Lucid Group Secures $1.1 Billion in Convertible Senior Notes to Fuel Growth and Strengthen Ties with PIF

Riyadh-based electric vehicle manufacturer Lucid Group has successfully closed a significant offering of convertible senior notes, raising $1.1 billion due in 2030. This strategic move is primarily aimed at bolstering the company’s financial position and facilitating future growth, while also reinforcing its partnership with Saudi Arabia’s Public Investment Fund (PIF), which holds a majority stake in the company.

In an official statement, Lucid announced that approximately $935.6 million of the net proceeds from this offering will be allocated to repurchasing around $1.05 billion in outstanding 1.25 percent convertible senior notes that are set to mature in 2026. This proactive approach not only helps manage the company’s debt but also minimizes potential dilution for existing shareholders.

The offering included an option for initial purchasers to acquire an additional $100 million in principal amount of the new notes, further enhancing the capital raise. This financial maneuver comes shortly after Lucid reported impressive first-quarter deliveries of 3,109 vehicles, marking a 58 percent increase compared to the same period last year. Such growth underscores the company’s potential in the rapidly evolving electric vehicle market.

Convertible senior notes are a unique financial instrument that allows companies to raise capital by borrowing money that can later be converted into shares. This structure provides a dual benefit: it secures immediate funding while protecting existing investors from dilution. Taoufiq Boussaid, Lucid’s Chief Financial Officer, expressed enthusiasm about the successful completion of the offering, stating, “We are delighted to have completed this offering, which better positions Lucid for future growth and success, while strengthening our already close partnership with the PIF, and minimizing any effect to existing shareholders.”

The PIF’s involvement in this transaction is noteworthy, as it backed the offering through a prepaid forward share purchase agreement. This arrangement provides Lucid with upfront cash while allowing the fund to acquire shares at a future date, further solidifying their strategic partnership.

To enhance the effective conversion price of the notes, Lucid executed capped call transactions, raising the conversion price to $4.80 per share of its Class A common stock. This price is double the last reported sale price of $2.40 as of April 2, indicating a significant buffer against potential dilution. The capped call transactions are designed to limit the number of shares that Lucid may need to issue to debt holders or investors, thereby protecting existing shareholders.

Lucid utilized approximately $118.3 million of the net proceeds from the offering to cover the costs associated with these capped call transactions. The company plans to use the remaining net proceeds for general corporate purposes, ensuring flexibility in its financial strategy.

Convertible senior notes are classified as “senior” in the capital structure, meaning they take precedence over other unsecured or subordinated debt in the event of liquidation. This characteristic offers greater protection to investors, making the offering an attractive option for those looking to invest in the electric vehicle sector.

In conclusion, Lucid Group’s successful $1.1 billion offering of convertible senior notes marks a significant step in its journey toward growth and sustainability in the electric vehicle market. With strong backing from the PIF and a strategic approach to managing its debt, Lucid is well-positioned to capitalize on the increasing demand for electric vehicles while minimizing risks for its investors. As the company continues to innovate and expand, its partnership with the PIF will likely play a crucial role in shaping its future success.