Why Lucid Group Stock Is Plunging Today
Lucid Group stock is spiraling Thursday after the EV maker said it is selling stock to raise cash. Here's why that's important to investors.
Lucid Group (LCID) shares are spiraling in Thursday's session after the electric vehicle (EV) maker announced a public offering of nearly 262.5 million shares.
In a filing with the Securities and Exchange Commission (SEC), Lucid said it will sell 262,446,931 shares of its common stock. In addition, Lucid announced that its largest shareholder and an affiliate of the Public Investment Fund (PIF), Ayar Third Investment Company, will buy nearly 375 million shares of LCID stock in a private placement. Following this transaction, Ayar will continue to own nearly 60% of Lucid's outstanding shares.
The EV maker said it will use the proceeds from the public offering and private placement for "general corporate purposes, which may include, among other things, capital expenditures and working capital."
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Why is Lucid stock lower?
Lucid's stock is selling off on the news because when a company announces a stock offering, it often leads to a decline in its share price over concerns of dilution. A stock offering increases the number of shares available in the market and reduces the ownership percentage of existing shareholders. The dilution also negatively impacts a company's earnings per share since there are more shares outstanding.
A stock offering can also cause concern because it shows that the company needs additional capital and is willing to dilute existing shareholders to raise it.
Compounding woes for the EV maker is its Wednesday night warning that it anticipates Q3 operation losses of $765 million to $790 million, more than the $752 million analysts are expecting.
Is LCID stock a buy, sell or hold?
Lucid Group's troubles on and off the price charts have dragged shares further into penny-stock territory throughout the year. As such, Wall Street is on the sidelines when it comes to the consumer discretionary stock.
According to S&P Global Market Intelligence, the average analyst target price for LCID stock is $3.16, which was a discount to the October 16 close at $3.28. Additionally, the consensus recommendation is a Hold.
Financial services firm Stifel is one of those with a Hold rating on LCID stock, but sees a glimmer of hope for the EV maker down the road.
Specifically, Stifel analyst Stephen Gengaro thinks the company's Lucid Air electric car is an "outstanding vehicle" and believes the recently unveiled Gravity SUV will give it access to the lucrative sports utility vehicle segment.
However, he notes that Lucid's "cash burn remains high" and that the company is still in the "prove-it-to-me stage."
Related Content
-
Why Some Michigan Tax Refunds Are Taking Longer Than Usual This YearState Taxes If your Michigan tax refund hasn’t arrived, you’re not alone. Here’s what "pending manual review" means and how to verify your identity if needed.
-
If You'd Put $1,000 Into Caterpillar Stock 20 Years Ago, Here's What You'd Have TodayCaterpillar stock has been a remarkably resilient market beater for a very long time.
-
Good Stock Picking Gives This Primecap Odyssey Fund a LiftOutsize exposure to an outperforming tech stock and a pair of drugmakers have boosted recent returns for the Primecap Odyssey Growth Fund.
-
If You'd Put $1,000 Into Caterpillar Stock 20 Years Ago, Here's What You'd Have Today
Caterpillar stock has been a remarkably resilient market beater for a very long time.
-
Good Stock Picking Gives This Primecap Odyssey Fund a Lift
Outsize exposure to an outperforming tech stock and a pair of drugmakers have boosted recent returns for the Primecap Odyssey Growth Fund.
-
More Tools to Build a Bond LadderVanguard aims to launch a line of target-maturity corporate bond ETFs.
-
A Newly Retired Couple With a Portfolio Full of Winners Faced a $50,000 Tax Bill: This Is the Strategy That Helped Save ThemLarge unrealized capital gains can create a serious tax headache for retirees with a successful portfolio. A tax-aware long-short strategy can help.
-
5 Retirement Myths to Leave Behind (and How to Start Planning for the Reality)Separating facts from fiction is an important first step toward building a retirement plan that's grounded in reality and not based on incorrect assumptions.
-
I'm a Financial Adviser: Silence Is Golden, But It Hurts Your Heirs More Than You ThinkTalking to heirs about transferring wealth can be overwhelming, but avoiding it now can lead to conflict later. Here's how to start sharing your plans.
-
Dow Dives 521 Points as Goldman, AmEx Slide: Stock Market TodayNews of Block's massive layoffs exacerbated AI worries across the financial sector.
-
The Merger Market is Heating Up. Here's How to Cash InInvesting in takeover deals can be a low-volatility way to diversify your portfolio.
