Struggling electric vehicle (EV) maker Lucid Group Inc. (NASDAQ: LCID) has received a $1 billion lifeline from a firm related to the Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund. Ayar Third Investment Company will purchase $1 billion of a new series of convertible preferred through a private placement. The deal represents approximately 12% of Lucid’s shares outstanding. Lucid’s shares made a lackluster move up on the news.

“We are extremely pleased to receive this strong, continued support from the PIF, as we work to solidify our place as the world’s leading EV technology company,” Peter Rawlinson, CEO and CTO of Lucid Group, commented. The fact that the stock did not move more is a sign of skepticism about his management. The stock closed up only 5% to $2.92, which means it continues to be a penny stock. The 52-week high share price is $8.87. (Check out a Lucid stock price prediction for 2030: bull, base, and bear forecasts.)

The Problem With Lucid

Lucid’s problems fall into several categories. The first is that EV sales across the industry have slowed, which is true for companies ranging from Tesla to Ford. Consumers have turned to hybrids because they have small gasoline engines that improve their range without recharging. Some consumers have complaints about EVs, including the number of charging stations nationwide and the range of batteries, which can be less than 300 miles.

Several analysts have commented on the chance Lucid can survive in the competitive EV sector. Stifel analyst Stephen Gengaro recently said Lucid’s weak guidance for 2024 unit sales was “lackluster.” Baird analyst Ben Kallo sent clients a note saying, “We continue to believe in LCID’s technology but see 2024 as a difficult year with high interest rates and a high price point for LCID’s vehicles.” Famous stock picker Louis Navellier recently wrote that Lucid’s stock could drop to $1 a share.

Lucid’s 2023 financials were a disaster. Revenue was $595 million for the year, down from $608 million in 2022. The company’s net loss was $2.8 billion, compared to a loss of $2.6 billion in 2022. And Lucid said it would produce only 9,000 vehicles this year.

Based on its cash burn, even with the new investment, Lucid has less than three years to turn itself around, and the pace at which it is producing vehicles is not fast enough.

 

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