Lucid Motors (NYSE: LCID) has filed with the SEC to raise up to $8 billion in cash. Both pure-play EV (electric vehicle) companies as well as legacy automakers have stepped up their investments in EVs.
During its earnings call for the second quarter of 2022, Lucid Motors said that it had $4.6 billion in cash on its balance sheet, which it said was sufficient to fund its cash burn until the end of 2023. The company has been burning cash like most other startup EV companies.
Lucid Motors is not only ramping up production at its US plant but also investing in its second plant in Saudi Arabia. The company secured $4.4 billion from the SPAC merger last year, which was the biggest deal until then. Grab later replaced Lucid Motors as the biggest SPAC merger. However, while Grab trades at a fraction of the SPAC IPO price, despite the slump, Lucid Motors is comfortably above the IPO price.
Saudi Arabia’s PIF (public investment fund), which was an existing Lucid Motors investor, also participated in the PIPE (private investment in public equity). While the usual convention is to price the PIPE at the SPAC IPO price, in Lucid Motors’ case it was priced at $15, which was a 50% premium to the IPO price.
Lucid Motors Stock Sinks on Stock Sale Report
Amid the crash, Lucid Motors stock is now approaching $15. Notably, while the broader markets as well as other EV stocks have recovered, LCID stock continues to languish near its 52-week lows. The stock is sinking today also after the news of the stock sale offer. Notably, stock sale leads to dilution for existing investors, especially when it is done at depressed prices.
However, to fund its cash burn, both towards capex as well as negative operating cash flows, Lucid Motors needs to raise cash. Other EV companies have also been on a capital-raising spree. Li Auto raised cash from an at-the-market offering in the US and ended June with total cash of $8 billion.
Tesla also raised $13 billion by selling shares in 2020. The company’s balance sheet is in much better shape as compared to other EV companies, almost all of which are posting losses.
Tesla is Also Increasing its Capex, Bulls See Stock as a Buy
Tesla’s CEO Elon Musk has been worried about a recession and has said that he has “super bad feelings” about the economy. Tesla has also cut its salaried workforce as the company works toward cutting its costs. He also said that the new Berlin and Austin plants are burning a lot of cash.
Meanwhile, despite all the gloom and doom that Musk has been forecasting, Tesla said in its SEC filing that the company would increase its 2022 capex budget to $6-$8 billion, which is higher than the previous forecast of $5-$7 billion.
Wall Street analysts are mixed on Tesla stock. Last week, Argus reiterated Tesla stock as a buy. Despite the many controversies surrounding Tesla and Musk, the stock hasn’t disappointed bulls.
Lucid Motors is Struggling with Deliveries
Execution is what separates Tesla from other EV companies. Tesla almost met its production guidance in 2020 despite the COVID-19 lockdowns. This year, while the company lost production in China due to the lockdowns, it maintained its guidance of a 50% delivery CAGR. Lucid Motors on the other hand has lowered its guidance twice this year.
In March, Lucid Motors lowered its production guidance from 20,000 units to 12,000-14,000 units. During the Q2 2022 earnings release, it lowered the guidance to 6,000-7,000 units. The guidance is now only about a third of what it had originally provided. It delivered only 679 cars in the second quarter and said that it has total reservations of 37,000 units which is 7,000 higher than the previous quarter.
In his prepared remarks, Lucid Motors’ CEO Peter Rawlinson said, “Our revised production guidance reflects the extraordinary supply chain and logistics challenges we encountered.”
Ray Dalio Bought More Lucid Motors Shares
Meanwhile, while several analysts have been getting bearish on startup EV companies, Ray Dalio bought more Lucid Motors shares in the second quarter. The billionaire also added more shares of Ford, NIO, and Xpeng Motors in the quarter.
Ford has been ramping up its EV production. It expects its annual EV production run rate to reach 600,000 by the end of 2023 and 2 million by 2026. The company sells more EVs than startup EV companies like NIO but markets give a premium valuation to pure-play EV companies.
Beginning in 2023, Ford would start reporting the results of the EV business separately, which many see as another step towards an eventual spin-off of the EV business from the legacy ICE (internal combustion engine) business.
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