24/7 Wall St. Insights

• Lucid Group Inc. (NASDAQ: LCID) stock plunged on news that it would sell stock to raise cash.
• The electric vehicle maker’s prospects don’t look good. Here’s why.
• Also: Dividend legends to hold forever.

Lucid Group Inc. (NASDAQ: LCID) stock plunged 15% on news that it would sell stock to raise money. The company stock is now down 22% for the year, while the S&P 500 is 22% higher. The electric vehicle (EV) company’s losses are expected to be significant when it announces earnings, with an expected loss of $765 million to $790 million. That is worse than consensus forecasts.

The total number of shares sold was 262 million. Lucid will also sell another 347 million shares in a private placement to one of its largest shareholders, Saudi Arabia’s Public Investment Fund, known as Ayar Third Investment. The EV maker commented, “As a result of these purchases, Ayar expects to maintain its approximate 58.8% ownership of Lucid’s outstanding common stock.”

Lucid said it would use the proceeds for “general purpose,” but it is well known that the company needs cash. It has posted tremendous losses, adding well into the billions of dollars over the past several quarters.

Lucid has been a penny stock for a year, and after the sell-off, its share price will be $2.70. This will also put the shares down 80% over the past two years.

Lucid’s challenge is that there has been no catalyst to attract shareholders. Its most recent production and delivery figures were poor. For instance, Lucid produced 1,805 vehicles in the third quarter and delivered 2,781. It calls itself the “maker of the world’s most advanced electric vehicles.” However, there is nothing to back that claim.

The hurdles to Lucid’s chance for survival are twofold. The first is that the EV industry in the United States has slowed. According to Cox Automotive, EV sales rose only 8% in the third quarter to 346,309. That was 8.9% of all cars and light trucks sold in the quarter. EVs are not replacing gasoline-powered vehicles at anything close to enough to say the EV segment is successful.

Lucid’s second hurdle is that it finds it hard to argue that it will survive as an independent public company. It will not announce third-quarter earnings until next month. However, they are not expected to be much better than the second-quarter figures. In that quarter, it lost $792 million on $201 million in revenue.

Here Are the Odds Lucid Goes Bankrupt in the Next 5 Years

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