Lucid Group: Stock Price in Reverse After Disappointing Quarterly Figures

Lucid Group shares experienced a significant drop on Thursday after the electric vehicle manufacturer announced a secondary stock offering and presented disappointing preliminary results for the third quarter. By midday, the shares were down 15.2%. Investors are often skeptical of such stock offerings as they dilute the shares of existing shareholders. The weak quarterly results indicate that Lucid is still far from running a profitable business. This week, the company will issue approximately 262.4 million new shares, leading to an 11% dilution for shareholders. Additionally, an agreement has been made with the major shareholder, a subsidiary of the Saudi Public Investment Fund. This entity will acquire another 374.7 million shares by the end of the month, resulting in an additional 16% dilution. In total, 27% of the shares will be diluted. With these two stock sales, Lucid expects to generate about $1.67 billion. The preliminary results for the third quarter, projecting revenue of $199 to $200 million and an operating loss of $765 to $790 million, are largely stagnant compared to the previous quarter. During this period, 1,805 vehicles were produced and 2,781 vehicles were delivered. Fortunately, Lucid can count on the support of the Saudi sovereign wealth fund; without this relationship, the company might already be insolvent. Although it ended the quarter with $1.9 billion in cash, the company feels compelled to raise more capital as it loses nearly a billion dollars per quarter. In the first half of the year, the loss from free cash flow amounted to nearly $1.5 billion. Given the challenges in the electric vehicle industry and Lucid's difficulties in scaling up production, the stock remains a risky investment, even as investors eagerly anticipate the launch of the Gravity SUV later this year.