Lucid Motors Proposes a 1-for-10 Reverse Split: Should Investors Be Worried?

Globe and Mail

a day ago

Key Points
Exploring how the proposed reverse stock split may impact Lucid stock.
Details on a potential game-changing development that sent the stock surging higher.
Whether investors can buy the news, or if they should stick to the sidelines instead.
10 stocks we like better than Lucid Group ›
Stock splits often generate headlines, and investors typically cheer them.
However, Lucid Group (NASDAQ: LCID) recently announced that it proposed a 1-for-10 reverse stock split. Unlike a regular stock split, many investors see a reverse stock split as bad news because they typically occur when a stock has lost a significant portion of its value. Lucid fits that description; shares are down over 94% from their all-time high. But Lucid also announced a potential game changer the same day as the reverse stock split, which sent the stock soaring.
Should investors worry about the stock and the company's future?
What the reverse stock split means for investors
Lucid's proposal is for a 1-for-10 reverse stock split. If approved, the reverse split would consolidate every 10 shares into one. So, Lucid's share price, currently $3, would be $30 following the reverse split, but there would be 10% as many shares as before. The bottom line here is that the stock's market capitalization and financial valuation remain unchanged.
Stock splits don't mean as much for investors as you'd think, considering all the attention they receive. Usually, the reason for the stock split matters more than the split itself, especially for reverse stock splits.
In Lucid's case, the reverse split will help the stock remain compliant with the Nasdaq stock exchange 's minimum share price listing requirements. Additionally, a higher share price may improve the stock's appeal to individual and institutional investors.
The scoop on Lucid Group's brand-new partnership
Lucid also dropped some major news. It announced a massive partnership with Uber Technologies and Nuro. The venture will have Lucid supply vehicles equipped with Nuro's autonomous driving technology to Uber for use in an autonomous robotaxi program.
The deal involves the purchase of 20,000 vehicles over six years. Uber is also making "multi-hundred-million dollar investments" in Lucid Group and Nuro. The joint venture signals Uber's urgency to counter emerging autonomous competition from Alphabet 's Waymo and Tesla 's Cybercab.
For Lucid, it provides a much-needed sales boost. The company's electric vehicle (EV) technology has garnered awards, but Lucid still sells far fewer vehicles than needed to sustain its factories and is operating at significant net and cash losses.
Should investors worry about Lucid Group?
By itself, the reverse stock split shouldn't worry investors. It's the stock's ongoing challenges that should. Share prices rarely experience such severe declines without reason.
Lucid has continuously raised funds by issuing new stock. The resulting share dilution has a significant impact on the stock's performance. Uber's investment gives the company a financial incentive to help Lucid succeed, but it's likely going to dilute existing shareholders further.
The 20,000 vehicles may also not be enough to get Lucid over the hump. That's approximately 3,333 vehicles annually, or 833 each quarter. It's a nice boost, but it's also unlikely to solve Lucid's volume problems single-handedly.
Lucid delivered 3,109 units in the first quarter of 2025, generating $235 million in revenue, but reported a $366 million net loss and a $589 million cash-flow loss. It will still take a home run with its upcoming Lucid Earth, a more affordable SUV than its newly launched Gravity, to generate the volume it needs to operate profitably.
Investors would probably be wise to remain cautious, at the very least, until Lucid grows its sales volume to the point where its financial losses become small enough to sustain its business operations without requiring additional fundraising.
Until then, Lucid's business and stock could remain under pressure, even with its exciting new partnership.
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