Lucid Group announced its intention to generate approximately $3 billion through a stock offering, with a substantial portion of the funding, almost two-thirds, coming from the Public Investment Fund (PIF) of Saudi Arabia. Following this news, shares of the luxury electric-vehicle manufacturer experienced a 9% decline in after-market trading.
In a private placement, PIF, which currently holds over 60% of Lucid’s shares, has agreed to purchase 265.7 million shares for around $1.8 billion. This implies a price of approximately $6.80 per share, contrasting with the closing price of $7.76 on Wednesday.
The remaining funds will be raised through a public offering of 173.5 million shares of common stock.
These additional financial resources are crucial for Lucid as the company, like other players in the industry, grapples with mounting losses and diminishing cash reserves amidst concerns of a recession and the ongoing price competition instigated by Tesla Inc (TSLA.O), the market leader.
Louis Navellier, the Chief Investment Officer at money management firm Navellier, commented on the situation, saying, “The secondary offering will probably be ok as there’s a lot of ESG dollars looking for investments. That, along with money from the Saudis, will ensure Lucid survives a couple of more years. But their burn rate needs to fall fast. There’s a glut of EVs for sale in the U.S. and competitors are cutting prices and offering discounts.”
At the end of the first quarter, Lucid’s cash and cash equivalents had declined to $900 million from $1.74 billion in the previous quarter. However, CFO Sherry House assured investors that the company had approximately $4.1 billion in liquidity, providing enough funding to sustain the EV maker until at least the second quarter of the following year.
Despite the challenges faced by Lucid, the Public Investment Fund of Saudi Arabia, led by Crown Prince Mohammed bin Salman, has remained a steadfast investor in the automaker, with its stake currently valued at nearly $9 billion. The California-based EV manufacturer is constructing its first overseas production factory in Saudi Arabia, and the Saudi government has committed to purchasing up to 100,000 Lucid vehicles over the next ten years.
In its announcement on Wednesday, Lucid revealed plans to utilize the net proceeds from the offerings for general corporate purposes, including capital expenditure and working capital. Bank of America Corp has been appointed as the book-running manager for the public offering. Bloomberg News initially reported on the fundraising initiative.
