Lucid Motors CEO Peter Rawlinson poses at the Nasdaq MarketSite as Lucid Motors (Nasdaq: LCID) begins trading on the Nasdaq Stock Exchange following the completion of its business combination with Churchill Capital Corp IV in New York, New York, July 26, 2021 .
Andrew Kelly | Reuters
DETROIT — Investors misinterpreted an initial public offering Wednesday by Lucid Group that raised about $1.75 billion — and led to 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 shares of its common stock, was a timely, strategic business decision to ensure the electric vehicle company has enough capital for its ongoing operations and growth plans . It should also ease any potential concerns that the company would need to issue a “going concern” disclosure about its operations, he said.
“We had indicated that we had a cash corridor in the fourth quarter of next year. As a Nasdaq company, we have to avoid going concern. And going concern is issued within 12 months of your financial corridor,” Rawlinson said Monday from the company. offices recently opened in suburban Detroit. “Well, it shouldn’t have come as a surprise to 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 cash 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 said Saudi Arabia’s Public Investment Fund agreed to provide the company with $1.5 billion in cash as the EV maker looks to add new models to its lineup.
“The cap increase was slightly larger and earlier than we expected,” Morgan Stanley analyst Adam Jonas wrote after the increase was announced after the market closed on Wednesday.
shares of Lucid
RBC Capital Markets analyst Tom Narayan shared similar thoughts: “We suspect investors will be wondering why LCID is raising more capital immediately after securing PIF capital in August and at current bearish share price levels. We expect Lucid shares will trade significantly lower as a result,” he wrote in an investment note on Wednesday night.
Rawlinson reiterated on Monday that the company would raise capital “opportunistically”. He said the company’s current funds now secure its capital until 2026, ahead of the launch of a new midsize platform later that year.
“This is exactly as expected. It’s right in the playbook. It should have been zero surprise to anybody,” he said. “And why did I choose this moment? Because I didn’t want to string her to the end, because I didn’t have to.”
Shares of Lucid fell about 18% on Thursday after the announcement — marking the worst one-day drop for the company since December 2021.
Rawlinson said Lucid is currently in a period of capital-intensive investment as it expands its only US plant in Arizona. is building a second factory in Saudi Arabia. is preparing to launch its second product, an SUV called Gravity. develops the next generation powertrain. and develops the retail and service network.
“These five categories are the long-term investment in the future that we’re making now,” Rawlinson said. “Do we have to cut costs with every car we make? Absolutely.”
Wednesday’s announcement came in conjunction with plans for Lucid’s majority shareholder and PIF subsidiary, Ayar Third Investment Co., to buy more than 374.7 million shares of common stock from Lucid to retain about 59% ownership. of the company.
Such a transaction is called pro rata, which allows an investor like the PIF to participate in future rounds of funding and retain its ownership stake. It’s something PIF usually does with Lucid.
Individual investors were likely concerned about the stock’s decline after the action, but Rawlinson said continued support for the PIF should be seen as a positive.
“I think it’s been misconstrued and misrepresented,” Rawlinson said. “The rule is to go proportionally. If we didn’t go proportionally, it would certainly be a signal that the PIF was losing faith in us.”
Lucid last week said the public offering is expected to raise about $1.67 billion, with a 30-day option for underwriter BofA Securities to buy up to nearly 39.37 million additional shares of Lucid common stock as well.
Lucid has reported record 2024 deliveries of its current model, an all-electric sedan called the Air. 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, Lucid’s sales and financial performance have not scaled as quickly as expected due to higher costs, slower-than-expected demand for electric vehicles, and marketing and awareness issues for the company.