Lucid is expected to have Saudi Arabia backing even if a full buyout does not happen
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Lucid Group (NASDAQ:LCID) cooled off in afternoon trading on Monday after Friday's monster 40% rally based on speculation that Saudi Arabia's Public Investment Fund may be preparing to acquire the remainder of the electric vehicle maker it doesn't already own.
While the story has seen no new developments, Morgan Stanley weighed in previously on the Lucid-Saudi PIF relationship in a note that predated the report from FT's Betaville. Analyst Adam Jonas said it is the firm's working assumption that the relationship between the Kingdom of Saudi Arabia and Lucid could extend beyond a controlling shareholder status.
"In our opinion, the Public Investment Fund stake in LCID represents a 'seat at the table' for the energy transition story that aligns with the KSAâs long term economic and social reforms of Vision 2030. As such, we believe investors should appreciate the potential for further expansion of the relationship as demonstrated to date with previously announced manufacturing plans in the KSA and other activities."
Morgan Stanley thinks having long-term and highly capitalized strategic partners represents an important advantage in the build-out of sustainable transportation ecosystems. Specifically, the firm believe the ability for LCID to support long-term infrastructure and supply chain development, as well as talent attraction and technology acquisition/partnership, are potentially enhanced by the guidance and support of the Kingdom of Saudi Arabia. However, MS is sticking with an Underweight rating on LCID in the near term with the EV maker needing to overcome execution headwinds in a year where we will see severe EV deflation.
Meanwhile, Seeking Alpha author The Asian Investor explains why takeover rumors may be unfounded based on the Saudi PIF's lack of a strong takeover history.
Shares of Lucid fell 7.60% in early trading on Monday afternoon to $11.90. The 52-week trading range for the highly-shorted stock is $6.09 to $30.85.