May 31 (Reuters) – Lucid Group ( LCID.O ) plans to raise about $3 billion through a share offering, nearly two-thirds of which will come from Saudi Arabia’s Public Investment Fund (PIF), sending shares in the luxury powerhouse. The automaker fell 9% after market hours.
PIF, which owns more than 60% of the company, agreed to buy 265.7 million shares for $1.8 billion in a private placement, Lucid said, representing a price of about $6.80 per Lucid share, compared with the stock’s Wednesday close of $7.76.
The remaining 173.5 million will be raised from a public offering of common shares.
The extra funds are critical and the automaker, like its peers, is struggling with mounting losses and tightening cash reserves amid recession fears and a price war fueled by market leader Tesla Inc ( TSLA.O ).
“The secondary offering is going to be OK because there are more ESG dollars looking for investments,” said Louis Navellier, chief investment officer at Navellier, a money management firm that has made EV and related investments.
“That, along with the money from the Saudis, should ensure that Lucid survives for another couple of years. But their burn rate should slow down rapidly. There are so many EVs on sale in the U.S., competitors are cutting prices and offering discounts,” he said. said.
Lucid’s cash and cash equivalents decreased to $900 million at the end of the first quarter, from $1.74 billion in the prior quarter.
CFO Sherry House said the company has about $4.1 billion in cash flow, enough to fund the EV maker through at least the second quarter of next year.
The maker of luxury air sedans this month cut its 2023 production forecast and reported lower-than-expected first-quarter revenue, with CEO Peter Rawlinson citing rising interest rates as a challenge for the market.
Despite Lucid’s struggles, Saudi’s PIF, led by Crown Prince Mohammed bin Salman, has remained a loyal investor in the automaker and its stake is now worth nearly $9 billion.
The California-based EV maker is building its first overseas manufacturing plant in Saudi Arabia, where the Saudi government has agreed to buy 100,000 Lucid vehicles over the next decade.
On Wednesday, Lucid, which is set to unveil its gravity sports utility vehicle later this year ahead of a 2024 launch, plans to use the net proceeds for general corporate purposes, including capital expenditures and working capital.
Bank of America Corp ( BAC.N ) is acting as book-running manager for the public offering. The fundraising was first reported by Bloomberg News.
Reporting by Kanjik Ghosh and Akriti Sharma in Bengaluru and Abirup Roy in San Francisco; Editing by Devika Syamnath and Muralikumar Anantharaman
Our Standards: Thomson Reuters Trust Principles.