In Monday's premarket trading, Lucid stock jumped 7% as the market revalued the risk of dilution from a $1.75 billion convertible debt issue.
If there is a conversion, it will take place at a price of $54.78, which is a 50% premium over the stock's December 9 price of $36.52. This is based on just over 18 common stock shares per $1,000 principal amount of notes. A 1.5% coupon is included in the publication.
Lenders' readiness to lend to the company on the basis of a 50% premium demonstrates their belief in the company's growth prospects. When the current market price is higher than the conversion price, debtors typically convert their debt into equity.
If an over-allotment option is exercised, the business estimates net proceeds from the exercise to be as high as $1.98 billion.
Lucid can put the money toward growing its manufacturing capabilities, enhancing its retail operations and service network, investing in R&D, and supporting other possible growth possibilities.
Bondholders can convert their notes before September 15, 2026, if certain requirements are met, according to Lucid.
The notes will also be redeemed at any time at Lucid's discretion.