Key takeaways
- Lucid Group has raised an additional $1.5 billion to support ongoing operations, with $915 million being contributed by the Saudi Arabia Public Investment Fund.
- It keeps the Fund’s stake in Lucid at around 62%, continuing their status as a majority owner of the company.
- Despite almost $1 billion in additional investment, it’s a drop in the bucket compared to the funds total value, which is estimated at over $620 billion.
- It marks a continued diversification of the oil states diversification away from fossil fuels, into a wide range of investment from video games to sports teams to major infrastructure projects.
Electric vehicle (EV) manufacturing has come a long way over the past ten years. Back in 2008 when the first generation Tesla Roadster was launched, EV's were very much a curiosity.
It was the first road legal production EV, and while less than 2,500 Roadsters were sold across the world, it kicked off a trend that continues to pick up pace today.
Tesla wasn't the first company to make an electric vehicle. They’ve been made in one form or another as far back as 1828. But Tesla were the first to mass produce one that was legally able to be driven on the road, and they made it sexy to boot.
Since then, the EV market has exploded.
There have been a huge number of newcomers to the space, with companies such as Rivian, Nikola, Polestar, Fisker and Lucid all vying for their share of the electric gold rush. Not only that, but traditional automakers are pumping billions of dollars into the sector as well.
Companies such as General Motors
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The trend is only going to pick up speed. Many jurisdictions are now seeking to ban the sale of new gasoline and diesel powered cars, such as California and all states signed up to their Zero Emission Vehicle Program, plus the UK and Europe, Canada, New Zealand, Singapore, Japan, Iceland, Norway and even China.
So with all that going on in the background, it’s not a stretch to suggest that the oil states might be getting a little nervous. It’s why we’ve seen such a huge push from places like Sudi Arabia, the United Arab Emirates and Oman to diversify their economies away from just oil.
The Saudi Arabia Public Investment Fund is already a majority owner of Lucid Motors, and with an additional $915 million cash tipped in with this round, their stake remains at sound 62%.
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Lucid raises $1.5 billion
In addition to the $915 million added by Saudi Arabia, Lucid raised an additional $600 million through a traditional secondary stock offering. The funds will be used to help bolster the company’s balance sheet, after it posted underwhelming third quarter results.
The figures showed delivery numbers way down from expectations which had been as high as 20,000 vehicles in 2022. Now the number is expected to be below 7,000.
Lucid is now likely to have over $5 billion in cash reserves, with the newly raised $1.5 billion being added to the $3.85 billion on hand on September 30.
After going public in January 2021, Lucid’s stock price rose very quickly from an IPO price of $14 to hit an all-time high closing price of $58.05 in February of that year. It came back down soon after to settle in the low $20 range, before running up to the high $50’s again in late 2021.
Since then the price has crashed in 2022 and is down over 81% year to date. It currently trades at just under $8 per share.
What is the Saudi Arabia Public Investment Fund?
By far the largest investor in Lucid is the Saudi Arabia Public Investment Fund (PIF), which holds around 62% of the company. The PIF is a sovereign wealth fund that was established by the government of Saudi Arabia in 1971. Its mandate is to manage the country's financial assets and make strategic investments that will contribute to the economic development of Saudi Arabia.
The PIF is one of the largest sovereign wealth funds in the world, with assets estimated at over $620 billion. It is a key financial institution in Saudi Arabia, and it is responsible for managing a large portion of the country's financial resources.
The PIF has made a number of high-profile investments in recent years, including a $3.5 billion stake in Uber, $522 million in Meta, $495 million in Disney, $487 million in Bank of America, $713 million in Boeing and $522 million in Citigroup.
The fund has also made a number of bets on gaming, at various times taking minority ownership in Electronic Arts, Take-Two Interactive, Activision Blizzard, Capcom, Nexon and Nintendo.
It doesn’t end there.
There have been a range of high profile investments in sports as well. In 2021 the fund purchased English Premier League club Newcastle United for $370 million and also launched LIV Golf, a high profile, big money competitor to the PGA Tour.
These investments were made in order to help the PIF diversify its portfolio and generate returns for the benefit of the Saudi government and its citizens.
The PIF has also played a key role in the Saudi government's efforts to diversify the country's economy away from oil. For example, it has invested in a number of infrastructure projects, like the construction of a new international airport in Riyadh and the development of a new city called NEOM - the crazy, 100 mile long, mirror-finished, futuristic ‘line’ in the desert.
These projects are intended to create jobs and stimulate economic growth in non-oil sectors, and they are part of the Saudi government's Vision 2030 plan to transform the country into a more diversified and modern economy.
The PIF is hugely important for Saudi Arabia, and it is expected to play a key role in the country's economic development in the future. It’s responsible for managing a significant portion of the country's financial resources, and it is working to make strategic investments that will contribute to the economic growth and diversification of the country.
Why are oil states moving away from oil?
It’s not just the move to EV’s which is driving this diversification.
At the end of the day, oil is a finite resource, which means that it will eventually run out. The oil reserves in these countries are not infinite, and at some point in the future, they’ll be gone.
That might be a long way off, but nonetheless it will happen.
This is a concern for the governments of these countries because oil has traditionally been the main source of income and economic activity in the region. If they don’t diversify their economies and find other sources of income, they’ll be in big trouble when oil or its demand begins to run out.
Another reason for diversification is that the demand for oil can fluctuate significantly, and this can have a big impact on their economies. For example, if there is a recession or a drop in global oil prices, the economies of these countries may suffer. This is because the demand for oil decreases during these times, and as a result, the revenues that these countries generate from oil exports may decrease as well. By diversifying their economies, these countries can be less reliant on a single resource and be less vulnerable to these fluctuations.
The oil states also recognize that there are increasing concerns about the environmental impacts of fossil fuels and the need to transition to more sustainable sources of energy.
Diversifying their economies can help them achieve this goal by promoting more diverse and sustainable sources of economic activity, such as renewable energy, tourism and technology.
Overall, diversifying their economies away from oil is seen as a way for the Middle Eastern oil states to ensure their long-term economic stability and sustainability. By having a more diverse and resilient economy, they can better weather economic downturns and other challenges, and continue to thrive in the future.
How can investors benefit?
There’s no denying that moving towards a more sustainable future makes sense. Not just from an environmental standpoint, but from an investment one as well. There is a huge push for new technologies and strategies to make our economy cleaner, and this creates a big opportunity for companies.
In our Clean Tech Kit, we use the power of AI to invest across a range of different green technologies. These include renewable sectors such as EV producers and infrastructure manufacturers, hydrogen fuel cell tech, alternative fuels, battery manufacture, waste reduction and smart water technologies.
Every week our AI predicts how each holding in the predetermined investment universe is likely to perform in the coming week on a risk-adjusted basis, and then automatically rebalances the Kit in line with these predictions.
This includes three ETFs, plus a weekly allocation to between 16-19 individual stocks out of a total universe of 58.
It’s like having a professional investment manager, right in your pocket.
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