Shares of Lucid (NASDAQ:LCID) are in the red after the company filed an $8 billion shelf offering registration. The registration gives Lucid the flexibility to offer $8 billion of securities anytime over the next three years. Furthermore, the company stated it has no immediate plans to sell any new LCID stock, specifying that it is “not offering or selling any new securities as of the filing of this registration statement.” The offering includes common and preferred stock, warrants and more.
Shelf offerings allow a company to save time on paperwork and registration fees. A company can register for a shelf offering over a period of time instead of having to register each time it wants to offer securities.
As part of the offering, some existing shareholders are eligible to sell their shares. This includes Public Investment Fund (PIF) subsidiary Ayar, which owns a 60.7% stake of all LCID common stock outstanding, as well as CEO Peter Rawlinson. Ayar is eligible to resell 1.02 billion shares, while Rawlinson can resell 33.89 million shares. Ayar also has the power to nominate five of the nine directors on Lucid’s board.
LCID Stock: Lucid Files For $8 Billion Shelf Offering
The shelf offering does not come as much as a surprise. At the end of the second quarter, Lucid had a cash balance of $4.6 billion and disclosed that the cash could fund operations until 2023, which isn’t very long. Manufacturing electric vehicles (EVs) is an extremely cash-intensive process, and Lucid is currently ramping up production and advancing its factories.
The $8 billion offering represented about 30% of Lucid’s market capitalization as of yesterday’s close. The offering also allows the EV company to issue 44.35 million shares of common stock through the exercise of warrants at a price of $11.50 per share.
Lucid will not receive proceeds through the resale of shares from existing shareholders. However, if all private placement and working capital warrants are exercised, representing 44.35 million shares, Lucid will receive approximately $510 million. The proceeds will be used for “general corporate purposes,” such as for capital expenditures and working capital.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.