What happened
It's no surprise that many electric vehicle (EV) start-ups have plans to raise capital as they work toward manufacturing at a scale that brings in enough cash. Investors react negatively anyway when those plans are announced.
Today, that helped drive shares of Lucid Group (LCID 5.88%) and Nikola (NKLA 0.76%) lower. The stocks of Lucid and Nikola were down by 6.7% and 8.1%, respectively, as of 11:30 a.m. ET. Shares of hydrogen fuel cell company Plug Power (PLUG 4.02%) bucked that trend, however, with the stock up as much as 7.6% in early trading. Plug shares lost much of those gains but still traded slightly higher as of 11:30 a.m.
Image source: Lucid Group.
So what
Lucid announced plans to raise up to another $8 billion to fund its growth. Also today Nikola said in a regulatory filing that it plans to issue up to $400 million worth of new stock. Both companies have begun shipping electric vehicles and are starting to bring in revenue. But they are still a long way from being cash flow positive, and both announcements drove shares lower. Investors in Plug Power, however, are still cheering an announcement it made last week that should significantly help it fund its growth plans.
Now what
Lucid ended the second quarter with $4.6 billion in cash, cash equivalents, and investments. The company said it expects that to fund its operations and growth plans "well into 2023." Those growth plans include a second manufacturing plant and its first outside the U.S. The new filing from Lucid indicated it is looking beyond 2023 with potential plans to raise up to another $8 billion through a combination of offerings that could include common stock, debt securities, preferred shares, or other means.
Nikola similarly said it would sell new stock in an at-the-market offering to bring in up to $400 million that will be used to fund its plans, including the acquisition of battery pack supplier Romeo Power. Nikola announced it was buying Romeo Power earlier this month.
Many clean energy names have gotten a boost since President Joe Biden signed the climate-friendly Inflation Reduction Act into law two weeks ago. EV makers and hydrogen-focused companies like Plug Power stand to benefit from various incentives in the new law. Subsequent to that new tailwind, Plug announced an agreement to supply Amazon with green hydrogen beginning in 2025 to help the e-commerce giant achieve its sustainability goals.
Plug said that deal will help it achieve its goal of $3 billion in revenue by 2025. Investors have driven Plug shares higher over the last month thanks to both the supportive new legislation and the Amazon agreement. If the company can self-fund its growth plans, that upward trend could continue. But as seen with Lucid and Nikola shares today, there will likely be volatility in any growth stocks that need to bring in additional capital to fund growth.
