Lucid Shares Soar On New Saudi Lifeline
An affiliate of Saudi Arabia's Public Investment Fund has thrown struggling electric car maker Lucid Group a $1.5 billion lifeline (second one of the year). This comes as Lucid prepares to launch its first sport utility vehicle amid a downturn in the EV automotive space.
Lucid revealed it entered into agreements with its majority stockholder, Ayar Third Investment Company, an affiliate of the Saudi PIF, to purchase $750 million of convertible preferred stock through a private placement and provide a $750 million unsecured loan.
Lucid already received $1 billion from Ayar in March. Shortly after, the EV maker announced plans to slash about 6% of its workforce by the end of Q3. This follows a brutal 2023 of production woes, workforce reductions, and a shakeup in its top management.
CEO Peter Rawlinson told Reuters that the new funds from Ayar will be used to produce the Gravity SUV and build a factory in Saudi Arabia, with an annual capacity of 150,000 vehicles.
Shares of Lucid soared as much as 16% in premarket trading on the new funding from Ayar. However, for the year, shares are down nearly 29% (as of Monday's closing price). Lucid's float is 26.29% short.
Lucid also reported second-quarter earnings. Revenue of $200.6 million exceeded the average Wall Street estimate of $185.8 million. However, it lost 29 cents a share on an adjusted basis for the quarter, with analysts forecasting a 27 cents-a-share loss.
Here's a snapshot of the second quarter earnings (courtesy of Bloomberg):
Revenue $200.6 million, +33% y/y, estimate $185.8 million (Bloomberg Consensus)
Adjusted loss per share 29c vs. loss/shr 38c y/y, estimate loss/shr 27c
Loss per share 34c vs. loss/shr 40c y/y
Adjusted Ebitda loss $647.6 million, -8.8% y/y, estimate loss $560.9 million
Vehicles Delivered 2,394, estimate 1,999
Andres Sheppard, senior equity analyst at Cantor Fitzgerald, said, "The $1.5 billion helps to solidify the relationship between PIF and Lucid further. There was some investor concern out there that should the PIF become frustrated with the company that they wouldn't provide any additional commitments."
Here's more commentary from Wall Street analysts (courtesy of Bloomberg):
Citi analyst Itay Michaeli (neutral)
Says the new $1.5 billion capital raise is expected to extend Lucid's liquidity runway into 4Q 2025
The results were encouraging with free cash flow burn narrower
RBC analyst Tom Narayan (sector perform)
Says the extra liquidity cushion provided by the Saudi deal, investor focus on the liquidity topic, as well as on how committed PIF is to Lucid's long-term success, can all push the shares up sharply on this news
Lucid expects start of production for the Gravity SUV later this year and reservations should begin before that
Adds that there should be some indication of demand in the 3Q, and the analyst expects deliveries to begin in 1Q of 2025
Notes that Lucid management has said on a few occasions that it does not want to take reservations too early as this can lead to cancellations and the long lead time can upset customers
Bloomberg Intelligence analyst Steve Man
- Says unlike the $5 billion commitment Rivian received from Volkswagen, Lucid's $1.5 billion capital raise doesn't fully address the company's "liquidity needs to launch a high-volume, medium-sized vehicle, which is scheduled to debut in late 2026"
Earlier this year, Morgan Stanley's autos guru, Adam Jonas, said the EV sales slowdown would trigger four potential paths for collaboration for legacy OEMs and EV startups. So far, Rivian made a deal with Volkswagen...
Meanwhile, the EV industry (excluding Tesla) might face a reckoning next year if Trump wins in November. That's because the former president has stated that EV subsidies will be eliminated. Even Musk supports this move.
Musk recently said: "Take away the subsidies. It will only help Tesla. Also, remove subsidies from all industries!"