Cornerstone Crumbs: Lucid Knee-Jerk Reaction on Capital Raise

"The Lord bless you and keep you;

The Lord make His face shine upon you,

And be gracious to you;

The Lord lift up His countenance upon you,

And give you peace."

Numbers 6: 24-26

I'll keep this very short using today's daily chart for Lucid Group, Inc. (LCID) as a snapshot.

Lucid dropped below $42 to start the morning. With this afternoon's announcement of the company selling $1.8 billion of convertible senior notes due in 2026, we now know why. I suspect Lucid will sell $2 billion based on the allowance to increase.

After-hours action has reverted right back to the early morning level. This is a nothing-burger, and I'm a little shocked that Lucid didn't dilute instead to maintain a cleaner B/S. Through 2023, I expect that Lucid will burn around $6-$8 billion in Cash when factoring for OCF and Capex. Today, Lucid has $4.8 billion in Cash. By Q4 2021 end, I'm assuming that they will have around $4 billion in Cash. With the Cash infusion back towards $6 billion to begin 2022, Lucid is in a very strong position to continue through all of 2022 and into 2023.

There was no question that the company would need to raise another $4-5 billion over the coming years. I assumed that Lucid could dilute based on an increasing SP. Lucid could have raised $2.5 billion selling 50 million shares at the $50 level, which I would have supported whole heartedly as dilution would have been at only 3%. Regardless, this news may knock the SP back towards $40 tomorrow, but it's actually a positive to keep the company on track to produce and deliver its vehicles through 2022 and into 2023.

Lucid isn't a bad buy towards $40. Lucid is my largest position with an average unit cost basis at $21, so I'm not going to accumulate further, unless I see weakness into the $30s. I view the SEC subpoena as being a bigger impact on weighing the SP down, but I still believe that Lucid may still end the year north of $40.

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