Lucid Group investors received a proverbial dose of sunshine for a change yesterday, which split apart the monotony of recurring new lows for the stock and revitalized the bullish spirits for the FY 2023. To wit, Lucid Group announced yesterday that it has now completed its at-the-market offering announced back in November, raising around $600 million in the process by selling 56.2 million shares. This offering has been a major headwind for the stock in recent weeks. Now that this selling pressure has abated, the stock’s bulls can try to reassert their influence over the prevailing narrative around the stock. However, in what constituted a pleasant surprise, Lucid Group also announced that it is raising approximately $915 million by selling some of its shares to the Ayar Third Investment Company, an affiliate of the Saudi PIF. Crucially, this share sale will occur through a private placement and will not affect the stock price. When combined with Lucid’s at-the-market offering, the company stands to gain a whopping $1.515 billion in fresh liquidity to bolster its cash position, which stood at $3.85 billion at the end of Q3 2022 and comprised of cash, cash equivalents, and investments.
— Gary Black (@garyblack00) December 9, 2022 Bear in mind that many analysts, including The Future Fund’s Gary Black, have continued to flag Lucid Group’s ongoing cash burn problem as a major headwind. After all, Lucid continues to burn cash at the rate of $4 billion per year. Moreover, with a Total Addressable Market (TAM) of around 15 percent in the US, the company’s prospects appear daunting at a cursory glance. However, it is here that Lucid’s unique strength comes into play – the unwavering backing from the Saudis. While many expected the Saudi PIF to start paring its gigantic 62.5 percent stake in Lucid Group, the sovereign wealth fund has so far refused to do so. Moreover, by facilitating the $915 million new capital raising exercise, the Saudi PIF just saved the company from near-certain financial ruin in 2023. Let’s do the math. Lucid Group is currently burning around $1 billion in cash every quarter. Consequently, the company’s cash position would have declined to an estimated $2.85 billion by the end of December 2022. However, given the infusion of fresh liquidity, the company will end the current quarter with a whopping $4.365 billion – more than enough to cover the entire FY 2023! Of course, 2023 will also see the reservations for the Lucid Gravity SUV open up, with deliveries expected to commence in 2024. As a refresher, Lucid Group’s AMP-1 facility in Casa Grande, Arizona, currently has a production capacity of 34,000 units per annum. The company is adding a second assembly line at the facility to handle the production of the Lucid Gravity SUV. Once the upgrade is complete, the facility’s annual production capacity will increase to 90,000 vehicles per year. Separately, Saudi Arabia recently awarded Lucid Group around $3 billion in incentives to establish a 155,000-units-per-year production facility in the Kingdom. The Saudis have also signed an agreement to purchase up to 100,000 electric vehicles from the company over the next ten years.
