Both company-specific and electric vehicle industry developments continue to weigh on Lucid Group, Inc. (NASDAQ: LCID) shares. The stock price has declined to just above US$5 per share which is a key price level for any stock. Breaching the US$5 level can have significant negative implications for a publicly traded stock.
First, Rivian Automotive, Inc.’s (NASDAQ: RIVN) October 4th announcement that it plans to raise US$1.5 billion from the sale of convertible notes must be considered a red flag for Lucid. (Rivian investors were shocked at the news; the stock fell 18.5% on October 5.) Rivian decided that, despite having US$9.1 billion of cash on its balance sheet as of September 30, 2023, it had to raise the additional capital because it is burning so much cash (about US$1.6 billion per quarter).
READ: Lucid Burned Almost A Billion Dollars In Q2
Lucid is confronting these same challenges: it is burning through US$0.9 billion to US$1.0 billion per quarter and had US$5.2 billion of cash as of June 30, 2023. Its cash balance as of September 30 is therefore likely to be in the low US$4 billion range. In simple terms, if Rivian felt it had to raise additional growth capital now as a bridge to achieving breakeven or better cash flow in the future, Lucid could likewise be forced to reach the same near-term conclusion.
Cash burn is defined as operating cash flow minus capital expenditures.
LUCID GROUP, INC.
| (in thousands of US $, except production/delivery unit statistics, revenue per vehicle delivered, and for shares outstanding) | 2023 Management Guidance | Twelve Months Ended 6-30-23 | June 30, 2023 | March 31, 2023 | December 31, 2022 |
| Lucid Air Vehicles Delivered | 6,140 | 1,404 | 1,406 | 1,932 | |
| Lucid Air Vehicles Produced | > 10,000 | 10,262 | 2,173 | 2,314 | 3,493 |
| Revenue | $753,476 | $150,874 | $149,432 | $257,713 | |
| Revenue per Vehicle Delivered | $122,716 | $107,460 | $106,282 | $133,392 | |
| Operating Income | ($3,047,108) | ($837,685) | ($772,161) | ($749,739) | |
| Operating Cash Flow | ($2,719,603) | ($700,358) | ($801,264) | ($648,515) | |
| Capital Expenditures | ($1,100,000) to ($1,300,000) | ($1,025,437) | ($203,715) | ($241,770) | ($289,888) |
| Adjusted EBITDA | ($2,530,753) | ($710,342) | ($643,898) | ($623,610) | |
| Cash | Sufficient liquidity at least into 2025 | $5,249,294 | $5,249,294 | $2,978,415 | $3,912,996 |
| Debt | $2,083,167 | $2,083,167 | $2,082,197 | $2,083,762 | |
| Shares Outstanding (millions) | 2,282 | 2,282 | 1,833 | 1,829 |
A day later October 5, Lucid introduced a new rear-wheel drive version of the Air Pure sedan. The new model has a starting price of US$77,400, about US$5,000 less than the previous lowest cost Air Pure model. It is possible the new model was introduced because of low demand for the company’s relatively high-priced vehicles. Indeed, U.S. registration data on Lucid Air models were particularly weak in July 2023, as compiled by Automotive News. Lucid was expected to announce its 3Q 2023 vehicle production and delivery results sometime this past week – however they appear to be delayed, bucking tradition for the company.
Finally, Lucid stock is now trading at US$5.16, near its all-time low of US$4.87. The US$5 per share price is critical because some institutional investors, including pensions and mutual funds, are not permitted to own stocks priced less than US$5 per share. In other words, Lucid shares may be precariously close to piercing a price that could trigger a significant amount of forced selling.
Of course, Lucid could remedy this situation if it were to execute a reverse stock split. However, many stocks lose value after executing such a cosmetic change as investors generally view a reverse split as a sign of financial distress and sell at least some of their holdings.
Even at US$5.16, Lucid remains a very expensive stock. Factoring in its 2.282 billion shares outstanding and US$3.15 billion of net cash on its balance sheet, Lucid’s enterprise value (EV) is about US$8.7 billion. The company’s revenue over the twelve months ended June 30, 2023 totaled just over US$750 million, meaning the stock trades at an EV-to-revenue multiple of around 11.5x.
Phrased another way, Lucid’s adjusted EBITDA loss over the last twelve months is more than US$2.5 billion, and quarterly losses have been steepening: US$710 million in 2Q 2023; US$644 million in 1Q 2023; US$624 million in 4Q 2022; and US$553 million in 3Q 2022. Given this worrying trend, investors’ assigning a ~US$9 billion EV to Lucid is difficult to justify.
Information for this story was found via Edgar and the sources and companies 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.
