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Lucid Motors capital raise: Is LCID stock a buy after $1.5bn stock sale sank shares?

By Rob Griffin

Edited by Jekaterina Drozdovica

09:05, 23 November 2022

Lucid card standing in a row.
The EV maker’s stock plunged after the capital rise announcement. – Photo: Shutterstock; Tada Images

Shares in Lucid Motors (LCID) have fallen since the luxury electric vehicle (EV) maker announced in early November a $530.1m loss for the third quarter. The US-based manufacturer also revealed plans to sell up to $1.5bn of its stock for capital expenditures and to boost working capital.

The Lucid Group stock price has now fallen 77% since mid-January 2022, as of 22 November – but does this make it an attractive entry point or is further bad news on the way?

LCID live stock price

In our analysis, we examine the company’s recent results, the proposed Lucid Motors capital raise and where the price could go this year.

What is Lucid?

Founded in 2007, the luxury electric vehicle manufacturer is based in Newark, California, near the heart of Silicon Valley.

Formerly known as Atieva, it initially focused on developing batteries and electric powertrains. The rebranding to Lucid came in October 2016. 

Lucid Motors went public on 26 July 2021 after merging with special purchase acquisition company (SPAC) Churchill Capital Corp IV. LCID stock trades on the Nasdaq Stock Exchange under the LCID ticker

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Lucid Motors capital raise: What has been announced? 

In early November, Lucid announced an agreement to sell up to $600m-worth of shares through BofA Securities, Barclays Capital and Citigroup Global Markets. It also agreed with Ayar Third Investment Company, its majority stockholder and affiliate of the Public Investment Fund, which is the Kingdom of Saudi Arabia’s sovereign wealth fund, to sell up to $915m-worth of shares. 

The Lucid Motors capital raise statement noted that the company intends to use the net proceeds for “general corporate purposes”, which may include capital expenditures and working capital.

On the same day, Lucid reported third quarter revenue of $195.5m on deliveries of 1,398 vehicles and a net loss of $530.1m – 1% worse than the previous quarter.

In a statement, Peter Rawlinson, Lucid’s CEO and CTO, confirmed Lucid had made “significant progress” towards achieving its 2022 production target of 6,000 to 7,000 vehicles.

“I’m also pleased to announce that we’ve not proven our ability to produce 300 cars a week, with a visible pathway to our next incremental ramp up,” he said.

In other news, the company’s first electric vehicle, the Lucid Air, has been named 2022 MotorTrend Car of the Year.

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Ed Loh, MotorTrend group’s head of editorial, branded it a “technological tour de force” and highlighted its 520 mile estimated driving range.

“The sleek futuristic Lucid Air sedan looks like nothing else on the road, while its gorgeous, smartly-packaged interior the standard for the next generation of luxury cars,” he said.

According to Lucid, reservations for the Air stood at more than 34,000, as of 7 November, 2022, representing potential sales in excess of $3.2bn. 

This reservation number does not include the up to 100,000 vehicles under the agreement with the government of Saudi Arabia. 

LCID stock, meanwhile, has fallen almost 80% over the past year from $51.12 to $10.20, as of 23 November, amid the wider slump in the markets. Year-to-date the stock is down 74%. 

Outlook for LCID

The stock had a ‘hold’ consensus rating based on the views of six Wall Street analysts compiled by TipRanks as of 23 November, although opinions were divided. Three had it as a ‘buy’, two a ‘sell’ and one a ‘hold’. 

The consensus average price target was $17, which would represent a potential upside of 64.89% for the stock. The highest Lucid stock value forecast was $28 and the lowest came in at $10.

Analysts at Morgan Stanley and RF Lafferty both lowered their price targets for Lucid Motors stock on 10 November 222 in the wake of third quarter results. Morgan Stanley reduced its from $12 to $10, while RF Lafferty went from $19 to $17.

Note that analysts’ predictions can be wrong and shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading, looking at the latest news, a wide range of commentary, technical and fundamental analysis. 

Remember, past performance does not guarantee future returns. And never trade money you cannot afford to lose.

FAQs

Who is the largest investor in Lucid?

The Public Investment Fund, which is the Kingdom of Saudi Arabia’s sovereign wealth fund, was the largest investor in Lucid, as of July 2021. According to an SEC filing, it had a stake of 60.7%.

What percentage of Lucid is owned by Saudi Arabia?

The Public Investment Fund owned 60.7% of the company, according to filings with the SEC of July 2021.

Can Lucid stock reach $100?

No-one can say for sure but $100 looks a stretch from current levels. The consensus average price of analysts compiled by TipRanks was $17 as of 23 November, ranging from the high of $28 and the low of $10, yet their views can be wrong. Always conduct your own due diligence before trading.

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Lucid Group, Inc.
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-0.17 -4.310%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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