On January 27, Lucid Group, Inc. (NASDAQ: LCID) shares soared 43% and closed at US$12.87 on unsubstantiated rumors that Saudi Arabia’s Public Investment Fund (PIF), which owns about a 62% stake in Lucid, is preparing to buy the shares in the auto maker it does not already own. Neither Lucid nor PIF has commented on the report that was published on a website called Betaville.
While such a complete takeover is possible, the odds of its occurring seem low based on the sveral points.
First, PIF already owns a controlling stake in Lucid. It is not clear what strategic advantage it would gain by acquiring the remaining shares. Of course, buying out the shares of other holders could make financial sense if Lucid’s shares were priced at unusually low multiples of revenue or EBITDA. However, that valuation argument does not seem to apply in this case.
Second, if PIF were to gain full control of Lucid, it may be required to inject additional cash into the company fairly quickly. Such required incremental cash infusions would be unusual in a buyout transaction.
Factoring in its recent US$1.515 billion equity raise (of which PIF contributed about 62%), Lucid’s pro forma cash position as of September 30, 2022 is nearly US$5 billion. However, the car maker burned US$860 million and US$820 million of cash in 3Q 2022 and 2Q 2022, respectively. Cash burn is defined here as operating cash flow deficit plus capital expenditures. So, it would not be difficult to imagine that a 100%-owner PIF would have to put additional cash into Lucid before the end of 2023 — even if Lucid’s production and sales rate were to improve in 2023 versus disappointing rates in 2022.
LUCID GROUP, INC.
| (in thousands of US $, except production/delivery unit statistics and shares outstanding) | 4Q 2022 Guidance | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 |
| Lucid Air Vehicles Delivered | 1,398 | 679 | 360 | ||
| Year-to-Date Deliveries (A) | 4,369 | 1,932 | 2,437 | 1,039 | 360 |
| Lucid Air Vehicles Produced (A) | 7,180 | 3,493 | 2,282 | 1,405 (B) | |
| Revenue | $195,457 | $97,336 | $57,675 | ||
| Operating Income | ($687,523) | ($559,199) | ($597,530) | ||
| Operating Cash Flow | ($569,466) | ($513,628) | ($494,639) | ||
| Capital Expenditures | ($415,054) | ($290,064) | ($309,800) | ($185,082) | |
| Adjusted EBITDA | ($552,903) | ($414,082) | ($383,781) | ||
| Cash – Period End | Sufficient liquidity into at least 4Q 2023 | $3,342,181 | $4,294,082 | $5,391,844 | |
| Debt – Period End | $2,079,722 | $1,999,234 | $1,998,571 | ||
| Shares Outstanding (Millions) | 1,681 | 1,668 | 1,668 |
(B) 1,405 vehicles were produced in the first half of 2022.
Third, Lucid has been a huge winner for PIF. It invested about US$1.3 billion in the automaker in 2018 and another US$915 million in 4Q 2022. Its nearly 1.1-billion share position (out of the 1.82 billion total shares outstanding) are currently worth more than US$14 billion. Its next biggest position in a U.S.-listed stock was around US$3 billion as of September 30, 2022.
It is of course possible that PIF could choose to further concentrate its holdings by buying more Lucid shares, but Lucid already represents nearly 40% of the US$37 billion value of its U.S. stock portfolio as of September 30, 2022.
After the January 27 share price spike, Lucid’s enterprise value is about US$20 billion. That valuation seems extremely robust given its extremely high cash burn rate and the great uncertainty surrounding: 1) if PIF is considering a share buyout announcement; and 2) when positive cash flow could be attained. Lucid shareholders might consider trimming positions in light of the recent sharp rally.
Lucid Group, Inc. last traded at US$12.87 on the NASDAQ.
Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
