Lucid Group (NASDAQ:LCID) delivered what investors fear most: share dilution. That was the harsh reality shareholders faced on Thursday.
Lucid shares cratered ~18% after the company announced that it is issuing 262.4 million common shares, along with a private placement of 374.7 million shares to Ayar Third Investment Company, an affiliate of the Saudi Public Investment Fund (PIF). The Saudis are already Lucid’s majority stockholder and will maintain an ownership stake of around 59%.
The total shares offered, including both the public and private placement, represent 28% of the previous outstanding share count. Based on a share price of about $3, the equity offering will generate gross proceeds of approximately $1.9 billion.
At the same time, the luxury EV maker also offered a preliminary guide for Q3, calling for revenue of $199-200 million vs. the Street at $196 million. The company also expects an operating loss in the range between $765 million to $790 million, falling shy of consensus at (752) million.
Investors might be bemoaning the dilution but Stifel analyst Stephen Gengaro notes that the offering will significantly bolster LCID’s liquidity and will also go toward helping the company achieve its goals, such as the ability to launch the Gravity SUV and fund the development of the Atlas next-gen drive unit.
“While we did not believe LCID needed to raise capital at this time, we expected additional capital would be needed over the next 12 months,” the analyst further said. “The equity raise plus the approximately $5.16 billion of total liquidity as of 9/30/24 certainly creates a longer runway for LCID and should bolster investor confidence in its liquidity and that the Saudi PIF fund will continue to support Lucid’s capital needs.”
Bottom line, there’s no change to Gengaro’s stance, who reiterates a Hold (i.e., Neutral) rating on the LCID although that might as well be a Buy considering his $4 price target factors in 12-month returns of ~49%. (To watch Gengaro’s track record, click here)
Amongst his colleagues, 6 other analysts join Gengaro on the fence while the addition of 1 Sell does not alter the Hold consensus rating. The average price target currently stands at $3.22, suggesting the shares will climb ~20% over the next year. (See Lucid stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
