Lucid Secures $1B Investment from Saudi PIF Affiliate

Lucid Stock

Lucid Group, Inc. (NASDAQ:LCID) has announced a significant capital infusion of $1 billion from Ayar Third Investment Company, an affiliate of Saudi Arabia’s Public Investment Fund (PIF). This recent investment from a sovereign wealth fund is expected to provide Lucid with a competitive edge amidst challenges faced by other electric vehicle (EV) startups.

With the Saudi government’s strategic aim to diversify its economy, substantial investments have been directed towards Lucid, with the PIF currently holding a 60% stake in LCID. As per filings with the U.S. securities regulator, Ayar Third Investment Company will acquire $1 billion in convertible preferred stock, with the option to convert it into nearly 280 million shares.

The capital raised will be utilized for various corporate purposes, including capital expenditures and working capital. Lucid anticipates capital spending of approximately $1.5 billion in 2024, which includes the launch of its Gravity SUV.

Despite facing challenges such as lower-than-anticipated EV demand and a pricing competition initiated by Tesla, Lucid is optimistic about its future trajectory. Notably, this is not the first time PIF has invested in Lucid, having agreed to purchase nearly 266 million shares of LCID for approximately $1.8 billion in mid-2023. However, since the announcement, LCID’s shares have experienced a decline of over $4 per share.

The question remains whether this latest investment will facilitate Lucid’s rebound. In 2023, Lucid produced 8,428 vehicles, falling short of its guidance of over 10,000 units. The company aims to manufacture nearly 9,000 vehicles in 2024, below Wall Street’s estimate of 12,000 units.

Despite reducing prices, LCID’s vehicles remain relatively expensive for many consumers. The Lucid Air Pure, Air Touring, and Air Grand Touring models start at $69,900, $77,900, and $109,900, respectively, which has deterred potential buyers, leading to sales of only 6,001 units in 2023.

Lucid continues to grapple with widening losses, reporting a net loss of $654 million in the fourth quarter of 2023, compared to $473 million in the same period of 2022. According to Peter Rawlinson, Lucid’s CEO, the company is burning approximately $1 billion in cash per quarter, indicating significant financial challenges.

While the $1 billion investment represents a substantial capital injection, some analysts express concerns that it may not be adequate for a company currently burning through a similar amount of cash each quarter.

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