On July 26, 2021, Lucid Motors (NASDAQ: LCID) began trading on the Nasdaq Stock Exchange following the completion of its business combination with Churchill Capital Corp IV in New York City, Lucid Motors CEO Peter Peter Rawlinson poses on the Nasdaq Market website.
Andrew Kelly | Reuters
DETROIT — Investors misunderstood last week’s public offering sobriety group Chief Executive Peter Rawlinson told CNBC the financing raised about $1.75 billion and resulted in the stock’s worst single-day performance in nearly three years.
Rawlinson said that the financing, which includes the public offering of nearly 262.5 million shares of common stock, is a timely strategic business decision to ensure that the electric vehicle company has sufficient funds to support its continued operations and growth plans. He said it should also alleviate potential concerns about the company needing to issue “going concern” disclosures about its operations.
“We have said we have a cash runway to the fourth quarter of next year. As a Nasdaq company, we have to avoid going concern. Going concern is 12 months after the financial runway,” Rawlinson said on Monday. the company said in a press release. “So, it’s not a surprise to anyone.”
But Wall Street analysts mostly viewed the move negatively because of the timing. Some said the financing was unnecessary or came earlier than expected by the company, which had $5.16 billion in total liquidity at the end of the third quarter. This includes more than $4 billion in cash, cash equivalents and investment balances.
Two months ago, Lucid said Saudi Arabia’s Public Investment Fund had agreed to provide the company with $1.5 billion in cash as the electric car maker looks to add new models to its lineup.
“The cap rate hike is slightly larger and earlier than we expected,” Morgan Stanley analyst Adam Jonas wrote after the rate hike was announced after markets closed on Wednesday.
sober stocks
RBC Capital Markets analyst Tom Narayan had similar thoughts: “We suspect investors will wonder why LCID, after receiving PIF capital in August, raised more money at the current depressed share price level. We expect Lucid shares to move significantly lower, Because of the results,” he wrote in an investor note Wednesday night.
Rawlinson reiterated on Monday that the company would “opportunistically” raise funds. He said the company’s current funding now ensures it has capital to last until 2026 before launching a new mid-sized platform later that year.
“It was exactly as expected. It was exactly as scripted. There should be zero surprises for anybody,” he said. “Why did I choose this moment? Because I didn’t want to drag it out until the end because I didn’t have to.”
Lucid shares fell about 18% on Thursday after the news was announced, the company’s worst one-day drop since December 2021.
Rawlinson said Lucid is currently in the midst of a highly capital-intensive investment period as the company expands its only U.S. factory in Arizona. Building a second factory in Saudi Arabia; preparing to launch its second product, an SUV called Gravity; developing next-generation powertrains; and building out its retail and service network.
“These five categories are the long-term investments we are making now for the future,” Rawlinson said. “Do we have to cut costs on every car we make? Absolutely.”
Concurrently with the announcement last week, Ayar Third Investment Co., Lucid’s majority shareholder and PIF affiliate, plans to purchase more than 374.7 million common shares from Lucid to maintain approximately 59% ownership of the company.
The deal, known as a pro-rata deal, allows investors such as PIF to participate in future rounds of funding and retain their ownership stake. This is something PIF and Lucid often collaborate on.
Individual investors may be concerned about share dilution following the move, but Rawlinson said the PIF’s continued support should be viewed as a positive.
“I think it’s been misunderstood and misreported,” Rawlinson said. “The norm is to do it proportionately. If we don’t do it proportionately, it would certainly be a sign that the PIF has lost confidence in us.”
Lucid said last week that the public offering is expected to raise about $1.67 billion, and underwriter BofA Securities also has a 30-day option to purchase nearly 39.37 million additional shares of Lucid common stock.
Lucid reported record deliveries of its current model, an all-electric sedan called the Air, this year. The company expects to produce 9,000 vehicles this year. Production of its Gravity SUV is expected to begin by the end of this year.
However, Lucid’s sales and financial results haven’t expanded as quickly as expected due to rising costs, lower-than-expected EV demand, and the company’s marketing and awareness issues.
About The Author
