Lucid Group (LCID.O) dropped 9% after market hours after announcing a $3 billion stock offering, roughly two-thirds of which will come from Saudi Arabia’s Public Investment Fund (PIF).
Lucid said PIF, which owns more than 60% of the firm, has agreed to buy 265.7 million shares in a private placement for $1.8 billion, assuming a price of $6.80 per Lucid share, compared to the stock’s Wednesday closing of $7.76.
A public offering of 173.5 million ordinary stock will raise the rest.
The additional finances are crucial as the automaker, like its peers, battles with rising losses and tightening cash reserves amid recession fears and a price war triggered by market leader Tesla Inc (TSLA.O).
“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, which has invested in EVs but not Lucid.
That and Saudi money will keep Lucid alive for two more years. After that, their burn rate must drop quickly. “The U.S. has a glut of EVs, and competitors are cutting prices and offering discounts,” he said.
Lucid’s cash and cash equivalents fell to $900 million from $1.74 billion in the first quarter.
ACCORDING TO CFO SHERRY HOUSE, the EV producer had $4.1 billion in liquidity.
This month, luxury Air sedan producer Peter Rawlinson cited rising interest rates as a business problem and lowered its 2023 production target.
Despite its troubles, Saudi’s PIF, overseen by Crown Prince Mohammed bin Salman, has invested roughly $9 billion in Lucid.
The Saudi government will acquire up to 100,000 Lucid EVs from California-based EV company Lucid over the next decade.
Lucid, which will showcase its Gravity sport utility vehicle later this year before its 2024 launch, said on Wednesday that it would utilize the net proceeds from its sales for general company objectives, including capital expenditure and operating capital.
The public offering book-running manager is Bank of America Corp (BAC.N). Bloomberg reported the financing.
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