Lucid CEO says Wall Street misinterpreted $1.75 billion capital raise

DETROIT – Investors have misinterpreted Wednesday's IPO before Lucid Collection That raised nearly $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 approximately 262.5 million shares of its common stock, was a timely, strategic business decision to ensure the electric vehicle company had sufficient capital for its ongoing operations and growth plans. He said it should also allay any potential concerns that the company may need to issue a “going concern” disclosure regarding its operations.

“We have indicated that we have a cash runway for the fourth quarter of next year. As a Nasdaq company, we have to avoid going concern. The going concern is issued within 12 months of your financial runway,” Rawlinson said Monday from the company's headquarters. Newly opened offices in the suburbs of Detroit. “So, it shouldn't come as a surprise to anyone.”

But Wall Street analysts took a largely negative view of the move because of its timing. Many said the increase was unnecessary or came earlier than expected for the company, which had $5.16 billion in total cash to end the third quarter. This included more than $4 billion in cash, cash equivalents and investment balances.

The announced deals also come two months after Lucid announced that the Saudi Public Investment Fund had agreed to provide the company with $1.5 billion in cash, as the electric car maker looks to add new models to its production line.

“The cap increase was a bit larger and earlier than we expected,” Adam Jonas, an analyst at Morgan Stanley, wrote after the increase was announced on Wednesday after markets closed.

RBC Capital Markets analyst Tom Narayan shared similar thoughts: “We think investors will wonder why LCID is raising more capital following its acquisition of PIF capital in August, and at currently low share price levels. We expect shares to trade Lucid fell sharply as a result,” he wrote in an investment note Wednesday night.

Rawlinson confirmed on Monday that the company would raise capital “opportunistically.” He said the company's existing funds now secure its capital until 2026, before launching a new mid-sized platform later that year.

“This is exactly as expected. It is completely in accordance with the rules of the game. This should not be a surprise to anyone,” he said. “Why did I choose this moment? Because I didn't want to drag it out until the end, because I didn't have to.”

Lucid shares fell about 18% on Thursday after the announcement — marking the company's worst daily decline since December 2021.

Rawlinson said Lucid is currently going through a capital-intensive investment period as it expands its only U.S. plant in Arizona; Building a second factory in Saudi Arabia; It is preparing to launch its second product, an SUV called Gravity. the evolution of the next generation powertrain; It is building its own retail and service network.

“Those five categories are the long-term investment for the future that we are making now,” Rawlinson said. “Do we have to cut costs on every car we make? Absolutely.”

Wednesday's announcement came in conjunction with plans by Lucid's majority shareholder and PIF affiliate, Ayar Third Investment Co., to purchase more than 374.7 million shares of common stock from Lucid to maintain its approximately 59% ownership of the company.

This transaction is called pro rata, which allows an investor such as the Public Investment Fund to participate in future financing rounds and retain its ownership stake. It's something PIF has done routinely with Lucid.

Retail investors are likely to be concerned about share dilution following the action, but Rawlinson said continued support from the PIF should be seen as a positive.

“I think it was misinterpreted and misreported,” Rawlinson said. “The rule is that we go on a proportional basis. If we do not go on a proportional basis, it will certainly be a signal that the Public Investment Fund is losing confidence in us.”

Lucid said last week that the public offering is expected to raise about $1.67 billion, with a 30-day option for BofA Securities to purchase approximately 39.37 million additional shares of Lucid common stock as well.

Lucid has announced record deliveries in 2024 for its current model, an all-electric sedan called the Air. The company expects to produce 9,000 cars this year. Production of the Gravity SUV is expected to begin by the end of this year.

However, Lucid's sales and financial performance did not expand as quickly as expected following rising costs, slower-than-expected demand for electric vehicles, and the company's marketing and awareness issues.