A large secondary stock offering and a weak preliminary earnings report disappointed investors.
Shares of Lucid Group (LCID -15.24%) shifted into reverse Thursday after the electric vehicle (EV) maker announced a secondary stock offering and released disappointing preliminary results for the third quarter Wednesday night.
As of 12:41 p.m. ET, the stock was down 15.2%.
Image source: Lucid.
Lucid faces more skepticism
Investors tend to dislike secondary stock offerings as they dilute existing shareholders, and the weak third-quarter results show Lucid is still a long way from profitability.
It’s selling approximately 262.4 million shares this week, which will dilute shareholders by about 11%. It has also entered into a separate agreement with its majority shareholder, an affiliate of the Saudi Public Investment Fund (PIF). That entity, Ayar Third Investment Company, will buy another 374.7 million shares before the end of the month, diluting investors by another 16%, or 27% total. According to the company, the two stock sales will raise about $1.67 billion for it.
That’s a significant dilution for existing shareholders, so it’s not surprising that the stock is moving lower.
Additionally, the company provided preliminary results for the third quarter, saying it expected revenue of $199 million to $200 million and an operating loss of $765 million to $790 million. It produced 1,805 vehicles in the period and delivered 2,781.
Those numbers were essentially flat compared to its second-quarter performance, showing little improvement.
What it means for Lucid
It’s fortunate for Lucid that it has a close relationship with the Saudi PIF — without it, the EV maker might very well have gone out of business by now. It finished Q3 with $1.9 billion in cash and equivalents on its books, yet still feels the need to raise money, largely because it’s losing nearly $1 billion on an operating basis each quarter. On a free-cash-flow basis, it lost nearly $1.5 billion in the first half of the year.
Considering the broader headwinds in the EV industry and the company’s struggles to ramp up production, Lucid stock continues to look like an investment best avoided even as investors look forward to the release of its Gravity SUV later this year.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
