Lucid Recalled 4,400 Gravity SUVs, Delayed the Cosmos, and Is "Buying Time." Here's How Many Shares It Needs to Sell to Survive 2027.
Key Points
Lucid Group reported its latest quarterly results this week, with its top and bottom lines falling short of expectations, and the company announcing further plans to borrow more money to sustain operations.
Lucid's management may have highlighted last quarter's reduced cash burn, but barring rapid success with its upcoming Cosmos midsize SUV, the floundering EV start-up will likely need to raise more money a year from now.
The company hasn't sold any additional shares, but it may have to eventually swap some of its outstanding debt and preferred stock for common stock, a move that would severely dilute outside shareholders.
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It's been another rough year for Lucid Group (NASDAQ: LCID). Earlier this year, the electric vehicle (EV) start-up recalled nearly 4,500 of its Gravity SUVs. Lucid also delayed its plans to launch a midsize SUV, the Cosmos, from late 2026 to late 2027.
Worse yet, the bad news just keeps on coming. Just this week, Lucid released its latest fiscal results and investor updates. Although cash burn may be coming down, it remains substantial. Still "buying time," Lucid remains dependent on cash from its majority shareholder, Saudi Arabia's Public Investment Fund (PIF).
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Lucid and its latest lackluster results
Lucid Group released its Q3 2026 earnings report on Nov. 9. For the quarter ending Sept. 30, Lucid missed on both revenue and earnings, with its $350.3 million top line falling short of analyst estimates calling for $407 million in sales, and its non-GAAP (generally accepted accounting principles) losses of $2.30 per share coming at the bottom end of Wall Street's estimate of losses of around $2.21 per share.
That said, Lucid's management spun this up quite well in the post-earnings press release by highlighting key positives. During Q3 2026, Lucid reported negative free cash flow of $1.04 billion, a 30% decrease from the prior quarter. Management also noted that it now has $3.75 billion in liquidity and expects to have sufficient funding for operations and expansion through the end of 2027.
However, with the stock pulling back after a pre-earnings surge, investors don't seem to be buying Lucid's upbeat assessment. That's not surprising, given that while Lucid may have a plan to keep the lights on for another year, this plan comes at a steep cost to outside shareholders.
The dilution spiral continues
The key issue with Lucid shares hasn't been its poor financial performance, per se. Instead, it's come from Lucid Group's heavy dilution of shareholders, from its continued need to raise money.
According to the latest news, in theory, Lucid doesn't need to sell more stock to shore up its cash position for the coming year. However, its increased borrowing from PIF is concerning. As of Sept. 30, Lucid had around $4.5 billion in outstanding debt, with a large portion of it borrowed from PIF.
Since then, it has borrowed another $1.75 billion from its majority shareholder. In addition to borrowing money from PIF, Lucid has also sold PIF several classes of preferred stock. These shares have a liquidation preference totaling around $3.2 billion.
Perhaps the Cosmo's launch a year from now could spark a much-awaited growth wave, but if that fails to happen, Lucid may need to raise even more capital, at the very least to pay down its outstanding debt and preferred stock. Considering Lucid's current market cap of $1.4 billion, converting the preferred stock alone would result in nearly 70% shareholder dilution. PIF, which is arguably in Lucid Group just as much to jump-start Saudi Arabia's EV industry, may continue to fund Lucid, irrespective of whether cash burn keeps tumbling from here.
However, as the dilution spiral remains far from over, there's no reason to even consider this stock. Even if you're bullish on electric car stocks, consider stronger contenders like Tesla or Rivian, not "also-ran" busted growth stocks like Lucid.
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Thomas Niel 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.
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