Lucid Group Announces a Proposed $1.75 Billion Convertible Senior Notes Offering
【Summary】Luxury electric carmaker Lucid Group, Inc. announced on Wednesday its intention to offer $1,750,000,000 aggregate principal amount of convertible senior notes due 2026 in a private offering to qualified institutional buyers. The notes will be senior, unsecured obligations of Lucid, will accrue interest payable semi-annually in arrears, and will mature on Dec 15, 2026, unless redeemed or converted.

Luxury electric carmaker Lucid Group, Inc. announced on Wednesday its intention to offer $1,750,000,000 aggregate principal amount of convertible senior notes due 2026 in a private offering to qualified institutional buyers, which will be pursuant to Rule 144A under the Securities Act of 1933.
Rule 144A modifies restrictions for the purchase and sale of privately placed securities by qualified institutional buyers without the need for SEC registrations.
Lucid also expects to grant the initial purchasers of the notes an option, for settlement within a period of 13 days from the date the notes are first issued, to purchase up to an additional $262,500,000 principal amount of notes.
A convertible note is a type of short-term debt that the holder can convert into equity in the company its purchased from. Issuing senior convertible notes is a popular way for companies to raise additional funds from investors.
For Lucid, this method of financing is fairly easy to execute and allows young companies to gain quicker access to investor funds.
The notes will be senior, unsecured obligations of Lucid, will accrue interest payable semi-annually in arrears, and will mature on Dec 15, 2026, unless earlier repurchased, redeemed, or converted.
Lucid says the notes will be convertible under certain circumstances into cash, shares of Lucid's Class A common stock, or a combination of both at the company's election.
The notes will be redeemable on or after Dec 20, 2024 and on or before the 31st scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of Lucid's common stock exceeds 130% of the conversion price for a specified period of time and certain liquidity conditions are met.
The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest. The interest rate, initial conversion rate and other terms of the notes will be determined at the pricing of the offering.
Lucid intends to allocate an amount equal to the net proceeds from the notes to finance or refinance, in whole or in part, one or more new or existing "Eligible Green Investments," including investments and expenditures related to renewable energy, energy efficiency, and sustainable water and waste management.
These might include business expansion and general corporate purposes, which may include investments in manufacturing capabilities, expanding and improving operations such as our retail and service network, investing in research and development, and supporting other potential growth opportunities.
The announcement of the proposed offering sent Lucid's stock price down nearly 14% to $38.47, as investors fear Lucid will have to raise cash.
Last week, Lucid received a subpoena from the U.S. Securities and Exchange Commission (SEC) over details surrounding its $24 billion merger with special purpose acquisition company (SPAC) Churchill Capital Corp IV that launched its IPO.
An SEC regulator requested documents from the company related to an investigation into its SPAC deal, joining a growing list of companies that have come under scrutiny for their mergers with shell companies as an easier path to launch an IPO and raise money from investors on Wall Street.
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