Lucid's liquidity clock was wound until late 2024 with its $3 billion stock sale in June, yet further large injections, perhaps as soon as late 2024, could help stem the cash burn while the company scales operations. Stiff competition in the luxury-end of the auto industry from peers like Mercedes, Tesla, Audi and BMW, and the potential for an economic downturn, add substantial risk to Lucid's journey toward profitability. A takeover by the Kingdom of Saudi Arabia (60% stake in Lucid via the Public Investment Fund) is possible, yet the timing is questionable relative to the company's convertible bonds' 2026 maturity. The potential of such an action makes our view of event risk favorable -- and a consideration given the country's Vision 2030 plan - but it does make the bonds more of a lottery ticket than well-defined credit.

Eoin Treacy's view

Building an automotive brand is capital intensive. Tesla got first mover advantage by being the first to provide electric vehicles consumers desired and monopolized the carbon emission sales market for several years. Every subsequent company must be even more efficient and needs to produce even better products. The challenge of funding in a rising interest rate environment is a clear problem. Having a big brother to help with liquidity is certainly a bonus.