Lucid Soars 14% — Was the Reverse Stock Split Just What the EV Maker Needed?

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A Split Decision

Stock splits often spark excitement in the market, which are seen as bullish signals. When a company’s stock splits, reducing the price per share, investors interpret it as management’s confidence in future growth, expecting the lower price to attract more buyers and drive momentum. 

Reverse stock splits, however, are a different beast. They are typically undertaken by companies in financial distress and the split consolidates the number of shares outstanding to boost the price, often to meet exchange listing requirements, like maintaining a price above $1. 

For luxury electric vehicle (EV) manufacturer Lucid Group (NASDAQ:LCID), the 1-for-10 reverse stock split executed on Sept. 2 lifted its share price from below $2 to a closing price of $17.66 per share. While the stock dipped 8% over the next two days, it surged 14% on Friday, closing the week 4% above its post-split adjusted price. Was this the catalyst Lucid needed to reignite growth, or is it a fleeting mirage?

Lucid’s Bumpy Road

Lucid has faced significant hurdles since its 2021 SPAC debut. The company has consistently missed ambitious delivery targets, projecting 20,000 vehicles in 2022, 49,000 in 2023, and 90,000 in 2024, but delivering only 4,369, 6,001, and 10,241, respectively. 

Its second-quarter earnings report last month underscored the EV maker’s ongoing struggles. Lucid reported a net loss of $739.3 million, better than the $768.3 million expected but worse than the $643.4 million loss a year ago. 

Its gross loss margin was a staggering 105%, driven by production bottlenecks and high fixed costs, exacerbated by a $54 million tariff impact. The company also cut its 2025 production guidance from 20,000 to 18,000 to 20,000 vehicles, signaling persistent operational inefficiencies. Leadership turmoil, including the February 2025 departure of CEO Peter Rawlinson, and a $3.1 billion net loss in 2024 — equating to $299,000 per vehicle sold — further cloud Lucid’s outlook.

Cosmetic Fix, Fundamental Flaws

A reverse stock split is a superficial maneuver that doesn’t address underlying issues. A study by NYU’s Stern School of Business found that companies undergoing reverse splits underperform their non-splitting peers by increasing margins for years afterward, as the split merely masks financial woes. 

While exceptions like Citigroup (NYSE:C), AIG (NYSE:AIG), and Priceline (rebranded as Booking.com (NASDAQ:BKNG)) have seen post-split success, most companies falter because the split doesn’t fix core problems. 

For Lucid, the reverse split was not driven by an immediate delisting threat, as its stock was above $1, but rather an attempt to attract institutional investors by lifting the price from penny-stock territory. However, with staggering gross loss margins, reliance on $1.67 billion from Saudi Arabia’s Public Investment Fund, and a market cap of $5.7 billion against Tesla’s (NASDAQ:TSLA) $1.13 trillion, Lucid’s challenges — production bottlenecks, high costs, and lack of profitability — remain unresolved. 

The company’s pivot to a more affordable SUV, potentially named “Earth” in 2026, is promising but unproven.

Key Takeaway

Investors cheered Cantor Fitzgerald analyst Andres Sheppard raising his price target on LCID stock to $20 from $3 per share post-split, implying 13% upside from the $17.66 adjusted price. However, this adjustment reflects an actual cut from what would have been an effective $30 pre-split target, indicating at best tempered optimism. 

The market’s 14% rally on Friday misinterpreted this as a bullish signal, but a 13% potential gain is modest for a high-beta stock like LCID, which has lost 55.48% over the past year. Sheppard’s neutral rating also aligns with broader analyst caution, with targets ranging from $10 to an old outlier of $70 per share but the consensus “Hold” reflects deep skepticism. 

Given Lucid’s unresolved operational and financial challenges, a reverse split alone won’t alter its trajectory. A more prudent stance than neutral would be to issue a more realistic sell rating, as the stock’s volatility and lack of a clear path to profitability outweigh any short-term enthusiasm.