Lucid Group said it plans to raise about $3 billion through a stock offering, nearly two-thirds of which will come from Saudi Arabia’s Public Investment Fund (PIF), sending shares of the luxury electric-vehicle maker down 9% after market hours.
PIF, which owns more than 60% of the company, has agreed to buy 265.7 million shares in a private placement for about $1.8 billion, Lucid said, implying a price of about $6.80 per Lucid share, compared with the stock’s Wednesday close of $7.76.
The remainder will be raised from a public offering of 173.5 million shares of common stock.
The additional funds are critical and come as the automaker, like its peers, struggles with mounting losses and tightening cash reserves amid recession fears and a price war sparked 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 made EV and related investments but has stayed away from Lucid.
“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,” he said.
Lucid’s cash and cash equivalents had dropped to $900 million at the end of the first quarter, from $1.74 billion in the previous quarter.
CFO Sherry House had said the company had about $4.1 billion in liquidity, enough to fund the EV maker at least into the second quarter of next year.
The maker of luxury Air sedans trimmed its 2023 production forecast this month and reported a lower-than-expected first-quarter revenue, with CEO Peter Rawlinson citing rising interest rates as a challenge to the market.
Despite Lucid’s struggles, Saudi’s PIF, led by Crown Prince Mohammed bin Salman, has been a loyal investor in the automaker with its stake currently worth nearly $9 billion.
The California-based EV maker is building its first overseas production factory in Saudi Arabia and the Saudi government has agreed to buy up to 100,000 Lucid vehicles over the next decade.
On Wednesday, Lucid, which is set to unveil its Gravity sport utility vehicle later this year ahead of its launch in 2024, said it plans to use the net proceeds from its offerings for general corporate purposes, including capital expenditure and working capital.
Bank of America Corp (BAC.N) is acting as the book-running manager for the public offering. The fundraising was first reported by Bloomberg News.