The Current Reasons Lucid Stock Is Climbing

Monday saw a sharp increase in Lucid stock (NASDAQ: LCID). According to data from S&P Global Market Intelligence, the share price of the company was 7.9% higher as of 12:10 p.m. ET. In the early going of today's trading, it climbed as high as 20.9%.

Before today's market opened, Lucid announced in a news release that it has reached a deal to sell preferred stock to Ayar Third Investment Company, a subsidiary of the Public Investment Fund (PIF) of Saudi Arabia. With over 60% ownership, the Saudi PIF is already the biggest stakeholder in the electric vehicle (EV) specialist.

Support for Lucid grows as its largest backer Lucid reported that the firm has agreed to sell newly issued convertible preferred stock valued at $1 billion. The most recent funding round demonstrates that the EV specialist still has significant support from the PIF, which allays investors' concerns about the company's financial stability.

This morning, analysts at Stifel (NYSE: SF) expressed their optimism about the fresh stock sale in a note that was issued. PIF's ownership in Lucid will increase to around 64.1%, according to Stifel's analysts, when the preferred stock is converted

Then what? Lucid lost $3.1 billion in 2023 despite making $595.3 million in sales. The company's significant losses meant it would likely need to raise more capital to continue operating beyond this year, even though it ended the year with around $4.8 billion in cash, equivalents, and investments

As a result of the new stock sale, the EV player will have more financial freedom. However, it is highly probable that it will require further investment before the end of 2025.

This year, Lucid plans to manufacture 9,000 automobiles, a 6.8% increase from 8,428 in 2023. The slight uptick in output is noteworthy because the company is planning to start making its Gravity SUV at the end of this year.

The company may avoid short-term financial difficulties with the help of the PIF, which will allow it to boost production and delivery, take advantage of economies of scale, and get closer to profitability. However, other shareholders should still be aware of the possibility of stock dilution.

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