Aug 22, 2025

Stock's volatility, falling institutional base means sentiment to dictate short term movements. Luxury EV maker Lucid said Thursday evening it will carry out a 1-for-10 reverse stock split, effective September 2 in a move that will shrink its outstanding share count and elevate its per-share price. The reverse stock split will reduce Lucid's outstanding shares from 3.07 billion to 307.3 million, pushing the per-share price into an estimated $10 to $12 range from its recent level near $2.25. Lucid stock closed at $2.09 ahead of the announcement, flat on the day, even as the broader S&P 500 and Dow Jones Industrial Average both slipped. In after-hours trading, shares edged down by about 0.5%, reflecting investor scepticism, while during pre-market trading on Friday, the stock was down by more than 2.8%. Reverse stock splits are often viewed as red flags by traders, signalling concerns about share performance While traditional splits typically imply optimism about growth, reverse splits are more frequently used to maintain exchange listing requirements or attract institutional investors. Market reaction post announcement suggests caution Lucid's decision is part of a broader wave of structural adjustments across the EV and clean-tech sector. ChargePoint implemented a 1-for-20 reverse split in July with some initial investor support, helped by stable revenue trends. Mullen Automotive's 1-for-100 split in June, by contrast, was followed by a steep 32% decline. Lucid's post-announcement trading suggests a cautious market mood. Shares briefly climbed before pulling back, leaving them down 31% year-to-date and off 42% over the past 12 months. Institutional ownership of the stock has already fallen 12% this year, while retail investors may now face higher entry barriers that reduce trading liquidity. LCID's journey from lofty highs to mounting challenges Lucid shares once commanded a record high of $58.05 in early 2021, a valuation that gave the company market capitalisation comparable to industry incumbents despite limited production. That optimism has faded sharply. Lucid's market value now stands at about $7 billion, with shares down 96% from peak levels. Wall Street expectations have also shifted. Analysts in 2021 projected Lucid could achieve $15 billion in sales from 100,000 vehicles annually by 2025. Current forecasts suggest sales of about $1.3 billion this year on deliveries of roughly 17,000 vehicles. The gap reflects not only Lucid's operational struggles but also slower-than-expected EV adoption. Electric cars now make up just 7% to 8% of new US auto sales, roughly half Europe's level and far below China's. At the same time, competition has surged. In 2021, only nine EV models sold more than 10,000 units in the US; by 2024, that number exceeded 30. Structural moves cannot mask profitability risks Lucid has sought to counter its slowing momentum with headline partnerships, including a tie-up with Uber and access to Tesla's charging network. But investors have remained unmoved. The company's gross margin stood at negative 105.7% in the second quarter of 2025, underscoring how far it remains from profitability. Analysts at AInvest noted the reverse split could improve institutional access but cautioned that it does not resolve underlying financial and operational hurdles. “The move could improve institutional access, but it must be paired with operational milestones: hitting revised production targets, reducing cash burn, and monetizing the robotaxi partnership,” the firm said. “A key metric to watch is gross margin improvement—Lucid's -105.7% Q2 2025 margin is unsustainable. If the company can demonstrate progress in these areas, the reverse split may signal a genuine pivot.” they said. A high-stakes gamble for investors For value investors, the reverse split is an opportunity to reassess Lucid's long-term potential. If production targets are met and margins improve, the company could regain credibility. But for momentum traders, the stock's volatility and shrinking institutional base mean sentiment will likely dictate short-term movements. Sector dynamics also weigh heavily. Tesla continues to dominate global EV sales, while Rivian and other peers push aggressively into new market segments. Rising production costs across the industry add to the challenge. “Lucid's reverse stock split is a signal, not a solution,” AInvest concluded. “The market will judge its efficacy not in the mechanics of the split, but in the company's ability to deliver on its promises,” it said. 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