CEO of Lucid clarifies $1.75 billion capital raise was not misinterpreted by Wall Street.

• Last week, Lucid Group unveiled a public offering aiming to collect approximately $1.75 billion.
• The CEO, Peter Rawlinson, stated that the raise was a well-timed and strategic business decision to secure sufficient capital for the EV manufacturer's ongoing operations and growth plans.
• After the company's stock fell, investors should have expected the move, according to what he told CNBC. He said it was "misinterpreted and misreported."

Last week, a public offering by Detroit raised $1.75 billion, but the stock's worst daily performance in nearly three years occurred due to investors' misinterpretation of the offering, as stated by CEO Peter Rawlinson to CNBC.

Rawlinson stated that the raise, comprising a public offering of approximately 262.5 million shares of its common stock, was a well-timed, strategic business decision to ensure the electric vehicle company has sufficient capital for its ongoing operations and growth plans. Additionally, it should assuage any concerns that the company may need to issue a "going concern" disclosure regarding its operations, he added.

"Rawlinson stated on Monday from the company's new offices in suburban Detroit that as a Nasdaq company, they must avoid a going concern. A going concern is issued within 12 months of a financial runway, which should have been expected."

Wall Street analysts generally viewed the move negatively due to its timing, with several stating that the raise was unnecessary or came earlier than anticipated for the company, which had $5.16 billion of total liquidity at the end of the third quarter, including over $4 billion in cash, cash equivalents, and investment balances.

The $1.5 billion cash investment from Saudi Arabia's Public Investment Fund, which was announced two months ago, is helping Lucid expand its product line with new models.

The cap raise was announced earlier and slightly larger than expected, according to Morgan Stanley analyst Adam Jonas.

Tom Narayan, an analyst at RBC Capital Markets, expressed similar concerns about Lucid Motors' decision to raise capital after securing PIF funding in August, at a time when share prices are low. He predicted that Lucid shares would experience a sharp decline as a result.

Rawlinson stated on Monday that the company would raise capital "as needed." He revealed that the company's current funds will sustain its operations until 2026, before it launches a new midsize platform that year.

"This is precisely what was anticipated. It adheres to the plan. No one should have been caught off guard," he remarked. "As for why I chose this particular moment, it was to avoid prolonging the anticipation and because I didn't need to."

On Thursday, Lucid's shares experienced a 18% decline, which was the company's worst daily decline since December 2021.

Lucid is currently undergoing a highly capital-intensive expansion phase, which includes building a second factory in Saudi Arabia, launching its second product, the Gravity SUV, developing its next-generation powertrain, and expanding its retail and service network.

"Rawlinson stated that the five categories represent the long-term investments for the future that are being made now. He emphasized the need to cut costs with every car being produced."

The announcement made last week was accompanied by plans for Ayar Third Investment Co., a majority stockholder and affiliate of PIF, to acquire more than 374.7 million shares of common stock from Lucid, thereby maintaining its ownership of approximately 59% of the company.

The term "pro rata" refers to a transaction that enables an investor, such as PIF, to participate in future financing rounds and maintain its ownership stake. PIF has frequently utilized this approach with Lucid.

The dilution of shares following the action may have caused concern among individual investors, but Rawlinson believes the continued support of the PIF is a positive sign.

"Rawlinson stated that the misinterpretation and misreporting of the situation were likely due to a misunderstanding of the norm, which is to go pro rata. If they had not gone pro rata, it would have been a clear indication that the PIF had lost confidence in them."

Last week, Lucid stated that the public offering was predicted to generate approximately $1.67 billion, with a 30-day option for underwriter BofA Securities to purchase up to nearly 39.37 million additional shares of Lucid's common stock.

This year, Lucid has recorded a high number of deliveries for its current model, the all-electric sedan Air. The company recently confirmed its plan to produce 9,000 vehicles this year. The production of the Gravity SUV is expected to begin by the end of this year.

Despite higher costs, slower-than-expected demand for EVs, and marketing and awareness problems, Lucid's sales and financial performance have not scaled as quickly as expected.