Lucid Shares Plunge on Stock Sale

By Douglas A. McIntyre Published Oct 17, 6:15AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Lucid Shares Plunge on Stock Sale — © grinvalds / Getty Images

24/7 Wall St. Insights

Lucid Group Inc. (NASDAQ: LCID | BA Price Prediction) 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

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.