Lucid Motors (NASDAQ:LCID) experienced a significant downturn on Friday as shares hit an intraday low of $3.62, marking a new record low for the emerging electric vehicle (EV) company. Even with the stock concluding at $3.80 and showing a modest rise early in the week, investor sentiment remains dampened, given that the current trading value is still below 50% of the 2021 special purpose acquisition company (SPAC) IPO price of $10.
The latest blow to Lucid Motors’ shares stems from a cut in its full-year production guidance, with expectations now ranging between 8,000-8,500 cars in 2023, down from the previous projection of over 10,000 vehicles. This follows multiple reductions in production guidance throughout 2022.
Lucid Motors has now entered the realm of penny stocks, prompting widespread doubts about its survival as the stock continues its descent. Elon Musk, CEO of Tesla (NASDAQ:TSLA), foresaw the demise of both Lucid Motors and Rivian (RIVN) in 2022 during an interview with the Tesla Silicon Valley Owners Club.
The EV industry’s exorbitant valuations in 2021, symbolized by Lucid Motors, Rivian, and others, indicated a bubble that eventually burst. Churchill Capital IV (CCIV), which merged with Lucid Motors, witnessed a staggering 550% spike in its stock price, reaching nearly $65 based on mere rumors of the SPAC merging with Lucid Motors. The subsequent reality check saw CCIV stock plummet sharply after the merger announcement.
While Lucid Motors and other EV names enjoyed a rally in late 2021, the sector has fallen out of favor with investors, with most companies trading well below their all-time highs, including LCID.
Concerns about bankruptcies loom over green energy companies, as demonstrated by Lordstown Motors’ filing for bankruptcy and Plug Power’s (NASDAQ:PLUG) “going concern” warning. Various factors contribute to corporate bankruptcies, ranging from falling demand and legal issues to worsening economic conditions and debt-related challenges.
The possibility of Lucid Motors facing bankruptcy raises concerns, yet the company, fortified by a total liquidity of $5.45 billion as of September 2023, maintains optimism regarding its ability to finance the launch of its Gravity vehicles and sustain operations until 2025. Additionally, support from Saudi Arabia’s sovereign wealth fund, marked by significant investments, including a private investment in public equity (PIPE) transaction and capital raises, adds a layer of financial stability.
Saudi Arabia’s strong enthusiasm for electric cars as a long-term growth driver, coupled with substantial financial support, diminishes the likelihood of Lucid Motors facing bankruptcy in the immediate future. However, there is market speculation suggesting that Saudi Arabia may be contemplating the privatization of Lucid Motors. The effectiveness of the “Saudi backstop” could be tested if Lucid Motors struggles to increase sales, particularly given the kingdom’s additional collaboration with Foxconn on a separate joint venture for electric car production within the country.
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