PIF makes billions on its investment in Lucid Motors

DUBAI: The Public Investment Fund, Saudi Arabia’s premier investing institution, has seen a multi-billion dollar increase in the value of its investment in Lucid Motors, the fast-growing Californian electric vehicle manufacturer, as a result of recent transactions.

PIF put $1 billion into Lucid in 2018, giving it a majority stake in the California-based company when it was at the early stages of designing advanced luxury electric cars. With the first model, the Air, unveiled and set for first delivery this year, that stake is now worth a lot more.

In a complex financial transaction recently unveiled in the US, Lucid will merge with a special purpose acquisition company, or SPAC — a company specifically designed to get an initial public offering (IPO) and a valuation on a stock market.

The SPAC involved with Lucid is Churchill Capital Corp IV, a creation of investment banker Michael Klein, who is well known for his investment advisory work in the Kingdom, including the record-breaking IPO of Saudi Aramco in 2019.

The SPAC deal gives Lucid a formal valuation of $24bn, and the PIF remains the majority investor in the new set-up.

The PIF declined to give a detailed breakdown of the value of its investment, but the documents published in the SPAC transaction show it at around $15bn – and will possibly be worth a lot more once vehicles start being sold.

Shares in Churchill gyrated wildly in the days before the deal with Lucid was formally announced but settled well above the value at which PIF and other big investors bought into the company.

The influential Lex column of the Financial Times said: “The biggest winner is Lucid’s largest current shareholder, Saudi Arabia’s PIF.”

Peter Rawlinson, the chief executive of Lucid who formerly worked at rival electric car company Tesla, told journalists: “I think that the valuation is a reflection of our technology.”

Electric vehicles have been one of the big investment themes of the past year, with Tesla — the market leader — soaring to a market capitalization of $670bn, bigger than all the traditional car manufacturers combined and making its founder, Elon Musk, one of the richest men in the world.

Rawlinson is unfazed by Tesla’s size or reputation. Last year, in the run up to the launch of the Air, he told Arab News: “We’ve got the best car in the world, but I’m more excited to know that we have technology that can cascade down to more affordable models for the man in the street. That’s what is going to change the world.”

For the PIF, the investment in Lucid is a demonstration of the value of its approach of taking strategic stakes in foreign companies. Last year, it spent $10bn buying US and European equities when they slumped in value after the pandemic crash, which it later sold when markets recovered.

There could also be an industrial benefit from the PIF-Lucid relationship. There has been increasing speculation that Rawlinson will choose Saudi Arabia as the first location for a manufacturing facility, with a site near Jeddah mentioned as a possible production plant.

Rawlinson said of PIF: “They put their faith in us, that’s why we’re here today thriving.”

The deal with Churchill will give Lucid the capital it needs to go into full-scale production of the Air from a new production facility in Arizona, and to move plans forward for an electric SUV.