The stock of Lucid(NASDAQ: LCID) is accelerating on Monday. The company's share price was up 7.9% as of 12:10 p.m. ET, according to data from S&P Global Market Intelligence. It had been up as much as 20.9% earlier in today's trading.
In a press release published before the market opened this morning, Lucid announced that it had entered into an agreement to sell preferred stock to Ayar Third Investment Company, an affiliate of Saudi Arabia's Public Investment Fund (PIF).
The Saudi PIF is already the largest stakeholder in the electric vehicle (EV) specialist, owning roughly 60% of the company.
Lucid's biggest backer increases support
According to the report published by Lucid, the company has agreed to sell $1 billion worth of newly created convertible preferred stock. For investors worried about the company's financial foundations, the latest round of fundraising shows that the EV specialist continues to have strong backing from the PIF.
In a note published this morning, analysts at Stifel(NYSE: SF) indicated that they saw the new stock sale as a positive development. Stifel's analysts anticipate that the conversion of the preferred stock will bring PIF's stake in Lucid to about 64.1%.
What's next?
In 2023, Lucid recorded an operating loss of $3.1 billion on sales of $595.3 million. While the company closed out the year with approximately $4.8 billion in cash, equivalents, and investments, heavy losses meant that it would still likely need to raise new capital to continue operating beyond this year. The new stock sale will give the EV player more financial flexibility, but there's a good chance that it will need to raise funding again at some point before the end of 2025.
Lucid anticipates that it will produce 9,000 vehicles this year, up 6.8% from the 8,428 that it produced in 2023. Given that the company plans to begin producing its Gravity SUV at the tail end of this year, the modest production increase is notable.
The business needs to increase production and deliveries in order to leverage economies of scale and move closer to profitability, but strong backing from the PIF greatly mitigates near-term financial pressures. On the other hand, other shareholders still need to keep the risk of stock dilution in mind.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
