Lucid Motors CEO Peter Rawlinson poses at the Nasdaq MarketSite as Lucid Motors (Nasdaq: LCID) begins trading on the Nasdaq Stock Exchange following its business combination with Churchill Capital Corp IV in New York City, New York, on March 26. was completed in July 2021.
Andrew Kelly | Reuters
DETROIT – Investors misinterpreted a public offering Wednesday Lucid Group That raised about $1.75 billion — and resulted in the stock's worst daily performance in nearly three years, CEO Peter Rawlinson told CNBC.
Rawlinson said the raise, which included a public offering of nearly 262.5 million common shares, was a timely, strategic business decision to ensure the electric vehicle company has sufficient capital for its ongoing operations and growth plans. This should also allay any potential concerns that the company would need to publish a going concern disclosure regarding its operations, he said.
“We had signaled that we would have a cash runway by the fourth quarter of next year. As a Nasdaq company, we must avoid going concern status. And a going concern will be issued within 12 months of your financial runway,” Rawlinson said Monday from the company’s newly opened offices in suburban Detroit. “So it shouldn’t have surprised anyone.”
However, Wall Street analysts were largely negative about the move due to its timing. Several said the increase was unnecessary or came sooner than expected for the company, which had total liquidity of $5.16 billion at the end of the third quarter. This included more than $4 billion in cash, cash equivalents and investment balances.
The announced transactions also come two months after Lucid announced that Saudi Arabia's Public Investment Fund had agreed to provide the company with $1.5 billion in cash as the electric vehicle maker expands its product line with new models want.
“A cap increase was somewhat larger and earlier than we expected,” Morgan Stanley analyst Adam Jonas wrote after the increase was announced after the market closed on Wednesday.
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Lucid's stock
RBC Capital Markets analyst Tom Narayan expressed similar thoughts: “We suspect investors will be wondering why LCID is raising more capital shortly after securing PIF capital in August, at current low share price levels. “We expect Lucid shares to trade significantly lower,” he wrote in an investor note on Wednesday evening.
Rawlinson reiterated on Monday that the company would raise capital “opportunistically.” He said the company's current funding now secures its capital until 2026 before it launches a new platform for mid-sized companies later this year.
“This is exactly as expected. It's exactly according to the playbook. It shouldn’t have been a surprise to anyone,” he said. “And why did I choose this moment? Because I didn’t want to finish it because I didn’t have to.”
Shares of Lucid fell about 18% on Thursday following the announcement – marking the worst daily decline for the company since December 2021.
Rawlinson said Lucid is currently in a highly capital-intensive investment phase as the company expands its only U.S. factory in Arizona. builds a second factory in Saudi Arabia; is preparing to launch its second product, an SUV called Gravity; develops its next-generation powertrain; and is expanding its retail and service network.
“These five categories are the long-term investment in the future that we are making now,” Rawlinson said. “Do we have to reduce the cost of every car we build? In any case.”
Wednesday's announcement came amid plans for Lucid's controlling shareholder and PIF subsidiary, Ayar Third Investment Co., to purchase more than 374.7 million shares of Lucid's common stock to retain its approximately 59 percent stake in the company.
Such a transaction is called a pro rata transaction, which allows an investor like PIF to participate in future funding rounds and retain their ownership interest. This is something the PIF did routinely with Lucid.
Individual investors were likely concerned about share dilution following the action, but Rawlinson said the PIF's continued support was positive.
“I think it was misinterpreted and misreported,” Rawlinson said. “The norm is to proceed proportionately. If we did not proceed proportionately, it would certainly be a sign that the PIF is losing trust in us.”
Lucid said last week that the public offering is expected to raise about $1.67 billion, with a 30-day option for underwriter BofA Securities to purchase up to nearly 39.37 million additional shares of Lucid's common stock.
Lucid has reported record deliveries of its current model, an all-electric sedan called Air, in 2024. 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, due to higher costs, slower-than-expected demand for electric vehicles, and marketing and awareness issues for the company, Lucid's revenue and financial results have not developed as quickly as expected.
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