What happened
Shares of electric vehicle maker Lucid Group (LCID 6.11%) are down an astounding 80% this year, but investors are getting a bit of a pop in the stock Tuesday morning. Lucid shares were trading up by 7.4% as of 10:30 a.m. ET, after the company announced another boost to its balance sheet.
So what
The maker of luxury electric sedans told investors back in August it had plans to raise up to an additional $8 billion in capital over the next three years. Lucid took one step toward that total after just announcing it raised almost $1.52 billion through a combination of a public stock offering and private placement funding. Sometimes investors balk when companies dilute existing shareholders by issuing additional stock, but the reaction was positive today for a couple reasons.
Image source: Lucid Group.
Now what
The company's prior filing was one reason the market is taking the news well. It takes billions in capital to ramp up any automotive manufacturing business, and there are likely more capital raises to come. Lucid was also able to access more than $900 million from an affiliate of the Saudi Arabian government's Public Investment Fund. The Saudis have previously invested in Lucid, so that seems to be another show of confidence, and kept the common stock issuance to only $600 million of the total.
Lucid ended the third quarter with about $3.85 billion in cash and equivalents. The company said that was enough to get it through another year of growth investments. Now another more than $1.5 billion gives it a further cushion as it works to grow its production rate.
Investors will be laser focused on how that production rate increases over the next year. The 80% drop in value this year has offered a decent entry point for the stock if the company executes. The latest capital raise adds comfort that there is enough money to continue to work on that through 2023 and beyond.
