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Lucid (NASDAQ:LCID) stock opened in the green today after the company’s Head of China Operations Zhu Jiang confirmed the electric vehicle (EV) company is preparing to sell its cars in China, the world’s largest automotive market. Lucid will import its EVs into China and is also in the process of deciding on initiating local production in the country, according to a source familiar with the matter.
Last year, Chinese consumers purchased 4.6 million battery-electric vehicles (BEVs), which accounts for about 60% of all global sales. In recent months, over 30% of all vehicles sold in China have been EVs, although that figure includes plug-in hybrid vehicles as well.
Still, an entry into the Chinese market will require capital, although Lucid seems prepared for that.
LCID Stock: Lucid to Enter Chinese Markets
In late May, Lucid announced a public offering of common stock and a private placement of common stock to Saudi Arabia’s Public Investment Fund (PIF) subsidiary Ayar Third Investment Company worth $3 billion. The public offering had an expected closing date of June 5. Meanwhile, the private placement is contingent on the public offering and is expected to close on June 26. This offering was likely initiated with plans of Chinese expansion in mind. Shares of LCID stock have fallen by about 15% since the announcement.
Specifically, the public offering was for 173.54 million shares, which would allow Lucid to receive gross proceeds of $1.2 billion. Next, the private placement is for 265.69 million shares, which should provide $1.8 billion of gross proceeds. Ayar is Lucid’s largest shareholder and the private placement will allow it to retain its 60.5% ownership stake in the company. Lucid will use the total $3 billion in gross proceeds toward general corporate expenses, including capital expenditures and working capital.
While the offering and private placement will provide Lucid with capital for its expansion plans, shareholders will be diluted in the process.
“The issuance of additional shares of our common stock or other equity or equity-linked securities, or sales of a significant portion of our common stock, could depress the market price of our common stock,” warned Lucid.
Following the completion of the offering and private placement, there will be 2.27 billion shares of LCID stock outstanding.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.
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