May 31 (Reuters) – Lucid Group (LCID.O) said it plans to raise about $3 billion through an equity offering, nearly two-thirds of which will come from Saudi Arabia’s Public Investment Fund (PIF), which is sending shares of the luxury electric company. The automaker is down 9% in after-hours market trading.
Lucid said the Public Investment Fund, which owns more than 60 percent of the company, agreed to buy 265.7 million shares in a private placement for about $1.8 billion, implying a price of about $6.80 per Lucid share, compared to Wednesday’s stock closing of 7.76. dollar.
The remainder will be raised from a public offering of 173.5 million shares of common stock.
The extra money is significant and comes as the automaker, like its peers, struggles with mounting losses and tightening cash reserves amid recession fears and a price war sparked by market leader Tesla Inc (TSLA.O).
“The secondary offering is probably okay because there are a lot of ESG dollars looking for investments,” said Louis Navellier, chief investment officer at money management firm Navellier, which has made EV and related investments but has moved away from Lucid.
“This, along with the money from the Saudis, will ensure Lucid will survive for a few more years. But its burn rate should drop quickly. There is a glut of electric vehicles for sale in the US, and competitors are cutting prices and offering discounts,” he said.
Lucid’s cash and cash equivalents fell to $900 million at the end of the first quarter from $1.74 billion in the prior quarter.
Chief Financial Officer Sherry House said the company has about $4.1 billion in cash, enough to fund the EV business at least in the second quarter of next year.
The luxury sedan maker cut its 2023 production forecast this month and reported lower-than-expected first-quarter revenue, with CEO Peter Rawlinson citing rising interest rates as a challenge to the market.
Despite Lucid’s struggles, Saudi Arabia’s Public Investment Fund, led by Crown Prince Mohammed bin Salman, has been a loyal investor in the automaker with its stake currently worth about $9 billion.
The California-based electric vehicle maker is building its first overseas production plant in Saudi Arabia, and the Saudi government has agreed to buy up to 100,000 Lucid vehicles over the next decade.
On Wednesday, Lucid, which is set to unveil its Gravity SUV later this year ahead of its 2024 launch, said it plans to use the net proceeds from its offerings for general corporate purposes, including capital expenditures and working capital.
Bank of America Corp (BAC.N) is serving as the underwriting manager for the IPO. The fundraiser was first reported by Bloomberg News.
Additional reporting by Kanjik Ghosh and Akriti Sharma in Bengaluru and Abhiroop Roy in San Francisco; Editing by Devika Syamnath and Muralikumar Anantharaman
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