Shares in Lucid Group (NASDAQ:LCID) are up 40% since Jan. 27 on rumors its Saudi Arabian investors may buy the rest of the company. LCID stock rose another 10% over the weekend, opening at about $13 per share.
As our Eddie Pan has reported, the Public Investment Fund (PIF) of the desert kingdom already owns 60% of Lucid. Lucid has promised to build a manufacturing plant in Saudi Arabia, but has yet to act on it.
Why Saudi Arabia Might Buy
Lucid’s luxury Air electric car has gotten strong reviews, but production has ramped up slowly in Arizona.
Lucid produced 3,493 cars during the fourth quarter of 2022, and 7,180 were produced during all of 2022. Lucid had promised 14,000 cars. Bulls like Andres Sheppard of Cantor Fitzgerald hope the company’s Feb. 22 earnings call provides a positive catalyst.
Slow deliveries and fear the company is missing its market window may be some reasons Saudi Arabia is considering a buy. Another may be slow progress in building its Saudi factory, for which it won $3.4 billion in incentives last spring. The plant is supposed to be capable of building 155,000 cars per year.
Even if the plant were to open this year, Lucid would still be a small player in the electric vehicle (EV) sweepstakes. Tesla (NASDAQ:TSLA) has promised deliveries of 1.8 million to 2 million cars this year. BYD (OTCMKTS:BYDDF), a Chinese producer focusing on mid-market vehicles, will build even more. A takeover would at least accelerate the production move, which the Kingdom has deemed essential to find good-paying jobs for a young, growing population.
The stock’s move, however, may forestall a Saudi Arabian bid. Our Louis Navellier recently called the stock overvalued. The company recently sold 56.2 million additional shares of stock, and it continues to lose money.
What Happens Next for LCID Stock?
There are nine Lucid analysts at Tipranks, almost equally divided between buyers and sellers.
Even if the Saudi Arabian government is interested, there is always the question of price. I think it unlikely they will pay much more than LCID stock is worth now, assuming they already own most of it. They may be a greater fool, but are they the greatest fool?
On the date of publication, Dana Blankenhorn 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.