Morning Commentary: Lucid convertible notes in focus following $3 billion stock offering

By Abigail W. Adams

Portland, Me., June 1 – It was a quiet morning in the convertibles secondary space on Thursday as investors digested the anticipated passage of the U.S. debt-limit deal and returned focus to rates and recession.

Equity indexes were wavering between gains and losses shortly after the opening bell but powered higher as the session progressed with the Dow Jones industrial average up 28 points, or 0.08%, the S&P 500 index up 0.41%, the Nasdaq Composite index up 0.48% and the Russell 2000 index up 0.62% shortly before 11 a.m. ET.

There was $53 million in reported convertibles trading volume about one hour into the session with one name accounting for nearly one-half of the activity in the space.

Lucid Group Inc.’s 1.25% convertible notes due 2026 were the name of the day on Thursday with the convertible notes falling outright as stock sank double digits on the heels of a massive follow-on offering.

The 1.25% convertible notes fell 1.125 points outright with stock off about 15%.

The notes were changing hands at 55.375 in heavy volume.

Despite a massive premium, the notes move on a heavy hedge of 80%, a source said.

There was $18 million on the tape.

Lucid’s stock was trading at $6.58, a decrease of 15.27%, shortly before 11 a.m. ET.

The EV startup’s stock plunged after the company announced a $3 billion follow-on offering and private placement of common stock.

Lucid is offering 173,544,348 common shares in a follow-on offering, in addition to a private placement of 265,693,703 shares with Saudi Arabia’s Public Investment Fund affiliate Ayar Third Investment Corp., according to a 424B5 filing with the Securities and Exchange Commission.

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