Misunderstandings Around the Fundraising Move
Lucid Group’s CEO, Peter Rawlinson, is speaking out after the company’s recent announcement of a $1.75 billion capital raise caused its stock to plunge. He insists that this move was both timely and strategic, aimed at securing enough funds for the company’s ongoing operations and future growth.
Why Did Lucid Raise Capital?
Last week, Lucid announced a public offering of nearly 262.5 million shares. This decision aimed to ensure the electric vehicle maker has the financial resources needed without triggering a “going concern” disclosure, which signals financial trouble. Rawlinson clarified that this was planned to prevent any concerns about the company’s financial health.
“We’d signaled we had a cash runway to Q4 next year,” Rawlinson explained. “So, it should have been no surprise to anybody.”
Wall Street’s Reaction
Despite Rawlinson’s reassurances, analysts reacted negatively. Many felt the timing of the capital raise was unnecessary, especially since Lucid reported having $5.16 billion in total liquidity at the end of the third quarter. This included over $4 billion in cash.
Morgan Stanley analyst Adam Jonas noted that the capital raise was larger and earlier than expected. RBC Capital Markets analyst Tom Narayan echoed this sentiment, questioning why Lucid was raising more funds just after securing $1.5 billion from Saudi Arabia’s Public Investment Fund (PIF) two months earlier.
Rawlinson’s Response
Rawlinson reiterated that Lucid would raise funds “opportunistically.” He stated that the current capital would support the company until 2026, aligning with the launch of their new SUV, the Gravity.
“Wednesday’s announcement was made as part of our strategic plan,” he said. “It’s a long-term investment for the future.”
The stock dropped about 18% after the announcement, marking its worst decline since December 2021.
The Bigger Picture
Lucid is in a capital-intensive phase, expanding its U.S. factory and building a second plant in Saudi Arabia, while also preparing for new product launches. The CEO noted that these investments are crucial for the company’s future success.
The capital raise included a pro rata deal where PIF will purchase more shares to maintain its ownership stake in Lucid. Rawlinson stressed that PIF’s continued support should be seen positively, countering concerns about share dilution.
Looking Ahead
Lucid has reported record deliveries of its all-electric sedan, the Air, and expects to produce 9,000 vehicles this year. The Gravity SUV is set to start production by the end of the year. However, the company still faces challenges with costs, demand, and market awareness.
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