Lucid Group (LCID.O) has announced its intention to raise approximately $3 billion through a stock offering, with Saudi Arabia's Public Investment Fund (PIF) contributing almost two-thirds of the total amount. Following this news, shares of the luxury electric-vehicle manufacturer experienced a decline of 9% after market hours.
As part of the stock offering, PIF, which currently holds over 60% of the company, has agreed to purchase 265.7 million shares in a private placement, amounting to around $1.8 billion. This implies a price of approximately $6.80 per Lucid share, compared to the previous day's closing price of $7.76. The remaining funds will be raised through a public offering of 173.5 million shares of common stock.
These additional funds are crucial for Lucid Group as it faces challenges common to the automotive industry, including mounting losses and tightening cash reserves. These difficulties have been exacerbated by recession fears and a price war instigated by market leader Tesla Inc (TSLA.O).
Louis Navellier, Chief Investment Officer at Navellier, a money management firm specializing in EV and related investments, commented on the situation, stating that the secondary offering is likely to attract interest from Environmental, Social, and Governance (ESG) investors who are actively seeking investment opportunities. He also mentioned that the investment from the Saudi government, in addition to the ESG dollars, will ensure Lucid's survival for the next few years. However, he emphasized the need for Lucid to reduce its burn rate promptly due to an oversupply of EVs in the US market, leading to price cuts and discounts by competitors.
Lucid's cash and cash equivalents decreased to $900 million by the end of the first quarter, down from $1.74 billion in the previous quarter. Chief Financial Officer Sherry House confirmed that the company had approximately $4.1 billion in liquidity, which would be sufficient to fund operations until at least the second quarter of next year.
Despite the challenges faced by Lucid, Saudi Arabia's PIF, led by Crown Prince Mohammed bin Salman, has been a steadfast investor in the company, with its current stake valued at nearly $9 billion. The California-based EV manufacturer is currently constructing its first international production facility in Saudi Arabia, and the Saudi government has committed to purchasing up to 100,000 Lucid vehicles over the next ten years.
Lucid intends to utilize the net proceeds from the stock offerings for general corporate purposes, including capital expenditure and working capital. Additionally, the company plans to unveil its Gravity sport utility vehicle later this year, with a scheduled launch in 2024.
As a leading independent research provider, TradeAlgo keeps you connected from anywhere.