Lucid Stock takes a fall. Why? Look at the composition of shareholders.
A sudden drop in
the stock price highlights a key idea in investing: ownership composition matters. Shares of the electric vehicle maker (ticker: LCID) fell 6.3% on Tuesday, while the
was down 0.6%. The news that Lucid is set to raise capital – a development that had long been in the cards – seemed to be behind the downfall.
Lucid has filed a Universal Registration Statement that allows it to raise up to $8 billion through any combination of equity, preferred stock, warrants and debt. That’s a lot, but the registration statement doesn’t mean a huge stock sell-off is imminent. Companies have limits on the securities they can sell without first telling their owners, the shareholders. Tablet listings give them the opportunity to raise funds when management feels the time is right.
The best explanation for the reaction to Lucid’s relatively routine filing might be that the stock is favored by individual rather than institutional investors. Individuals tend to be less familiar with the technicalities of the capital market than larger players. They own about 70% of Lucid’s available shares, based on Bloomberg data, while institutions own the rest. It’s high. Comparable figures for
are 45% and 25% respectively.
It’s no surprise that Lucid needs more capital. Wall Street predicts the company will burn about $7 billion over the next two years, as it ended the second quarter with some $4.3 billion on the books. Tesla used about $9 billion before it started generating free cash flow. Lucid stock is down about 60% this year, while the S&P 500 and
Dow Jones Industrial Average
are down about 15% and 12%, respectively.
Stocks tumbled after Jerome Powell’s hawkish speech on Jackson Hole, with indexes down 4% or more at the August close. The dollar has risen and job vacancies have increased. Bed Bath & Beyond and Snap laid off 20% of workers, and Nvidia warned against sales after new US chip restrictions to Russia and China. Covid has broken out again in China. The big news: August jobs hit 315,000, down from July but strong enough to stoke fears of a rate hike. On the week, Dow Jones industrials fell 2.99% to 31,318.44; the S&P 500 fell 3.29% to 3924.26; and the
fell 4.21%, to 11,630.86.
The Ukrainian offensive begins
Ukraine launched its long-awaited offensive around Kherson, attempting to cut off Russian troops on the western side of the Dnipro River. United Nations inspectors visited the beleaguered Ukrainian nuclear power plant amid the fighting. Exxon Mobil has sued Russia, claiming the Kremlin blocked its exit from its 30% stake in the Sakhalin-1 oil project. Russia shut down the Nord Stream 1 gas pipeline again. In a compromise, the European Union agreed to suspend the European visa pact with Moscow but allow some Russian tourism.
Pakistan under water
Pakistan has requested emergency aid from the UN after monsoon rains flooded the country, inundating up to a third of it. More than 1,200 people were killed and a million homes destroyed. The IMF offered a $1 billion loan.
NASA has delayed the launch of its new 38-story space launch system, Artemis I, until Saturday after a problem with engine cooling lines. Boeing is the biggest contractor for the SLS, the largest rocket ever built by NASA and intended to bring people back to the moon. “You don’t want to light the candle until it’s ready to go,” said NASA chief Bill Nelson.
Inside these boxes
The Justice Department, responding to former President Trump’s request for a special master to review documents taken from Mar-a-Lago during an FBI raid, accused Trump’s team of obstruction to justice. The DOJ file details the timeline of attempts to recover the material as well as the transport of the raid: 33 boxes containing more than 100 classified documents.
Annals of Deal Making
Illumina won its lawsuit against the Federal Trade Commission trying to block its $7.1 billion acquisition of Grail cancer screening… Honda and LG Energy Solution said they would spend $4.4 billion to build a plant of lithium-ion batteries in the United States, probably near Honda’s manufacturing operation in Ohio. … Delaware Chancery Judge Kathaleen St. J. McCormick ordered Twitter to hand Elon Musk an analysis of some 9,000 accounts he surveyed last year … Meta Platforms has reached an agreement on Facebook data collection by Cambridge Analytica for political advertising. Terms were not disclosed. Meta has already paid a $5 billion fine to the FTC in this case.
Write to Al Root at [email protected]