(Photograph by MediaNews Group/Bay Space Information by way of Getty Photographs)
Key Takeaways
- Lucid Group has raised a further $1.5 billion to help ongoing operations, with $915 million being contributed by the Saudi Arabia Public Funding Fund.
- It retains the Fund’s stake in Lucid at round 62%, persevering with their standing as a majority proprietor of the corporate.
- Regardless of virtually $1 billion in further funding, it’s a drop within the bucket in comparison with the funds complete worth, which is estimated at over $620 billion.
- It marks a continued diversification of the oil states diversification away from fossil fuels, into a variety of funding from video video games to sports activities groups to main infrastructure initiatives.
Electrical automobile (EV) manufacturing has come a great distance over the previous ten years. Again in 2008 when the primary era Tesla Roadster was launched, EV’s had been very a lot a curiosity.
It was the primary street authorized manufacturing EV, and whereas lower than 2,500 Roadsters had been bought the world over, it kicked off a development that continues to select up tempo in the present day.
Tesla wasn’t the primary firm to make an electrical automobile. They’ve been made in a single kind or one other way back to 1828. However Tesla had been the primary to mass produce one which was legally in a position to be pushed on the street, they usually made it horny as well.
Since then, the EV market has exploded.
There have been an enormous variety of newcomers to the area, with firms similar to Rivian, Nikola, Polestar, Fisker and Lucid all vying for his or her share of the electrical gold rush. Not solely that, however conventional automakers are pumping billions of {dollars} into the sector as effectively.
Firms similar to Common Motors, Mercedes-Benz, Volkswagen Group, Kia and Hyundai and others have all jumped on the bandwagon and now provide a variety of electrical autos alongside their inner combustion vary.
The development is simply going to select up velocity. Many jurisdictions are actually in search of to ban the sale of recent gasoline and diesel powered automobiles, similar to California and all states signed as much as their Zero Emission Automobile Program, plus the UK and Europe, Canada, New Zealand, Singapore, Japan, Iceland, Norway and even China.
So with all that occurring within the background, it’s not a stretch to recommend that the oil states may be getting a bit nervous. It’s why we’ve seen such an enormous push from locations like Sudi Arabia, the United Arab Emirates and Oman to diversify their economies away from simply oil.
The Saudi Arabia Public Funding Fund is already a majority proprietor of Lucid Motors, and with a further $915 million money tipped in with this spherical, their stake stays at sound 62%.
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Lucid raises $1.5 billion
Along with the $915 million added by Saudi Arabia, Lucid raised a further $600 million by a standard secondary inventory providing. The funds will likely be used to assist bolster the corporate’s steadiness sheet, after it posted underwhelming third quarter outcomes.
The figures confirmed supply numbers manner down from expectations which had been as excessive as 20,000 autos in 2022. Now the quantity is predicted to be beneath 7,000.
Lucid is now more likely to have over $5 billion in money reserves, with the newly raised $1.5 billion being added to the $3.85 billion available on September 30.
After going public in January 2021, Lucid’s inventory worth rose in a short time from an IPO worth of $14 to hit an all-time excessive closing worth of $58.05 in February of that yr. It got here again down quickly after to settle within the low $20 vary, earlier than working as much as the excessive $50’s once more in late 2021.
Since then the value has crashed in 2022 and is down over 81% yr up to now. It presently trades at just below $8 per share.
What’s the Saudi Arabia Public Funding Fund?
By far the biggest investor in Lucid is the Saudi Arabia Public Funding Fund (PIF), which holds round 62% of the corporate. The PIF is a sovereign wealth fund that was established by the federal government of Saudi Arabia in 1971. Its mandate is to handle the nation’s monetary property and make strategic investments that may contribute to the financial improvement of Saudi Arabia.
The PIF is among the largest sovereign wealth funds on this planet, with property estimated at over $620 billion. It’s a key monetary establishment in Saudi Arabia, and it’s accountable for managing a big portion of the nation’s monetary assets.
The PIF has made a variety of high-profile investments in recent times, together with a $3.5 billion stake in Uber, $522 million in Meta, $495 million in Disney, $487 million in Financial institution of America, $713 million in Boeing and $522 million in Citigroup.
The fund has additionally made a variety of bets on gaming, at varied occasions taking minority possession in Digital Arts, Take-Two Interactive, Activision Blizzard, Capcom, Nexon and Nintendo.
It doesn’t finish there.
There have been a variety of excessive profile investments in sports activities as effectively. In 2021 the fund bought English Premier League membership Newcastle United for $370 million and in addition launched LIV Golf, a excessive profile, huge cash competitor to the PGA Tour.
These investments had been made with a view to assist the PIF diversify its portfolio and generate returns for the good thing about the Saudi authorities and its residents.
The PIF has additionally performed a key function within the Saudi authorities’s efforts to diversify the nation’s financial system away from oil. For instance, it has invested in a variety of infrastructure initiatives, like the development of a brand new worldwide airport in Riyadh and the event of a brand new metropolis referred to as NEOM – the loopy, 100 mile lengthy, mirror-finished, futuristic ‘line’ within the desert.
These initiatives are supposed to create jobs and stimulate financial progress in non-oil sectors, and they’re a part of the Saudi authorities’s Imaginative and prescient 2030 plan to remodel the nation right into a extra diversified and trendy financial system.
The PIF is vastly necessary for Saudi Arabia, and it’s anticipated to play a key function within the nation’s financial improvement sooner or later. It’s accountable for managing a good portion of the nation’s monetary assets, and it’s working to make strategic investments that may contribute to the financial progress and diversification of the nation.
Why are oil states shifting away from oil?
It’s not simply the transfer to EV’s which is driving this diversification.
On the finish of the day, oil is a finite useful resource, which suggests that it’ll ultimately run out. The oil reserves in these international locations are usually not infinite, and sooner or later sooner or later, they’ll be gone.
That may be a great distance off, however nonetheless it would occur.
This can be a concern for the governments of those international locations as a result of oil has historically been the primary supply of revenue and financial exercise within the area. In the event that they don’t diversify their economies and discover different sources of revenue, they’ll be in huge bother when oil or its demand begins to expire.
Another excuse for diversification is that the demand for oil can fluctuate considerably, and this will have a big effect on their economies. For instance, if there’s a recession or a drop in international oil costs, the economies of those international locations might undergo. It is because the demand for oil decreases throughout these occasions, and because of this, the revenues that these international locations generate from oil exports might lower as effectively. By diversifying their economies, these international locations could be much less reliant on a single useful resource and be much less weak to those fluctuations.
The oil states additionally acknowledge that there are growing considerations concerning the environmental impacts of fossil fuels and the necessity to transition to extra sustainable sources of power.
Diversifying their economies might help them obtain this purpose by selling extra numerous and sustainable sources of financial exercise, similar to renewable power, tourism, and expertise.
Total, diversifying their economies away from oil is seen as a manner for the Center Jap oil states to make sure their long-term financial stability and sustainability. By having a extra numerous and resilient financial system, they will higher climate financial downturns and different challenges, and proceed to thrive sooner or later.
How can traders profit?
There’s no denying that shifting in the direction of a extra sustainable future is sensible. Not simply from an environmental standpoint, however from an funding one as effectively. There’s a big push for brand spanking new applied sciences and techniques to make our financial system cleaner, and this creates a giant alternative for firms.
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