Why Lucid Stock Dropped Today
Key Points
Lucid peer Rivian Automotive just announced a stock sale.
Lucid has relied heavily on funding from its Saudi backers.
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Shares of luxury electric vehicle (EV) maker Lucid Group (NASDAQ: LCID) are tanking today. Investors can thank a rival EV maker for the move. Rivian Automotive announced a capital raise, and that has investors focusing on Lucid's capital needs, too.
Lucid shares dropped as much as 10%, and remained lower by 8.6% as of 12:15 p.m. ET.
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Lucid's capital source
Lucid could arguably be out of business had it not been for its close relationship with the Saudi Arabian sovereign wealth fund. The Public Investment Fund (PIF) is Lucid's largest shareholder and has provided capital in several investment rounds in the past few years.
Most recently, Lucid withdrew $500 million in capital from the PIF-provided Delayed Draw Term Loan (DDTL). As of the end of Q1, there was still $2 billion remaining in undrawn capacity. After Rivian announced a common stock offering last night that should raise about $1.5 billion, investors may be scrutinizing Lucid's capital needs more closely.
To be clear, the company still has a large cushion of available capital. After fresh capital was raised after the end of Q1, Lucid's total liquidity was approximately $4.7 billion. The company needs to steer investor focus to the underlying business now. Its new, luxury Gravity SUV needs to show some strong sales numbers when Lucid reports Q2 on Aug. 4.
That, along with any progress on its self-driving technology, could drive the share price higher in the coming months.
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Howard Smith has positions in Lucid Group and Rivian Automotive. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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