Lucid Group Stock Plummets: Here’s What’s Dragging It Down Today

Another rough day for Lucid bulls as shares take a nosedive—welcome to the EV rollercoaster.

Why the selloff?

No sugarcoating it: the market’s shredding Lucid’s valuation like a bear tearing into weak hands. Short sellers? Macro fears? Or just another case of 'growth stocks getting punched in a rate-hike environment'?

The big picture

EV stocks aren’t for the faint-hearted—just ask the bagholders of 2021 SPAC hype. Lucid’s latest drop fits the script: high cash burn meets impatient Wall Street expectations. Meanwhile, Tesla keeps eating everyone’s lunch.

Cynical take: Maybe the market finally noticed that 'luxury EV maker' is code for 'burning money to sell six-figure cars to rich climate activists.'

Lucid wants to raise its share price

Lucid filed the statement showing that it will seek shareholder approval for a 1-for-10 reverse stock split. This WOULD mean that after the split is executed, Lucid shareholders would own a tenth of the shares they owned prior to the split, but each share would be worth 10 times as much. To be clear, this does not change the overall value of investors' positions.

The MOVE is often used by companies in danger of delisting -- theand the NYSE require a minimum share price of $1. Though Lucid's stock isn't in near-term danger of this, its low-single-digit share price means that many institutional investors that have set rules around minimum stock prices won't consider owning Lucid stock as it stands.

The reverse split could make the stock more attractive to a larger set of investors. However, a reverse split carries a lot of negative connotations, and news of the SEC filing led to today's drop in share price.

Image source: Getty Images.

Challenges remain

It's a critical time for the company, which recently launched a new vehicle, the Gravity SUV. The EV has been selling well compared to Lucid's sedan, but the numbers haven't been transformative. Lucid needs a major boost in sales if it ever hopes to approach profitability -- the low production volume means each vehicle is proportionally more expensive to make. Investors with a high risk tolerance may want to consider Lucid as a turnaround option, but for most, I would avoid the stock.