Benchmark cut its price target on Lucid Motors by more than half following the electric vehicle maker’s $875 million convertible note offering, citing concerns about dilution even as the analyst maintained a Buy rating.
Analyst Mickey Legg lowered the target to $30 from $70 in a new research note first obtained by PriceTarget.
The revision came one day after Lucid priced 7% convertible senior notes due 2031 in a private placement, with an additional $100 million greenshoe option that initial purchasers can exercise within 13 days of issuance.
Additionally, the stock has approached its all time low of $15.25 both on Wednesday and Thursday.
As of press time, shares of the EV maker are falling 6.4% at $15.52.
“Proceeds are being used to repurchase a substantial portion of the 1.25% 2026 notes (roughly $756 million principal for about $752 million cash) and for general corporate purposes, effectively terming out near-term maturities while increasing annual cash interest in our view,” Legg wrote.
Dilution Risk Looms
The convertible notes carry a conversion premium of approximately 22.5% to Lucid‘s $16.99 closing price on the pricing date, implying an initial conversion price of about $20.81 per share, or 48.0475 shares per $1,000 of principal amount.
At full conversion, the new notes would add roughly 42 million shares based on the $875 million base offering, or 47 million including the greenshoe.
The notes become callable at Lucid‘s option on or after November 6, 2028, if the stock trades at least 130% of the conversion price.
The issuance is scheduled to settle on or about November 17, subject to customary closing conditions.
Liquidity Cushion Grows
Last week, the Newark, California-based company announced that Saudi Arabia’s Public Investment Fund, its largest shareholder with a 58% stake, agreed to increase a delayed draw term loan facility to approximately $2 billion from $750 million.
Combined with the increased credit facility, Lucid‘s total liquidity at quarter-end would have been approximately $5.5 billion, up from actual total liquidity of $4.2 billion, the company said in its third-quarter earnings release.
Stock Under Pressure
Lucid shares have tumbled by more than 24% over the past 30 days.
Eric Bach, senior vice president of product and chief engineer, was dismissed, a person familiar with the matter told EV on Wednesday.
James Hawkins, vice president of engineering, also departed, TechCrunch reported, though Lucid did not announce his exit.
The departures bring the total to 14 C-suite or vice president exits in less than two years, underscoring persistent management turmoil at the struggling EV maker.
Institutional Investors
Despite the stock’s decline and operational challenges, institutional investors continue adding to positions.
As reported earlier this Thursday, the world’s largest asset manager BlackRock, with $13.5 trillion under management, increased its Lucid stake for the fourth consecutive quarter, purchasing about 270,000 shares between July and September.
