EV maker Lucid falls 9% on $3 billion stock offer; Morgan Stanley positive

Shares in Lucid Group (NASDAQ:) traded 9.5% lower in pre-market Thursday after the electric vehicle (EV) company said it is raising $3 billion in a common stock offering.

The majority of funds are expected to come from Saudi Arabian investors. The country’s largest sovereign wealth fund is buying $1.8B of LCID stock in a private placement, the company also said.

Ayar Third Investment Company, based in Saudi Arabia, is expected to maintain its approximate 60.5% ownership of Lucid’s outstanding common stock following the deal.

While the sale likely involves a significant dilution, it will also reduce expectations for Lucid to become a private company, at least in the near term.

Morgan Stanley analysts believe that the billions raised by Lucid will help fund its operations through 2025. Analysts see the EV maker spending $2.4B for the rest of 2023, a further $2.2B in 2024, and $1.2B in 2025.

“The ability to access such a substantial amount of equity financing is unique and provides greater time value to explore changes to the business, cost position, and strategy required to potentially become a self-funding enterprise,” analysts said.