Tesla Competitor Lucid Raises $1.5 Billion, Majority From Saudi Sovereign Wealth Fund

Key Takeaways

• Lucid Group has raised an extra $1.5 billion to help ongoing operations, with $915 million being contributed by the Saudi Arabia Public Funding Fund.
• It retains the Fund’s stake in Lucid at round 62%, persevering with their standing as a majority proprietor of the corporate.
• Regardless of nearly $1 billion in extra funding, it’s a drop within the bucket in comparison with the funds complete worth, which is estimated at over $620 billion.
• It marks a continued diversification of the oil states diversification away from fossil fuels, into a variety of funding from video video games to sports activities groups to main infrastructure initiatives.

Electrical automobile (EV) manufacturing has come a good distance over the previous ten years. Again in 2008 when the primary era Tesla Roadster was launched, EV’s have been very a lot a curiosity.

It was the primary highway authorized manufacturing EV, and whereas lower than 2,500 Roadsters have been offered internationally, it kicked off a pattern that continues to select up tempo right now.

Tesla wasn’t the primary firm to make an electrical automobile. They’ve been made in a single kind or one other way back to 1828. However Tesla have been the primary to mass produce one which was legally capable of be pushed on the highway, they usually made it attractive besides.

Since then, the EV market has exploded.

There have been an enormous variety of newcomers to the house, with firms corresponding to Rivian, Nikola, Polestar, Fisker and Lucid all vying for his or her share of the electrical gold rush. Not solely that, however conventional automakers are pumping billions of {dollars} into the sector as effectively.

Corporations corresponding to Normal Motors, Mercedes-Benz, Volkswagen Group, Kia and Hyundai and others have all jumped on the bandwagon and now provide a variety of electrical automobiles alongside their inside combustion vary.

The pattern is just going to select up pace. Many jurisdictions are actually searching for to ban the sale of latest gasoline and diesel powered vehicles, corresponding to California and all states signed as much as their Zero Emission Car Program, plus the UK and Europe, Canada, New Zealand, Singapore, Japan, Iceland, Norway and even China.

So with all that happening within the background, it’s not a stretch to recommend that the oil states may be getting just a little nervous. It’s why we’ve seen such an enormous push from locations like Sudi Arabia, the United Arab Emirates and Oman to diversify their economies away from simply oil.

The Saudi Arabia Public Funding Fund is already a majority proprietor of Lucid Motors, and with an extra $915 million money tipped in with this spherical, their stake stays at sound 62%.

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Lucid raises $1.5 billion

Along with the $915 million added by Saudi Arabia, Lucid raised an extra $600 million via a standard secondary inventory providing. The funds will likely be used to assist bolster the corporate’s stability sheet, after it posted underwhelming third quarter outcomes.

The figures confirmed supply numbers means down from expectations which had been as excessive as 20,000 automobiles in 2022. Now the quantity is predicted to be under 7,000.

Lucid is now more likely to have over $5 billion in money reserves, with the newly raised $1.5 billion being added to the $3.85 billion available on September 30.

After going public in January 2021, Lucid’s inventory value rose in a short time from an IPO value of $14 to hit an all-time excessive closing value of $58.05 in February of that 12 months. It got here again down quickly after to settle within the low $20 vary, earlier than operating as much as the excessive $50’s once more in late 2021.

Since then the worth has crashed in 2022 and is down over 81% 12 months so far. It at present trades at just below $8 per share.

What’s the Saudi Arabia Public Funding Fund?

By far the biggest investor in Lucid is the Saudi Arabia Public Funding Fund (PIF), which holds round 62% of the corporate. The PIF is a sovereign wealth fund that was established by the federal government of Saudi Arabia in 1971. Its mandate is to handle the nation’s monetary belongings and make strategic investments that may contribute to the financial improvement of Saudi Arabia.

The PIF is without doubt one of the largest sovereign wealth funds on the planet, with belongings estimated at over $620 billion. It’s a key monetary establishment in Saudi Arabia, and it’s accountable for managing a big portion of the nation’s monetary sources.

The PIF has made various high-profile investments in recent times, together with a $3.5 billion stake in Uber, $522 million in Meta, $495 million in Disney, $487 million in Financial institution of America, $713 million in Boeing and $522 million in Citigroup.

The fund has additionally made various bets on gaming, at varied occasions taking minority possession in Digital Arts, Take-Two Interactive, Activision Blizzard, Capcom, Nexon and Nintendo.

It doesn’t finish there.

There have been a variety of excessive profile investments in sports activities as effectively. In 2021 the fund bought English Premier League membership Newcastle United for $370 million and likewise launched LIV Golf, a excessive profile, huge cash competitor to the PGA Tour.

These investments have been made as a way to assist the PIF diversify its portfolio and generate returns for the advantage of the Saudi authorities and its residents.

The PIF has additionally performed a key position within the Saudi authorities’s efforts to diversify the nation’s economic system away from oil. For instance, it has invested in various infrastructure initiatives, like the development of a brand new worldwide airport in Riyadh and the event of a brand new metropolis known as NEOM – the loopy, 100 mile lengthy, mirror-finished, futuristic ‘line’ within the desert.

These initiatives are supposed to create jobs and stimulate financial progress in non-oil sectors, and they’re a part of the Saudi authorities’s Imaginative and prescient 2030 plan to rework the nation right into a extra diversified and fashionable economic system.

The PIF is vastly vital for Saudi Arabia, and it’s anticipated to play a key position within the nation’s financial improvement sooner or later. It’s accountable for managing a good portion of the nation’s monetary sources, and it’s working to make strategic investments that may contribute to the financial progress and diversification of the nation.

Why are oil states shifting away from oil?

It’s not simply the transfer to EV’s which is driving this diversification.

On the finish of the day, oil is a finite useful resource, which implies that it’s going to finally run out. The oil reserves in these international locations aren’t infinite, and in some unspecified time in the future sooner or later, they’ll be gone.

That may be a good distance off, however nonetheless it can occur.

It is a concern for the governments of those international locations as a result of oil has historically been the primary supply of earnings and financial exercise within the area. In the event that they don’t diversify their economies and discover different sources of earnings, they’ll be in huge bother when oil or its demand begins to expire.

Another excuse for diversification is that the demand for oil can fluctuate considerably, and this could have a huge impact on their economies. For instance, if there’s a recession or a drop in international oil costs, the economies of those international locations could undergo. It is because the demand for oil decreases throughout these occasions, and because of this, the revenues that these international locations generate from oil exports could lower as effectively. By diversifying their economies, these international locations could be much less reliant on a single useful resource and be much less weak to those fluctuations.

The oil states additionally acknowledge that there are rising considerations concerning the environmental impacts of fossil fuels and the necessity to transition to extra sustainable sources of vitality.

Diversifying their economies will help them obtain this aim by selling extra various and sustainable sources of financial exercise, corresponding to renewable vitality, tourism, and know-how.

Total, diversifying their economies away from oil is seen as a means for the Center Jap oil states to make sure their long-term financial stability and sustainability. By having a extra various and resilient economic system, they’ll higher climate financial downturns and different challenges, and proceed to thrive sooner or later.

How can buyers profit?

There’s no denying that shifting in direction of a extra sustainable future is sensible. Not simply from an environmental standpoint, however from an funding one as effectively. There’s a large push for brand spanking new applied sciences and techniques to make our economic system cleaner, and this creates an enormous alternative for firms.

In our Clean Tech Kit, we use the facility of AI to speculate throughout a variety of various inexperienced applied sciences. These embody renewable sectors corresponding to EV producers and infrastructure producers, hydrogen gas cell tech, various fuels, battery manufacture, waste discount and good water applied sciences.

Each week our AI predicts how every holding within the predetermined funding universe is more likely to carry out within the coming week on a risk-adjusted foundation, after which mechanically rebalances the Package in keeping with these predictions.

This contains three ETFs, plus a weekly allocation to between 16-19 particular person shares out of a complete universe of 58.

It’s like having an expert funding supervisor, proper in your pocket.

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