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Lucid Motors stock (NYSE: LCID) fell nearly 18% last week and hit its record lows on Friday amid a broad-based sell-off in startup electric vehicle (EV) names. The fall was further amplified by the capital raise that the company completed last week, which would lead to further dilution for existing shareholders.
Last week, Lucid announced the pricing of an $875 million offering of convertible senior notes due in 2031. The initial conversion price of the shares is $20.81 per share, representing a premium of approximately 22.5% over the closing price on November 11, 2025.
Lucid Announced Convertible Note Last Week
The primary use of the estimated $863.5 million in net proceeds is the repurchase of approximately $755.7 million aggregate principal amount of Lucid’s outstanding 1.25% Convertible Senior Notes due 2026. This debt-for-debt swap effectively pushes the maturity date of a substantial near-term obligation out by five years, providing significant breathing room for the company’s cash management. The remaining proceeds will be used for general corporate purposes.
Separately, Ayar, a wholly-owned subsidiary of Saudi Arabia’s sovereign wealth fund PIF (public investment fund), entered into a privately negotiated prepaid forward transaction with a forward counterparty (an affiliate of one of the initial purchasers of the convertible notes).
As part of that agreement, Ayar agreed to purchase $636.7 million worth of Lucid’s common stock from the forward counterparty, with the delivery of the shares expected to occur around the notes’ maturity date in 2031.
This arrangement is primarily intended to facilitate hedging strategies for the institutional investors who buy the convertible notes. When investors purchase convertible notes, they often employ a “convertible arbitrage” strategy, which involves simultaneously buying the notes and short-selling the underlying stock to lock in a return.
The forward counterparty, which is typically a bank or broker, uses the forward agreement with Ayar to manage its own exposure. By having a long-term buyer (Ayar/PIF) pre-commit to purchasing a large block of stock, the counterparty can more comfortably enter into derivative transactions (like swaps) with the note investors. Ayar’s willingness to engage in this transaction signals the PIF’s continued, strong support and provides a backstop for the stock-based derivatives market created by the new notes, helping to stabilize the overall transaction and potentially mitigating downward pressure on Lucid’s stock price from the initial hedge sales.
PIF Has Been Backing Lucid Motors
The PIF’s journey with Lucid is a cornerstone of Saudi Arabia’s “Vision 2030” initiative, which aims to diversify the Kingdom’s economy away from oil by investing in future industries like sustainable technology and advanced manufacturing.
In 2018, PIF announced a $1 billion investment in Lucid, which was completed the next year. This funding was essential for completing the engineering and testing of the Lucid Air, constructing its initial manufacturing plant in Casa Grande, Arizona (AMP-1), and beginning its global retail strategy. PIF also participated in the funding transaction during Lucid’s 2021 SPAC merger and has poured billions more in subsequent stock sales.
During their Q3 earnings call, Lucid Motors said that PIF agreed to increase a delayed draw term loan credit facility (DDTL) from $750 million to approximately $2.0 billion. This increase brought Lucid’s total pro forma liquidity to an estimated $5.5 billion, extending the company’s financial runway into the first half of 2027.
The PIF is Lucid’s largest and most consistent investor, owning a stake that has historically hovered around 60%, making it the primary financial pillar of the company. Through multiple rounds, including the initial massive injection, SPAC listing, and recent private placements/credit facilities, the PIF has ensured Lucid has the capital needed to complete R&D, build multiple factories, and weather the challenges of a scaling EV startup.
LCID To Build a Manufacturing Plant in Saudi Arabia
Notably, in 2022, Lucid signed agreements to build its first international manufacturing plant, AMP-2, in King Abdullah Economic City (KAEC), Saudi Arabia. The project was estimated to provide up to $3.4 billion in financing and incentives to Lucid over 15 years from Saudi government entities.
The facility began with semi-knocked-down (SKD) assembly and is planned to transition to full production with an expected annual capacity of up to 155,000 vehicles.
The Government of Saudi Arabia committed to purchasing at least 50,000 and potentially up to 100,000 Lucid vehicles over ten years, providing a guaranteed customer base for the KAEC plant.
Lucid Motors Has Been Posting Massive Losses
Meanwhile, Lucid Motors continues to burn cash and has precarious financials, operating with a negative gross margin. This means the cost of manufacturing and delivering the vehicles is currently higher than the revenue generated from their sales, resulting in a loss on every car sold.
The company’s cash burn was nearly a billion dollars in Q3 2025 as it continues to invest in new models. The Lucid Gravity SUV is widely regarded as a significant product launch in the company’s relatively short history. While it may not be a single “savior” that instantly solves all financial problems, its success is essential for Lucid to survive its cash burn phase and achieve long-term viability.
The luxury sedan market, where the Lucid Air competes, is a shrinking segment. Even with the Air’s world-class range and performance, its addressable market remains relatively small.
Midsize Platform Will be Crucial for LCID
The Gravity enters the premium SUV/Crossover segment, which is the largest and fastest-growing category in the automotive industry, particularly in the U.S. and globally. Lucid executives believe the SUV opens up a market six times larger than the one for the Air sedan. This dramatically increases the number of potential buyers.
The Gravity combines the attributes of a popular form factor (up to 7 seats, 120 cubic feet of cargo space, up to 6,000 lbs towing capacity) with Lucid’s core technological advantage (projected EPA range of up to 450 miles and 828 horsepower). Its starting price for the Touring model is around $79,900, making it competitive with rivals like the Tesla Model X and high-end SUVs from legacy brands.
However, to achieve sustainable profitability, Lucid Motors would need to significantly increase its volumes while cutting down on costs. The company is working on a midsize platform, which is expected by the end of next year, and could help buoy the company’s volumes, which are still quite low for it to be a serious player in the EV market.
