Lucid Touches All-Time Lows. Is It Finally Time for Investors to Risk Buying?

Lucid Motors (NASDAQ: LCID), Rivian (NASDAQ: RIVN) and Tesla (NASDAQ: TSLA) are all well-known young electric vehicle (EV) makers, and they almost certainly have more in common than not. However, you wouldn't be able to discern that from simply looking at a price chart over the past six months.

TSLA data by YCharts

It's clear that investors are getting a little cautious about jumping on the bandwagon for Lucid stock, even after the automaker has posted seven consecutive quarters of record deliveries and continues to ramp up production of its recently launched Gravity. With Lucid touching all-time lows last week, is it time for investors to take on the risk for its potential upside as the EV maker slowly gains traction in the coming years?

Message from Lucid

It's been far from an ideal scenario for Lucid recently as it faces headwinds in the U.S. market at a critical time for the Gravity to help drive the company into the next phase of growth. Lucid has had to deal with tariffs on automotive vehicle and part imports, changing policies and regulations, and the removal of the federal $7,500 EV tax credit, among other factors. But with the stock touching all-time lows, the company had a message for its investors.

"We know it's been a challenging period for our long-term holders," said Lucid's head of communications, Nick Twork, according to news site Electrek. He added, "We are focused on execution and being transparent." Twork reaffirmed that Lucid has "a strong liquidity runway."

Let's touch on the last point from Twork, as Lucid has made a couple of moves to shore up the company's liquidity. The first was raising $975 million aggregate principal amount of convertible senior notes due 2031. It used roughly $750 million of those net proceeds to repurchase roughly the same amount of its convertible senior notes outstanding due 2026, with the remainder to be used for general corporate purposes.

The move will essentially kick some of the company's obligations down the road, providing more financial flexibility as Lucid enters an important growth phase with Gravity production accelerating and a family of midsize SUVs on the way late next year.

Image source: Lucid Motors.

Also, some investors may have missed this tidbit: The automaker announced after the end of the quarter that the Public Investment Fund (PIF), Saudi Arabia's sovereign wealth fund, and Lucid had reached an agreement to increase an untapped credit line from roughly $750 million to roughly $2 billion. That would have bumped Lucid's total liquidity at quarter's end to about $5.5 billion, giving it funding that should last into 2027.

What it all means

The major takeaway for investors is that these moves will increase the company's liquidity with only a minor amount of shareholder dilution -- which is a primary concern, considering past capital raises, as you can see in the comparison to Rivian below.

RIVN Shares Outstanding data by YCharts

Although this is good news for investors, the reality is that Lucid's cash burn problems aren't fading anytime soon. It's also fair for investors to be wary of Saudi Arabia's PIF's roughly 60% control of the company. It's great to have its support, but could turn into a nightmare if the PIF decides to cut its losses and move in a different direction. The selling pressure alone would weigh on the stock, and additional capital would likely be more expensive to raise.

For most investors, Lucid is simply far too risky to invest in currently, but there is a light at the end of the tunnel. Lucid's deliveries are still gaining momentum, and it has funding to last through the launch of its midsize platform, and if the young EV maker can execute those launches and the product is in demand with car shoppers, that's when investors can start considering a small position in a theoretically more balanced and stable young automaker.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.