An affiliate of Saudi Arabia's Public Investment Fund has thrown struggling electric car maker Lucid Group a $1.5 billion lifeline (second one of the year). This comes as Lucid prepares to launch its first sport utility vehicle amid a downturn in the EV automotive space.
Lucid revealed it entered into agreements with its majority stockholder, Ayar Third Investment Company, an affiliate of the Saudi PIF, to purchase $750 million of convertible preferred stock through a private placement and provide a $750 million unsecured loan.
Lucid already received $1 billion from Ayar in March. Shortly after, the EV maker announced plans to slash about 6% of its workforce by the end of Q3. This follows a brutal 2023 of production woes, workforce reductions, and a shakeup in its top management.
CEO Peter Rawlinson told Reuters that the new funds from Ayar will be used to produce the Gravity SUV and build a factory in Saudi Arabia, with an annual capacity of 150,000 vehicles.
Shares of Lucid soared as much as 16% in premarket trading on the new funding from Ayar. However, for the year, shares are down nearly 29% (as of Monday's closing price). Lucid's float is 26.29% short.
Lucid also reported second-quarter earnings. Revenue of $200.6 million exceeded the average Wall Street estimate of $185.8 million. However, it lost 29 cents a share on an adjusted basis for the quarter, with analysts forecasting a 27 cents-a-share loss.
Here's a snapshot of the second quarter earnings (courtesy of Bloomberg):
Andres Sheppard, senior equity analyst at Cantor Fitzgerald, said, "The $1.5 billion helps to solidify the relationship between PIF and Lucid further. There was some investor concern out there that should the PIF become frustrated with the company that they wouldn't provide any additional commitments."
Here's more commentary from Wall Street analysts (courtesy of Bloomberg):
Citi analyst Itay Michaeli (neutral)
RBC analyst Tom Narayan (sector perform)
Bloomberg Intelligence analyst Steve Man
Earlier this year, Morgan Stanley's autos guru, Adam Jonas, said the EV sales slowdown would trigger four potential paths for collaboration for legacy OEMs and EV startups. So far, Rivian made a deal with Volkswagen...
Meanwhile, the EV industry (excluding Tesla) might face a reckoning next year if Trump wins in November. That's because the former president has stated that EV subsidies will be eliminated. Even Musk supports this move.
Musk recently said: "Take away the subsidies. It will only help Tesla. Also, remove subsidies from all industries!"
By Zerohedge.com
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