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LCID action: the majority shareholder of Lucid remains in his corner

  • Saudi Arabia’s Public Investment Fund, which owns 62.7% of Lucid Group (LCID), filed its quarterly 13F on May 16. He did not sell any of his LCID shares.
  • If you are a shareholder, this is considered good news.
  • However, if you are considering buying, you might want to think twice.

Source: Tada Images / Shutterstock

Saudi Arabia’s Public Investment Fund (PIF) filed its 13F for the first quarter of 2022 on May 16. The country’s sovereign wealth fund has retained each of its 1.015 billion shares of Lucid Group (NASDAQ:LCID). Some speculated that the fund would sell some of its LCID shares after asking Lucid to commit to building an assembly line in Saudi Arabia. This is excellent news for its other shareholders.

However, there’s no reason PIF – which owns 62.7% of Lucid – shouldn’t sell some in Q2 and beyond. Lucid needs PIF – not the other way around. If PIF were to ever reduce its stake in LCID stock significantly, you can be sure the stock price would be hammered on the news.

If you’re considering buying, it’s essential to remember that PIF is playing a totally different game than you or me.

Here’s why.

Teleprinter Company Price
LCID LucidGroup, Inc. $17.44

The LCID share represents 3% of PIF’s assets

The PIF website states that it is one of the largest sovereign wealth funds in the world, investing around $600 billion assets under management (AUM) in 13 strategic sectors. The fund’s Q1 2022 13F indicates it owned 37 stocks listed in the United States valued at $43.57 billion at the end of March. LCID accounted for 59% of these holdings.

I don’t think he wants to give up on his long-term goals for Lucid, both in the Middle East and elsewhere. However, anyone considering buying its shares should remember that the electric vehicle (EV) maker is just one of many investments made by the fund. Based on Lucid’s current market capitalization of $29.77 billion, PIF’s stake is worth $18.66 billion, or 3% of the fund’s assets under management.

While 13F might make Lucid look like a big investment for PIF, in the grand scheme of things, it likely has larger investments that are held in private companies.

You might want to read the five-year strategy to better understand its influence. For now, PIF’s investment is a blessing. But, inexorably linked to the Saudi government, it could become a curse in the blink of an eye.

Lucid is one of the 38 PIF initiatives for Vision 2030

The fund’s 2030 Vision has five industries it wants to scale. The automotive sector is one of the five. Others include aerospace, logistics and transportation, agriculture and food, construction and real estate. This is part of a total of 13 initiatives to launch and grow its national sectors. It’s very avant-garde.

The Lucid investment is part of the Kingdom’s plan to move away from oil profits. However, in 2019, Saudi Arabiathe largest energy company in the world, declared that it would take years to replace the internal combustion engine (ICE).

“The consensus of forecasters is that the internal combustion engine will be with us for decades to come,” said Saudi Aramco chief technology officer Ahmad Al Khowaiter. CNBC. “We still expect 90% of vehicles to be ICE driven by mid-century.”

So, by rudimentary calculations, that’s 10% electric vehicles by 2050. That’s good news for Lucid and its competitors. The bad news is that there is still plenty of time for the Kingdom to change its mind and bring in another EV manufacturer.

Early March, Lucid announcement that it would begin construction of a plant capable of producing 150,000 vehicles later this year. He expects it to be completed by 2025. Until Lucid Airs rolls off the assembly line in Saudi Arabia, investors can’t be sure that everything will go as planned.

The basics of LCID shares

Morgan Stanley (NYSE:MRS) analyst Adam Jonas estimates that Lucid will produce 9,900 vehicles in 2022, well below the company’s estimate of 12,000 to 14,000. As a result, he believes Lucid will seek to increase $5 billion in equity and debt financing in 2023 and 2024. Some of that money will likely go to the plant in Saudi Arabia.

The PIF can provide part of this funding. However, this event is not expected to occur until 2023. In the meantime, Lucid’s relationship with Saudi Arabia may deteriorate.

As long as PIF stays around Lucid, I wouldn’t take this to the bank. In the high-stakes world of the construction sector, PIF and the Saudi government hold all the cards.

This is something to consider before buying LCID stock.

As of the date of publication, Will Ashworth had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to Publication guidelines.

Will Ashworth has been writing about investing full time since 2008. Publications where he has appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger and many others in the US and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


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