A unit of the Public Investment Fund is buying an additional USD 1 bn worth of stock in US luxury EV manufacturer Lucid Motors, according to a statement yesterday. Lucid raised USD 3 bn in capital in 2Q 2023 of which USD 1.8 bn came from the PIF. PIF unit Ayar Third Investment Company will execute the transaction, which will see it buy convertible preferred stock.

The potential proceeds will finance the company’s capex and working capital, among other things, the statement reads.

What they said: “With their support, we remain focused upon accelerating our growth via deliveries, executing key business initiatives with relentless focus upon cost, and launching our game-changing Gravity SUV later this year," said Lucid CEO and CTO Peter Rawlinson.

Market reacts quickly: Lucid’s share prices rose 5.4% to USD 2.90 a piece at yesterday’s close. Lucid shares are down 31% since the beginning of the year, in large part reflecting the belief among some pundits that US appetite for EVs — which rose to a peak during covid — has fallen off. A number of high-profile conventional car makers have said in the past two months that they’re downsizing their electric vehicle plans.

Uh, Enterprise? What’s convertible preferred stock? You can think of it as a kind of hybrid between equity and a bond. PIF’s Ayar is giving Lucid USD 1 bn. There are three keys here: “preferred” means that Ayar gets dividend payments if Lucid starts making them, just like regular preferred stock. But Ayar is also locking in upside: It’s not buying common stock in the company. If the value of Lucid’s shares go above the price at which Ayar bought in, it can — if it wants — swap its convertible preferred stock for ordinary shares and book the difference in value as gain on the investment.

The statement doesn’t get into any conditions on the conversion or the implied price per share at which Ayar is buying in.

Digging beyond PIF’s deep pockets: Earlier this month, Lucid CEO Peter Rawlinson said his company cannot depend on the “bottomless wealth” of its Saudi owner and therefore needs to raise funds this year. “It’s inevitable we need to raise in the future, it’s just a question of when,” Rawlinson told the salmon-colored paper. “We need to pick our moment.”

REMEMBER- Lucid Motors saw its net loss for 2023 come in at USD 2.8 bn, more than double the USD 1.3 bn it lost the year before. Revenues dipped 2% y-o-y to USD 595 mn in 2023. For the fourth quarter, the automaker’s losses came in at USD 654 mn, against USD 473 mn in the comparable period.

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