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."
Sign up for Kiplinger’s Free E-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
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.
-
Taiwan Semiconductor Stock Hits a $1 Trillion Market Cap After Earnings
Taiwan Semiconductor stock is red-hot in Thursday's session after the chipmaker beat Q3 expectations and issued a strong outlook. Here's what you need to know.
By Joey Solitro Published
-
States That Offer a Child Tax Credit in 2024
Child Tax Credit Fifteen states plus the District of Columbia currently offer a child tax credit. Here’s how much you can get.
By Gabriella Cruz-Martínez Published
-
Taiwan Semiconductor Stock Hits a $1 Trillion Market Cap After Earnings
Taiwan Semiconductor stock is red-hot in Thursday's session after the chipmaker beat Q3 expectations and issued a strong outlook. Here's what you need to know.
By Joey Solitro Published
-
Five Ways to Minimize a Higher Capital Gains Tax Rate
With Harris’ proposal to raise the capital gains tax rate (which would require congressional approval), investors might want to consider tax-lowering options.
By Michael Aloi, CFP® Published
-
Collar Investing Strategy Can Help Protect Your Nest Egg
Here are some key considerations for using the collar strategy of put options and covered calls to safeguard your wealth in retirement.
By Matt Amberson Published
-
Understand Your ESOP Benefit: The Diversification Option
You can sell your shares back to the company during your employment years, called diversification in ESOP terms. What are the pros and cons?
By Peter Newman, CFA Published
-
Stock Market Today: Markets March Higher as Strong Earnings Offset Weakness in Chips
Upbeat quarterly results helped stocks bounce back with broad-based gains.
By Dan Burrows Published
-
The Best Growth Stocks to Buy
Growth stocks can create significant returns for investors, but what are they and how do you find the best ones? We take a closer look here.
By Kyle Woodley Published
-
Women's Wealth Growing: How to Handle It Like a Pro
Even as women play catch-up because of the gender pay gap and caregiving responsibilities, they're winning financially.
By Tiffany Welka Published
-
Electing to Be an S Corporation: Benefits You Need to Know
Entrepreneurs who meet the requirements and choose to be an S corporation could see lower taxes and experience several other advantages.
By Derek A. Miser, Investment Adviser Published