Why Lucid Stock Nearly Doubled Today

By Lou Whiteman – Jan 27, 2023 at 3:17PM

KEY POINTS

Lucid is down big over the last year, but a rumor surfaced Friday that the company’s largest shareholder is preparing to take it private.
A bid by the Saudi investment fund would make sense, but investors need to be careful when trading based on speculation.
10 stocks we like better than Lucid Group

A market rumor has fired up shareholders — and sent short-sellers scrambling.

What happened

Shares of Lucid Group (LCID 43.00%) are soaring today, rising as high as 97% following rumors that the luxury EV maker could be taken private by Saudi Arabia’s public wealth fund. As of 2:38 p.m. ET, the stock had settled to a 37% gain.

So what

Lucid’s stock has fallen on hard times lately. The shares lost more than 80% of their value in 2022 on concerns about a slowing auto market and the company’s need for cash as it ramps up production.

It seems at least one longtime believer hasn’t given up, though. Shares of Lucid jumped higher due to a story from market blog Betaville that said, according to unnamed contacts, that Saudi Arabia’s Public Investment Fund (PIF) is preparing a bid to take Lucid private.

The PIF already owns more than 60% of Lucid, but according to Betaville, it is in talks with banks for financing to acquire the shares it doesn’t already own.

Neither the company nor the fund offered any comment, and it is impossible to say for sure whether the rumor is correct — and if it is, what price the PIF might be willing to pay. But the rumor is creating understandable enthusiasm among Lucid investors, and is also ample reason for those who are short the stock to close their positions. About one-quarter of Lucid’s shares are currently sold short.

NASDAQ: LCID

Lucid Group

Today’s Change

(43.00%) $3.87

Current Price

$12.87

LCID S&P

KEY DATA POINTS

Market Cap

$24B

Day’s Range

$8.91 – $17.80

52wk Range

$6.09 – $30.85

Volume

208,145,220

Avg Vol

35,186,247

Gross Margin

-213.72%

Dividend Yield

N/A

Now what

Investors need to be careful trading on market rumors, and it probably wouldn’t be smart to chase this rally and buy in now. Even if the Saudis are serious, a potential deal could still fall through, and we have no idea what price they might be willing to pay.

There is a certain logic to the rumor. The Saudis have been very supportive of Lucid, participating in a fundraising round last November to help the company continue its production ramp. And the PIF has a history of dalliances with electric vehicle makers: Elon Musk claims it was interest from the PIF that caused him to tweet that he had “funding secured” to take Tesla private in 2018.

If you’ve only bought in recently and are now looking at a big gain on your investment, it could be tempting to sell instead of waiting to see how it plays out. But for most Lucid investors, the best thing to do is sit tight and see where this goes.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

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