Lucid Motors' $3 Billion Stock Sale
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A $3 billion equity offering will be carried out by Lucid Group, with some shares going to the Public Investment Fund, Saudi Arabia's sovereign wealth fund.
In order to finance Lucid's first production car, the proceeds of the stock offering will be used for capital expenditures and working capital. Due to the increase in outstanding shares, existing shareholders may experience dilution as a result of the capital offering, which may pose a short-term threat to the company's valuation.
Lucid Group (NASDAQ:LCID) has seen its share price crashed significantly an all time high of $60, as investors become more wary about the firm's production car launch. Doubts have been further solidified after Lucid had to reduce their production forecast three times during FY 2022 and FY 2023.
The EV start-up announced an enormous stock sale worth of $3B in order to support the launch of Lucid Air - being taken up by Saudi Arabia's sovereign wealth fund. This large amount of capital raising could potentially create further valuation pressure in the short term.
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Lucid announced its plans to raise funds by offering $3B worth of shares. This encompassed both public and private investments from Saudi Arabia’s Public Investment Fund (PIF).
This offer includes 173,544,948 shares being sold to the public for a total of $1.2B as well as an agreement with PIF's affiliate Ayar Third Investment Company which will purchase 265,693,703 shares of common stock from Lucid for gross proceeds of $1.8B.
Ayar Third Investment Company owns around 60% of Lucid and has contributed to its stock sales earlier. The $1.8B investment is equivalent to 60% of the firm's total equity offering so the Public Investment Fund stayed consistent with its 60% stake in Lucid (maintaining proportional ownership). Additionally, Saudi Arabia sealed a deal outlining terms for the delivery of up to 100 thousand electric vehicles over ten years (the agreement between Lucid and Saudi Arabia consisted of an initial 50 thousand EV purchase commitment with an option for another 50 thousand EVs).
As opposed to other EV manufacturers like Lordstown (RIDE), Lucid is not under any serious pressure to raise liquidity. At the end of the first quarter, Lucid had $3.4B in cash available (+$700M in additional credit facilities) and a very solid balance sheet.
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Lucid's capital raise is not a small one: With a market cap of $14.2 billion, the $3.0 billion the firm is expected to raise represents approximately 21% of its current value. A capital offering is usually a negative catalyst for a company's share price, since existing shareholders will be diluted as more shares are issued... which is why Lucid's shares fell by 5% after the equity offering was announced yesterday.
Lucid may have experienced a slower start than expected, yet long-term potential in the EV industry remains promising. As more companies launch their products and issues related to range and cost are addressed, Lucid could become one of the front-runners. Despite initial setbacks, the future looks bright for electric cars and Lucid's prospects in this space may still be significant.
Two of the biggest commercial risks to Lucid are a slowdown in demand for its electric vehicles as more become available and the possibility of guidance down-grading for FY 2023 if production targets are not achieved. This year alone, the EV maker Lucid has revised their production forecast, the company is now expecting around 10,000 EVs produced throughout 2023.
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