Lucid Stock Soars 98% on Speculation of Saudi Investment Fund Takeover

Lucid stock soars on rumors of potential takeover by Saudi Arabia’s PIF

Lucid stock: Shares of Lucid Group (LCID 43.00%) soared on Friday, rising as high as 97% following rumors that the luxury EV maker could be taken private by Saudi Arabia’s public wealth fund. As of 2:38 p.m. ET, the Lucid stock had settled to a 37% gain.

Lucid’s stock struggles in 2022 due to slowing auto market and production ramp-up

Lucid stock has been struggling lately, losing more than 80% of its value in 2022 on concerns about a slowing auto market and the company’s need for cash as it ramps up production. However, it seems at least one longtime believer hasn’t given up. Shares of Lucid jumped higher due to a story from market blog Betaville that said, according to unnamed contacts, that Saudi Arabia’s Public Investment Fund (PIF) is preparing a bid to take Lucid private.

Rumor of PIF’s potential bid to take Lucid private gains traction

The PIF already owns more than 60% of Lucid, but according to Betaville, it is in talks with banks for financing to acquire the shares it doesn’t already own. Neither the company nor the fund offered any comment, and it is impossible to say for sure whether the rumor is correct — and if it is, what price the PIF might be willing to pay. But the rumor is creating understandable enthusiasm among Lucid investors, and is also ample reason for those who are short the Lucid stock to close their positions. About one-quarter of Lucid’s shares are currently sold short.

It is important to remember that investors need to be careful trading on market rumors, and it probably wouldn’t be smart to chase this rally and buy in now. Even if the Saudis are serious, a potential deal could still fall through, and we have no idea what price they might be willing to pay.

Potential deal could still fall through and price PIF may be willing to pay is unknown

There is a certain logic to the rumor. The Saudis have been very supportive of Lucid, participating in a fundraising round last November to help the company continue its production ramp. And the PIF has a history of dalliances with electric vehicle makers: Elon Musk claims it was interest from the PIF that caused him to tweet that he had “funding secured” to take Tesla private in 2018.

If you’ve only bought in recently and are now looking at a big gain on your investment, it could be tempting to sell instead of waiting to see how it plays out. But for most Lucid investors, the best thing to do is sit tight and see where this goes.

It is worth noting that The Motley Fool Stock Advisor analyst team just revealed their 10 Best Buys Now… and Lucid Group wasn’t one of them. Stock Advisor is the online investing service that has beaten the stock market by 3x since 2002*. And the team just revealed their 10 Best Buys Now.

Saudi Arabia’s previous involvement and support of Lucid

Saudi Arabia’s PIF first invested $1.3 billion in Lucid in 2018, and it now owns around 65% of the shares today. The fund also bought 41 million shares of Tesla around that time, but has since sold off the stake in the rival EV maker. The fund has not publicly confirmed if it will buy the remaining shares of Lucid.

Previously, Lucid stock price slid 76% from its all-time-high of $55.21 in late 2021, mirroring the decline in other tech and EV stocks due to rising inflation and aggressive rate hikes from the Fed. The company is also expected to face increased competition this year after Tesla slashed prices on several of its models, which is putting pressure on other EV firms to lower prices.

Lucid and PIF’s history and connection to Saudi Arabia’s Vision 2030 plan.

Lucid and PIF have a long history. In 2018, before Lucid was a publicly traded entity, the fund agreed to invest over $1 billion in the company. The investment will work towards the Vision 2030 plan, which seeks to diversify Saudi Arabia.

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