Saudi Arabia's PIF pumps US$1.8 billion into Lucid’s stock offering
Lucid, a US-based luxury s (EV) company, hasn't had smooth sailing lately.
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The backstory: Lucid, a US-based luxury s (EV) company, hasn't had smooth sailing lately. You see, Tesla is Lucid’s biggest competitor, and it has been slashing prices and making more cars, which has made things tougher for Lucid and other EV start-ups like Rivian Automotive.
Saudi Arabia's Public Investment Fund (PIF) is Lucid's biggest shareholder. It’s been supporting the EV maker since way back in 2018 and even helped it go public two years ago. And now, the fund’s going full throttle. The Saudis are not only investing in Lucid but also planning to build a new EV factory in Saudi Arabia. The kingdom wants to pump out 300,000 cars by 2030, and Lucid's expected to take on half of that load.
More recently: In May, Lucid had to take a step back and revise its production forecast for 2023. And to make matters worse, its first-quarter revenue fell short of expectations. According to CEO Peter Rawlinson, rising interest rates played a role in this setback. But instead of taking the usual route of slashing prices on its luxurious Air sedan (which starts at US$87,400), Lucid decided to lay off 18% of its employees, around 1,300 folks, as part of a plan to save money and get back on track.
The development: Now, Lucid is cooking up some massive funding plans. The company is planning to raise a whopping US$3 billion through a stock offering. And guess who's chipping in? Saudi Arabia's PIF. The fund already owns more than half of the company, and now it's buying around 265 million more shares, totaling a sweet US$1.8 billion.
There'll also be a public offering of 173.5 million shares. This money infusion is key because Lucid has been wrestling with losses and a tight cash flow. But don't fret just yet. The CFO said the carmaker’s still got some moolah in the bank, around US$4.1 billion, to be precise. That should keep it on cruise control at least until next year's second quarter.
Key comments:
“Lucid intends to use the net proceeds from the public offering, as well as from the private placement by its majority stockholder, for general corporate purposes,” said Lucid.
"The secondary offering will probably be ok as there's a lot of ESG dollars looking for investments," said Louis Navellier, chief investment officer at money management firm Navellier. "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 US, and competitors are cutting prices and offering discounts.”
“We are on track to produce over 10,000 vehicles in 2023, with companywide initiatives ongoing that will enable Lucid to pivot to higher volumes as market conditions allow,” said Lucid CEO Peter Rawlinson in May.
"The revenue was actually the weakest that's been since the second quarter of last year, so there's a big miss on the top line," said Garrett Nelson, an analyst at CFRA Research, last month. "This could be an indication that this pricing war is having a direct impact on their results."
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