Lucid Group Inc., (LCID), saw its stock price increase by over 9% in response to two major announcements. Saudi Arabia Public Investment Fund (PIF), the majority shareholder of Lucid Group, increased its ownership stake. Lucid Group has entered into a deal with Aston Martin whereby the luxury car maker will exchange its company stock for Lucid’s technology and battery components. These developments demonstrate the increasing recognition Lucid Group has received for its advanced technology, and its ability to manufacture electric cars (EVs). The company’s future will be determined by its ability to increase production.
Key Points
1. Lucid Group saw its stock rise after two significant announcements. Saudi Arabia’s Public Investment Fund (PIF), which increased its stake, and the collaboration with Aston Martin.
2. Lucid Group’s technology and manufacturing ability are recognized by Aston Martin through the collaboration.
3. Lucid Group’s long-term prospects will be determined by the company’s capacity to meet and exceed its goals as well as the ability to maintain a sufficient cash flow.
Lucid Group Inc.’s (LCID) stock price soared over 9% after two major announcements. The first announcement was that Saudi Arabia’s Public Investment Fund, or PIF, is increasing its stake. PIF reported The acquisition of 259.69 LCID shares through a Form 4 filing valued at $1.8 Billion. PIF will now hold 60.5% of Lucid Group through this transaction.
PIF’s move was not a surprise for many analysts. Lucid announced a previous private placement agreement, where PIF would provide Lucid around $1.2billion in funding. Lucid Group acquired a stake of luxury car maker Aston Martin Lagonda Global Holdings plc. Aston Martin provided Lucid with battery components and technologies, including its electric car (EV) drivetrain. The exchange would bring Lucid a total of $232million.
Aston Martin’s agreement with Lucid shows that Lucid has been recognized for both its technology and its ability to manufacture EVs. Aston Martin chairman Lawrence Stroll said that the two companies were in discussions since two years ago, and PIF had suggested exploring potential collaboration. This deal brings Lucid much-needed cash, as it has been struggling to meet production targets.
Lucid’s CFO, Sherry House, confirmed that the company has enough cash to sustain its operations until 2024. Lucid reported $4 billion during its first-quarter earnings report in May 2023. Lucid projected to use $2 billion in 2020 and $1.3 in 2023. Sherry House from Lucid confirmed that Lucid had enough cash on hand to run its business until the second half of 2024. This highlights the capital-intensive nature EV companies, and the need for Lucid’s ability to scale its car production.
Lucid should be evaluated over a longer time period, given the EV market potential. This is because it will last for over a decade. Tesla, Inc.’s (TSLA) dominant position in the EV market is still intact. Lucid plans to deliver 10,000 cars in 2023 after failing to meet its goal in 2022. The company set a target of delivering 20,000 EVs but only transported 7,180.
LCID’s stock, while it experienced a significant one-day increase, has still fallen by 66.8% during the last 12 months. Before the positive news broke, the stock could have dropped below $5 and been classified as a penny-stock. Over 23% of LCID is owned by short sellers. This could lead to a possible short squeeze if LCID experiences a significant increase. Investors should carefully evaluate their risk tolerance prior to investing in LCID.
Lucid Group’s stock has risen due to the Saudi Arabian PIF’s announcement that it would increase its stake and the collaboration between Lucid and Aston Martin. These developments are positive, but the outlook for LCID will depend largely on Lucid’s ability to increase its production. Investors should monitor Lucid’s performance and stay informed as the EV industry continues to grow.
