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
-
Is Home Insurance Tax Deductible?With home insurance rates on the rise, you might be hoping to at least claim the cost as a tax deduction. Here's what you need to know ahead of tax season.
-
The December Jobs Report Is Out. Here's What It Means for the Next Fed MeetingThe December jobs report signaled a sluggish labor market, but it's not weak enough for the Fed to cut rates later this month.
-
Trump Signals Plan to Ban Institutional Investors From Buying Single-Family HomesThe president says the move could improve housing affordability. Here’s what the data shows about investor ownership, recent buying trends and what it could mean for homebuyers.
-
The December Jobs Report Is Out. Here's What It Means for the Next Fed Meeting
The December jobs report signaled a sluggish labor market, but it's not weak enough for the Fed to cut rates later this month.
-
4 Simple Money Targets to Aim for in 2026 (And How to Hit Them), From a Financial PlannerWhile January is the perfect time to strengthen your financial well-being, you're more likely to succeed if you set realistic goals and work with a partner.
-
Estate Planning Isn't Just for the Ultra-WealthyIf you've acquired assets over time, even just a home and some savings, you have an estate. That means you need a plan for that estate for your beneficiaries.
-
How to Be a Smart Insurance Shopper: The Price Might Be Right, But the Coverage Might Not BeChoosing the cheapest policy could cost you when you have a loss. You'll get the best results if you focus on the right coverage with the help of a good agent.
-
7 Reasons Why Your Portfolio Needs Short-Term Bond ETFsMoney market funds are a safe option for your cash, but ultra-short and short-term bond ETFs also deserve consideration. Here are seven reasons why.
-
Nasdaq Takes a Hit as the Tech Trade Falters: Stock Market TodayThe Dow Jones Industrial Average outperformed on strength in cyclical stocks.
-
I'm a Wealth Planner: Forget 2026 Market Forecasts and Focus on These 3 Goals for Financial SuccessWe know the economy is unpredictable and markets will do what they do, no matter who predicts what. Here's how to focus on what you can control.
-
I'm a Financial Adviser: Why In-Person Financial Guidance Remains the Gold StandardFace-to-face conversations between advisers and clients provide the human touch that encourages accountability and a real connection.
