By Dhirendra Tripathi
Investing.com – Lucid stock (NASDAQ:LCID) surged 7% in Monday’s premarket trading as the market repriced the dilution risk from a $1.75-billion convertible debt offering.
The conversion, if any, will happen at a share price of $54.78, a 50% premium to the stock’s December 9 price of $36.52. This is on the basis of just over 18 shares of common stock per $1,000 principal amount of notes. The paper carries a coupon of 1.5%.
The willingness of the lenders to give loans to the company assuming a 50% premium reflects their optimism in the company’s growth potential. Debtors usually convert their debt into equity when the prevailing market price is above the conversion price.
The company expects net proceeds from the exercise to be as much as $1.98 billion, if an over-allotment option is exercised.
Lucid has the option to use the funds for expanding manufacturing capabilities, improving retail operations and service network, investing in research and development, and supporting other potential growth opportunities.
Bondholders can convert their notes before September 15, 2026 under specified conditions, Lucid said. The notes will also be redeemable at Lucid's discretion at any time.