What happened
Shares of Lucid (LCID 0.55%) are getting crushed again this week. The electric-vehicle (EV) company's share price was down roughly 16% from last Friday's market close as of 1 p.m. ET today, according to data from S&P Global Market Intelligence.
Lucid announced yesterday that it would be raising $3 billion in funding through a new share offering. While the new capital injection will allow the business to continue operating until 2025, the new stock sale will result in significant dilution for existing shareholders.
So what
Last year, Lucid posted an operating loss of roughly $2.59 billion, and the company posted an operating loss of approximately $772.2 million in this year's first quarter. While the EV business is scaling rapidly and grew sales 159% year over year, it's years away from being able to shift into profitability, and it will need to continue to raise cash in order to reach economies of scale that allow it to generate profits.
With the new equity offering, Lucid will generate $3 billion in new funding and make it possible for the company to keep the lights on through the end of next year. Roughly $1.8 billion of the new stock is being sold to Saudi Arabia's Public Investment Fund (PIF), which already owns roughly 60.5% of the EV company.
Now what
The public offering of stock is set to close on June 5, while the private sale to the Saudi PIF is scheduled to close on June 23. With the new $3 billion share offering accounting coming at roughly 25% of Lucid's approximately $12 billion market capitalization, existing shareholders stand to be significantly diluted with the new stock sales.
If Lucid manages to achieve profitability, it could deliver huge returns for investors who buy at today's prices, but it's not clear the company will be able to get to that point. In the meantime, it looks like it will continue to sell new stock to fund operations as needed, which means more dilutive pressures could be on the way.
