Introduction

The Lucid Group announced its plan to raise about $3 billion through equity offerings, with the expectation that nearly two-thirds of the amount will come from the Saudi Public Investment Fund. However, this news has caused shares of the auto electric cars to drop 9% in post-market trading.

Equity Offerings

The Public Investment Fund, which owns more than 60% of the company, has agreed to buy 265.7 million shares in a private placement for approximately $1.8 billion, implying a per-share price of Lucid at approximately $6.80, compared to Wednesday’s closing price of $7.76. The remainder of the amount will be raised by a public offering of 173.5 million shares of common stock.

Importance of Extra Cash

The extra cash is important and comes as automakers whine amid fears of a recession and a price war sparked by market leader Tesla. Glossy cash and cash equivalents fell to $900 million at the end of the first quarter of the year, down from $1.74 billion in the prior quarter.

Cash on Hand

CFO Sherry House said the company has about $4.1 billion in cash, enough to fund the company’s auto luxury electric cars for at least the second quarter of next year.

Production Forecast

The luxury sedan maker cut its 2023 production forecast this month and reported lower-than-expected first-quarter revenue, which CEO Peter Rawlinson blamed on rising interest rates as a challenge to the market.

Overseas Manufacturing Plant

The company headquartered in California is building its first overseas manufacturing plant in the kingdom, and the Saudi government has agreed to buy up to 100,000 Lucid vehicles over the next ten years.

Use of Proceeds

The company, which will unveil its Gravity SUV later this year ahead of its 2024 launch, said on Wednesday it plans to use the proceeds from its offering for general corporate purposes, including spending in capital account and working capital. Bank of America will serve as bookrunner for the public offering, and Lucid intends to use the proceeds from both the public offering and the private placement for general corporate purposes.