m. ET: Powell remains 'resolutely dovish,' suggesting premature policy tightening not on the horizon even amid recovery: Capital Economics
Federal Reserve Chair Jerome Powell's testimony before the Senate Banking Committee was “resolutely dovish,” suggesting monetary policy will likely not be tightened at the first signs of inflationary pressure or rebound in employment, Capital Economics economist Paul Ashworth said in a note.
“Fed Chair Jerome Powell's prepared semi-annual testimony today was overwhelmingly dovish. His conclusion that 'the economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved' is a clear indication that, even with more massive fiscal stimulus this year, the Fed won't slow the pace of its asset purchases until next year, with interest rate hikes still several years away,” Ashworth said.
“The upshot is that the Fed won't blink an eye until the unemployment rate is back down to 4%, which is in line with its current estimate of the long-run equilibrium rate,” he added. “Even then it could delay tightening policy if officials felt that the unemployment rates for minorities and low-wage workers were too high. With officials also seemingly keen to label any rise in inflation as due to 'transitory' factors, at least until proven otherwise, we are struggling to think of a scenario that could arise in the next couple of years which would prompt the Fed to tighten monetary policy sooner than expected.”
10:00 a.m. ET: Consumer confidence improves more than expected in February
Consumer confidence improved by a greater margin than anticipated in February, based on The Conference Board's closely watched monthly index.
The institution's headline Consumer Confidence index rose to 91.3 in February from a downwardly revised 88.9 in January. This topped estimates for a print of 90.0, according to Bloomberg consensus data. The index remains well below pre-pandemic levels, however, and had averaged around 128 in 2019.
Beneath the headline index, subindices tracking both consumers' assessments of present situations and expectations for the future hovered came in at more than 90.
9:52 a.m. ET: Apple shares sink as much as 6% in worst session in nearly four months
Shares of Apple () – a heavily weighted stock in each of the S&P 500, Dow and Nasdaq – sank as much as 6% on Tuesday amid a broader drawdown in tech shares.
The decline marked the biggest drop for the stock since October 30. Shares were down 5% for the year-to-date through Monday's close, giving back gains after an 80% surge in 2020.
9:30 a.m. ET: Stocks open lower as tech selloff continues
Here's where markets were trading shortly after the opening bell:
S&P 500 (): -26 points (-0.67%) to 3,847.50
Dow (): -44 points (-0.14%) to 31,422.00
Nasdaq (): -236.5 points (-1.79%) to 12,987.75
Crude (): -$0.32 (-0.52%) to $61.38 a barrel
Gold (): -$2.90 (-0.16%) to $1,805.50 per ounce
10-year Treasury (): +0.7 bps to yield 1.376%
9:01 a.m. ET: Home price growth accelerated by the most since 2013 in December as surging demand pushes prices higher
Housing prices in the U.S. capping off a banner year for the housing market as new buyers flooded the market amid low rates.
Standard & Poor's S&P CoreLogic Case-Shiller national home price index rose by 10.4% year-over-year in December, up from 9.5% in November and representing the fastest growth rate since 2013. The 20-City Composite Index, tracking housing price trends across 20 major metropolitan areas, posted a 10.1% annual gain, up from 9.2% during November and beating estimates for a 9.90% year-over-year gain, according to consensus estimates compiled by Bloomberg.
8:50 a.m. ET: Tesla shares extend rout, dropping another 5% in early trading as stock is seen increasingly linked to Bitcoin
Shares of Tesla () were poised to open more than 5% lower on Tuesday, extending declines after a drop of 8.5% on Monday.
“The last few days have been nasty for Tesla shares as the company's stock continues to sell off for two core reasons in our opinion. First is related to Bitcoin, as since diving into the deep end of the pool with its $1.5 billion Bitcoin purchase last month for both good and bad the company's stock is now heavily tied to this digital currency,” Wedbush analyst Dan Ives said in a note Tuesday morning. Bitcoin prices () tumbled nearly 9% to fall below $50,000 on Tuesday.
“Second, Tesla stopping sales of its lowest price Model Y coupled by continued price cuts have led to Street demand concerns as the bears come out of hibernation mode,” he added.
7:29 a.m. ET: Home Depot shares drop after company declines to provide guidance, though 4Q sales easily top estimates
Shares of Home Depot () sank more than 2.5% in early trading after the company declined to offer a forecast for this year following a banner year of soaring sales in 2020, as customers turned in droves to the company for home improvement projects during the pandemic.
“As we look ahead to fiscal 2021, while we are not able to predict how consumer spending will evolve, if the demand environment during the back half of fiscal 2020 were to persist through fiscal 2021, it would imply flat to slightly positive comparable sales growth and operating margin of at least 14%,” Chief Financial Officer Richard McPhail,
Comparable sales soared 24.5% in the fourth quarter, surging over last year's 5.2% growth rate and topping estimates for 19.1% growth. Earnings of $2.65 per share also grew over the $2.28 posted last year.
7:19 a.m. ET Tuesday: Stock futures mixed, Nasdaq futures tumble
Here's where markets were trading ahead of the opening bell:
S&P 500 futures (): 3,856.5, down 17 points or 0.44%
Dow futures (): 31,459.00, down 7 points or 0.02%
Nasdaq futures (): 13,032.25, down 13,032.25 points or 1.45%
Crude (): +$0.38 (+0.62%) to $62.08 a barrel
Gold (): +$1.60 (+0.09%) to $1,810.00 per ounce
10-year Treasury (): -0.9 bps to yield 1.362%
6:07 p.m. ET Monday: Stock futures rise, steadying after losses
Here's where markets were trading as the overnight session began:
S&P 500 futures (): 3,880.75, up 7.25 points or 0.19%
Dow futures (): 31,522.00, up 56 points or 0.18%
Nasdaq futures (): 13,240.00, up 15.75 points or 0.12%
U.S. flags fly out in front of the New York Stock Exchange (NYSE) is seen in New York, U.S., February 16, 2021. REUTERS/Brendan McDermid
Emily McCormick is a reporter for Yahoo Finance.
Read more from Emily:
E-Mini S&P 500 Mar 213,843.50-30.00-0.77%Gold Apr 211,805.80-2.60-0.14%SPDR S&P 500 ETF Trust384.14-2.89-0.75%Mini Dow Jones Indus.-$5 Mar 2131,339.00-127.00-0.40%Treasury Yield 10 Years1.3520-0.0180-1.31%TRENDING 1. 2. 3. 4. 5.
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(Bloomberg) — Tech shares led a decline in U.S. stocks amid concern that valuations had gotten out of hand amid higher bond yields and bets on faster inflation.The Nasdaq 100 was about 1.5% lower midday and headed to its longest losing streak since 2019, but off the worst of its losses after Chairman Jerome Powell signaled the Federal Reserve was nowhere close to pulling back on its support for the U.S. economy. Airlines, lodging companies and cyclical shares set to benefit from the end of pandemic lockdowns outperformed, limiting losses for the Dow Jones Industrial Average. A similar rotation was underway in European stocks.So-called growth shares are having their worst month against value counterparts in more than two decades as vaccination campaigns gather pace and bond yields hover near a one-year high. Bets on faster growth have pushed the gap between 5- and 30-year yields to the highest level in more than six years.Investors are growing concerned that broad equity benchmarks have already priced in much of the prospective global recovery spurred by vaccines and U.S. stimulus. As Powell reassured investors on stimulus, he voiced expectations for a return to more normal, improved activity later this year and said that higher bond yields reflected economic optimism.“We’re starting to see some people take some money off the table,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors. “The side of the market that has been so overvalued for so long is the tech side and those bigger growth names, so we’re seeing some rotation.”Elsewhere, stocks in Asia were mostly higher. Bitcoin retreated below $50,000 after a bout of volatility highlighted lingering doubts about the durability of the token’s rally.Some key events to watch this week:EIA crude oil inventory report is out Wednesday.Finance ministers and central bankers from the Group of 20 will meet virtually Friday. U.S. Treasury Secretary Janet Yellen will be among the attendees.These are some of the main moves in markets:StocksThe S&P 500 Index declined 0.8% as of 11:47 a.m. New York time.The Stoxx Europe 600 Index fell 0.4%.The MSCI Asia Pacific Index was little changed.The MSCI Emerging Market Index fell 0.4%.CurrenciesThe Bloomberg Dollar Spot Index fell 0.1%.The euro fell 0.1% to $1.2148.The British pound rose 0.2% to $1.4097.The Japanese yen fell 0.1% to 105.18 per dollar.BondsThe yield on 10-year Treasuries fell one basis point to 1.35%.Germany’s 10-year yield jumped two basis points to -0.32%.Britain’s 10-year yield rose four basis points to 0.71%.CommoditiesWest Texas Intermediate crude fell 0.2% to $61.49 a barrel.Gold fell 0.2% to $1,806.17 an ounce.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
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Jim Cramer said Monday it is not too late “to make a big bet” on reopening stocks. What Happened: “You’re no longer early with these names, but that doesn’t mean you’re late either,” the CNBC “Mad Money” host said. Cramer’s picks include Walt Disney Co (NYSE: DIS), Marriott International Inc (NASDAQ: MAR), Wynn Resorts, Limited (NASDAQ: WYNN), Southwest Airlines Co (NYSE: LUV), and Royal Caribbean Cruises Ltd (NYSE: RCL). The former hedge fund manager also foresees a rise in business for credit card companies such as Visa Inc (NYSE: V), Mastercard Inc (NYSE: MA), and American Express Company (NYSE: AXP). Other favorites include Estee Lauder Companies Inc (NYSE: EL), Caterpillar Inc (NYSE: CAT), Nucor Corporation (NYSE: NUE), and Simon Property Group Inc (NYSE: SPG). “We all know the day will come, the day when we can see the light at the end of the tunnel. We knew the reopening stocks would jump ahead of time,” said Cramer. Why It Matters: The CNBC host advocated that investors latch on to the uptrend in economic recovery stocks but also advised that they should maintain exposure to growth stocks. “It is not too late to make a big bet on the reopening stocks, but remember to sock away a couple of the better growth names on the way down, too.” Cramer’s travel sector picks all ended the trading day in green on Monday. Royal Caribbean closed 9.33% higher in the regular session the same day to $86.23. The bounce in the shares came despite the cruise liner reporting a net loss of $5.8 billion in 2020 as against the income of $1.9 billion a year prior. See more from BenzingaClick here for options trades from BenzingaFacebook Re-Friends Australia As Government Amends News-Revenue-Sharing BillBitcoin Might Be Tanking But These Ethereum Killers Are Posting Major Gains Today© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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Standard & Poor’s said Tuesday that its S&P CoreLogic Case-Shiller national home price index posted a 10.4% annual gain in December, up from 9.5% in November — the fastest growth since 2013.
Soaring commodity prices, additional federal stimulus, and government bond yields on the rise are all raising the specter of inflation. Furthermore, there is growing concern that stocks – and tech ones in particular – are now at valuations disconnected from reality. Is the changing macro climate about to send the bull market into retreat? Too early to tell, but it does signal that a more prudent approach to investing might be a good move right now. And that will bring us to dividend stocks. Investors want a pad, something to protect their portfolio in case of a market drop, and dividends offer just that. These profit-sharing payments to stockholders provide a steady income stream, that typically stays reliable even in a downturn. RBC Capital analysts have been doing some of the footwork for us, pinpointing dividend-paying stocks that have kept up high yields, just above 10%. Opening up the TipRanks database, we examine the details behind those payments to find out what else makes these stocks compelling buys. Annaly Capital Management (NLY) First up, Annaly Capital Management, is a real estate investment trust (REIT). Annaly holds a portfolio of commercial real estate with a heavy focus on retail (31%) and office (29%) spaces. Other large investments include multifamily dwellings, hotels, and healthcare properties. The company has over $100 billion total assets. In the company’s 4Q20 results, Annaly showed a 5.1% economic return for Q4, far stronger than the 1.8% reported for 2020 as a whole. EPS came in at 60 cents per common share, and more than covered the regular quarterly dividend of 22 cents. This is the third quarter in a row with the dividend at that level; at the annualized rate of 88 cents per common share, the dividend is yielding 10.7%. This is head and shoulder above the ~2% yield found among peer companies in the financial sector. Annaly has a long history of adjusting its dividend payment to fit with earnings, making it a reliable payer. Also of interest to investors, Annaly finished Q4 with $8.7 billion in unencumbered assets, including cash on hand. The company used this deep pocket to authorize a $1.5 billion common stock repurchase program, in a move to return capital to shareholders and bolster share prices. RBC’s 5-star analyst Kenneth Lee likes what he sees in Annaly’s performance, writing, “We continue to favor Annaly's diversified operating model, strong liquidity and portfolio skew towards agency MBS amid current macro backdrop… Annaly has exposure to growth-oriented, credit assets, including residential and commercial mortgage credit and middle markets lending. We believe diversification should allow NLY to pivot between attractive investment opportunities.” In line with these comments, Lee rates NLY an Outperform (i.e. Buy), along with a $9.50 price target. 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Covering SUN for RBC, analyst Elvira Scotto notes that the recent Arctic storm patterns in the continental US have negatively impacted sales volumes but remains buoyed by other aspects. “SUN maintained its 2021 guidance and noted improvement in volumes in January. We do not expect the recent weather conditions to have a meaningful impact to SUN's 2021 volumes,” said the 5-star analyst. “We believe SUN shows investors sizable current income with an improved balance sheet. We expect SUN to maintain its distribution and expect distribution coverage to improve over time.” Scotto rates SUN shares an Outperform (i.e. Buy) and increased the price target from $36 to $38. The figure implies a 23% upside for the next 12 months. (To watch Scotto’s track record, click here) Overall, SUN shares have a Moderate Buy rating from the analyst consensus, based on a range of reviews including 5 Buys, 2 Holds, and 1 Sell. 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Over the past year Federal Reserve Chair Jerome Powell has engineered the largest economic rescue in U.S. history, thrown a controversial lifeline to companies hard hit by the coronavirus pandemic and steered a sweeping labor-friendly revamp of monetary policy that any presidential administration would welcome. Is it enough to earn the 68-year-old former investment banker four more years as the head of the U.S. central bank?That question will get increased attention during this, the final year of Powell's term, and the conversation may start as early as this week when the Fed chief delivers his semi-annual update on the economy in two hearings before Congress. The testimony before the Senate Banking Committee on Tuesday and House of Representatives Financial Services Committee on Wednesday will be Powell's first since President Joe Biden and his fellow Democrats took control of the White House and Capitol Hill.
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Tesla Inc (NASDAQ: TSLA) CEO Elon Musk is no longer the world’s richest person, according to Bloomberg Billionaires Index. What Happened: Musk was replaced by Amazon.com, Inc (NASDAQ: AMZN) CEO Jeff Bezos as the richest person on the list after Tesla shares fell 8.6% on Monday eroding $15.2 billion from his net wealth, according to Bloomberg. A tweet by Musk over the weekend which touched on the high valuation of Bitcoin (BTC) and Ethereum (ETH) furthered the entrepreneur’s decline in wealth. That said, BTC & ETH do seem high lol — Elon Musk (@elonmusk) February 20, 2021 Musk falls to second place on the Bloomberg Billionaire’s Index with a net worth of $183.4 billion, while Bezos has a net worth of $186.3 billion. Why It Matters: This month, Tesla invested .5 billion in Bitcoin and said it expects to accept the cryptocurrency as a means of payment in the near future. See also: How to Buy Bitcoin (BTC) Tesla’s $1.5 billion BTC investment is worth nearly .5 billion, a gain of almost 70%, at the press-time BTC price of $52,040.21. Market strategist Peter Schiff — a noted gold bug and a Bitcoin critic— commented on the decline in the prices of Tesla shares post the company’s BTC purchase. Two weeks after @elonmusk announced that he spent $1.5 billion of shareholder money buying Bitcoin, #Tesla stock entered a bear market, plunging 20% from its all-time high set on Jan. 25th, and 16% since disclosing the #Bitcoin buy. Not an example other CEOs will likely follow! — Peter Schiff (@PeterSchiff) February 22, 2021 Musk and Bezos have been trading places as the world’s richest persons since January 2021. Price Action: Tesla shares closed nearly 8.5% lower at $714.50 on Monday and fell almost 0.5% in the after-hours session. On the same day, Amazon shares closed 2.13% lower at $3,180.74. For news coverage in Italian or Spanish, check out Benzinga Italia and Benzinga España. Photo courtesy: Forbes via Wikimedia See more from BenzingaClick here for options trades from BenzingaAnother Elon Musk Dogecoin Tweet Sends Speculators AflutterPalantir Replaces GameStop As WallStreetBets' Top Interest© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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Bitcoin plummeted as much as 17% on Tuesday as investors grew nervous at sky-high valuations, triggering the liquidation of leveraged bets and sparking a sell-off across cryptocurrency markets. The world's biggest cryptocurrency was facing its biggest daily drop in a month, falling to as low as $45,000. Ether, the world's second largest cryptocurrency by market capitalisation that often moves in tandem with bitcoin, also dropped more than 20% to $1,410, down over 30% from last week's record peak.
(Bloomberg) — Tesla Inc. shares wiped out their year-to-date gains Tuesday and traded below the level where they were when the electric-carmaker entered the S&P 500 Index in December.The stock dropped as much as 13% to $619 in New York, its biggest intraday decline since Sept. 8, before paring much of the loss to trade down 1% at 10:55 a.m. The stock was down 31% from its Jan. 25 record intraday high at its lowest point on Tuesday.Tesla’s early-week decline amid a wider market selloff was fueled in part by Chief Executive Officer Elon Musk’s comments over the weekend that the prices of Bitcoin and smaller rival Ether “do seem high.”“Tesla is an EV play entering the golden age of EVs and there is a lingering worry that the Bitcoin sideshow could overshadow the overall EV growth story playing out for Tesla in 2021 and beyond,” Wedbush analyst Daniel Ives wrote in a note to clients.The concerns over the value of the cryptocurrency helped erase some of Bitcoin’s gains, which had rocketed to new highs after Tesla announced two weeks ago it added $1.5 billion in Bitcoin to its balance sheet. The cryptocurrency fell as much as 18% to $45,000 Tuesday.However, there are other recent factors that may also be taking the shine off Tesla’s valuation. The company’s decision to stop taking orders for the lowest-priced version of its Model Y electric SUV, as reported by Electrek earlier this week, may also be dampening investor enthusiasm, Ives said. “Tesla stopping sales of its lowest price Model Y coupled by continued price cuts have led to Street demand concerns as the bears come out of hibernation mode,” Ives added.In addition, a continuous stream of EV development news from traditional automakers such as General Motors Co. and Ford Motor Co., as they prepare to go all in on the electrification race, have emphasized that Tesla isn’t the only way to get exposure to the upcoming transformation in the auto sector.Smaller electric-vehicle stocks, which typically take their daily trading cues from Tesla, also dropped sharply Tuesday.(Updates stock move in second paragraph, adds analyst comments, context in fourth to eighth.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) — Shares of the blank-check firm combining with electric-vehicle startup Lucid Motors Inc. plunged in U.S. trading after confirming the biggest SPAC merger yet to cash in on investor enthusiasm for battery-powered cars.Churchill Capital Corp IV, the special-purpose acquisition company run by financier Michael Klein, fell as much as 46% on Tuesday after confirming its merger with Lucid. The deal will generate about $4.4 billion in cash for the 14-year-old carmaker, which announced production of its debut model will be delayed to the second half of this year.The slump follows a dramatic 472% run-up in the shares since Bloomberg first reported on Jan. 11 that Lucid and Churchill were in talks. Lucid has shied away from comparisons to market leader Tesla Inc., but the public listing at a pro-forma equity value of $24 billion positions it to compete for a slice of what’s expected to become a rapidly growing market for EVs. It plans to use the newly acquired funds to bring vehicles to market and expand its factory in Casa Grande, Arizona.Traders often sell “sell on the news” after a long-rumored deal is consummated. The scope of Churchill’s decline was especially pronounced, signifying investors may also have been disappointed by the production delay or the terms of the deal. Lucid said it expects to need $600 million in bridge financing to bolster the company’s cash until the transaction with Churchill closes. The company expects negative free cash flow of around $10 billion through 2024, raising the question of how it will seek additional funds.Read More: Lucid Gives Sobering Look Under the SPAC Hood: Chris BryantThe reverse-merger represents the biggest capital injection for Lucid since Saudi Arabia’s Public Investment Fund invested more than $1 billion in 2018. The agreement included a $2.5 billion private placement in public equity, or PIPE, the largest of its kind on record for a SPAC deal. It was led by PIF as well as BlackRock, Fidelity Management, Franklin Templeton, Neuberger Berman, Wellington Management and Winslow Capital, according to a joint statement from Lucid and Churchill Capital.The placement sold at $15 a share — a 50% premium to Churchill’s net asset value — which translates into about $24 billion in pro-forma equity value, the companies said. The combined company has a transaction equity value of $11.8 billion.“I see the SPAC as just a tool, another lever to pull on, where we can accelerate our trajectory,” Lucid Chief Executive Officer Peter Rawlinson said in an interview. “This is a technology race. Tesla gets this. It’s why they are so valuable and Lucid also has the technology.”The SPAC is the largest run by Klein, a former Citigroup Inc. investment banker who has played a prominent role in guiding the Kingdom of Saudi Arabia’s investments, serving as an adviser to the PIF. Among other deals, he advised on the Saudi Aramco initial public offering.The Lucid transaction is expected to close in the second quarter.Production TargetsLucid had previously said deliveries of its debut EV, a luxury sedan called the Air, would begin in the second quarter. The company has now decided not to commit to a start date for the $169,000 car as a result of talks with Churchill Capital, Rawlinson said. It plans to eventually produce more affordable versions of the Air and a battery-electric SUV.The Casa Grande factory currently has installed production capacity for 34,000 units annually, based on three work shifts, Rawlinson said. Lucid hopes to ramp that up to capacity for 85,000 units a year as soon as 2023, after additional investments are made.Lucid forecasts deliveries of 20,000 vehicles in 2022, generating sales of $2.2 billion. It sees revenue rising to $5.5 billion and $9.9 billion in 2023 and 2024, respectively, according to a presentation made to investors posted on its website. The company foresees positive earnings before interest, taxes, depreciation and amortization of $592 million in 2024.Beyond its manufacturing capacity, Lucid expects to invest heavily in new products and will grow headcount to 5,000 over the next year, Rawlinson said.Lucid’s debut vehicle will challenge Tesla in the still-niche market for premium EV sedans. The Air model has a range of 517 miles on a single charge, based on Environmental Protection Agency estimates. It can reach zero-to-60 miles per hour in 2.5 seconds and has access to Electrify America’s network of DC fast chargers. That’s comparable with the Model S Plaid +, which has a maximum range of around 520 miles, a zero-to-60 time of less than 2 seconds and access to Tesla’s nationwide network of fast chargers.Ire of MuskThe market capitalization of Lucid is just a fraction of Tesla’s roughly $686 billion valuation, but not bad for a luxury electric-vehicle maker that has yet to deliver its first car. Rawlinson has stated repeatedly that Lucid is not a direct competitor to Tesla because his company’s price point is beyond the mass-market buyers Elon Musk aspires to reach.But there are signs of a budding rivalry.The Newark, California-based company — the headquarters of which are just 16 miles from Tesla’s in Palo Alto — says its first EV will go the distance against the longest-range Model S sedan. Lucid’s new factory arose out of the Arizona desert as fast as Tesla’s in China. And growing interest in the startup and its CEO has drawn the ire of none other than Musk.Rawlinson and Musk have a complicated history. The Lucid CEO was chief engineer on Tesla’s flagship Model S, but Musk has downplayed his role in its development and also accused him in a tweet of leaving the company “in the lurch just as things got tough” in 2012.Longer-term, Lucid is also working on energy storage solutions similar to Tesla’s Powerwall. The company wants to use the same battery technology in its cars to develop batteries to power homes and utility-scale devices and already has working prototypes, Rawlinson said.(Updates with explanation for stock slump in fourth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
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