Lucid (NASDAQ:LCID) just got another major investment from the Public Investment Fund’s (PIFs) Ayar Third Investment Company. However, shareholders should be prepared for the dilution that will come along with it. LCID stock is up about 8% this morning.
On March 24, Lucid entered into a subscription agreement with Ayar. The agreement stipulates that Ayar would pay Lucid $1 billion in exchange for 10,000 Series A convertible preferred shares in a private placement. The proceeds will be used toward general corporate expenses, such as capital expenditures and working capital.
The preferred shares are initially convertible into a significant 278.15 million shares of LCID stock. That represents 12% of Lucid’s issued and outstanding shares. The initial conversion price is $3.59 while the transaction is expected to close no later than 10 business days after the agreement date.
“We continue to invest for the long term in both our technology and our vertically integrated manufacturing capabilities, with PIF’s support a key differentiator,” said Lucid CEO Peter Rawlinson. “With their support, we remain focused upon accelerating our growth via deliveries, executing key business initiatives with relentless focus upon cost, and launching our game-changing Gravity SUV later this year.”
LCID Stock: Lucid Receives $1 Billion Investment From PIF’s Ayar Third Investment
The investment comes as Lucid has struggled to offload its production in light of intense electric vehicle (EV) competition and price wars. Last year, Lucid initially guided for the production of between 10,000 and 14,000 vehicles. Actual production was just 8,428 vehicles. Lucid has guided for the production of 9,000 vehicles this year, signaling about 7% growth. The guidance likely includes Lucid’s upcoming Gravity SUV, which is expected to start production in late 2024.
Rawlinson had also warned of needing to raise more capital in an interview with the Financial Times earlier this month, adding, “If I adopt a mindset that there is bottomless wealth from PIF, that is very dangerous, that is something I will never do, I respect them far too much for that.”
Before the new investment, PIF and Ayar owned 1.37 billion shares of LCID, equivalent to a 60% ownership stake.
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.
