The slump in the value of electric carmaker Lucid caused a 16% q-o-q fall in the value of the Public Investment Fund’s (PIF) US equity portfolio to US$30.9 billion, but Global SWF’s estimates indicate a rapid turn in fortunes in the past six weeks with the reversal of Q4 losses.
Global SWF forecast in December that, if the Saudi fund maintained its positions in the market, the decline in Lucid’s stock value would lead to a 17.7% fall in the portfolio’s value to US$30.3 billion – some modest adjustments in stockholdings and an uptick in the prices of some counters at the end of 2022 ensured the decline was not quite as brutal, but still an eye-watering loss.
The value of PIF’s stake in Lucid nearly halved to US$7.57 billion at end-December from end-September, despite the fund’s purchase of a stake of approximately 5.6% in Q3. Over the course of 2022, Lucid’s stock price fell by around 84%, a worse performance than its bigger rival Tesla which fell around 70%.
In terms of changes in its positions in Q4, PIF cut its shareholding in online luxury shopping retailer Farfetch by 36.5% leading to a US$14.7 million fall in value, but increased its position in games developer Activision Blizzard leading to a US$86.7 million rise in the holding.
Compared to end-2021, Lucid’s free-fall contributed to a US$25 billion overall loss in PIF’s US public equities holdings – the equivalent of just under 4% of its total AUM. Yet, the Saudi fund’s wider portfolio gained in value. If Lucid was excluded, the portfolio increased by US$6.2 billion or 36% over the year, assisted by both increased allocations and positive returns on positions.
The losses sustained in Q4 have already been reversed with the portfolio’s value estimated to have risen by more than 22% to approximately US$38 billion, based on the assumption of no changes in its shareholdings from end-2022 and on stock prices at today's close of trading. Again, the carmaker was pivotal to the portfolio’s performance, growing 74% in value to US$13.2 billion – although it is still barely more than half the value reported at end-Q3 2021, the first quarter Lucid was traded on the NYSE.
The recovery in Lucid’s price is driven by rumors that the Saudi fund is set to take electric vehicle maker private by buying a 34.5% stake, following a troubled year for PIF’s investment in Lucid. If Lucid was taken private today, PIF’s total US public equities portfolio would total US$25.1 billion – 57% higher than end-June 2021, before Lucid’s IPO.
PIF began its involvement in Lucid in 2018 when it invested US$1 billion in the Tesla rival. In February 2021, PIF, BlackRock and others invested another US$2.5 billion in Lucid as part of its merger with special purpose acquisition company Churchill Capital Corporation IV.
In 2022, Lucid built a total of 7,180 vehicles at its only plant in Arizona. Lucid Group already has ambitions in Saudi Arabia with plans launched last February to produce EVs with a targeted production capacity of 150,000 cars per year, initially using knocked-down kits manufactured in the US. The government plans to order up to 100,000 EVs from Lucid of a 10-year period. Production could start as early as this year, albeit at a fraction of its target.
The development of EVs is part of Saudi Arabia’s Vision 2030, which aims for 30% of vehicle sales to be electric by the end of the decade, supported by locally manufactured cars. PIF also aims to reach net zero by 2060 and is deploying various efforts in the development of renewable energy and sustainable communities. The automotive industry is one of the main targets for carbon emissions reductions, but also it sees the sector as an opportunity for economic diversification with plans to export over 150,000 EVs in 2026 and by 2030. By bringing Lucid back into its full ownership, PIF could better align the carmaker with its vision.