Lucid's Reverse Split Disaster: A Stock in Free Fall

Lucid’s shares are plummeting yet again Thursday, down 7.5% as of 1:55 p.m. ET, while major indexes like the S&P 500 and Nasdaq Composite both gained 0.5%. This marks the third consecutive day of losses for the struggling EV manufacturer following its reverse stock split implementation.

I’ve watched this disaster unfold with a mixture of fascination and horror. The 10-for-1 reverse split that took effect Tuesday has been nothing short of catastrophic for shareholders. In theory, this financial maneuver shouldn’t affect the overall value of anyone’s investment - you simply own fewer shares at a higher price. But in practice? The stock has tanked nearly 20% since the split.

Management claims they executed this split to make shares more attractive to institutional investors who prefer higher-priced stocks. But let’s be real - this reeks of desperation. While Lucid wasn’t technically at risk of delisting (shares weren’t below the $1 threshold), the market clearly interprets reverse splits as distress signals. And rightly so.

The painful truth is that Lucid appears to be circling the drain. Despite producing what many consider superior EV technology, they’ve failed to achieve meaningful market penetration or approach profitability. Their vehicles remain prohibitively expensive while production numbers disappoint quarter after quarter.

Some might see this 20% drop as a buying opportunity. I couldn’t disagree more. This looks like a falling knife that could slice off many more fingers before finding bottom. The company faces existential challenges in scaling production, controlling costs, and competing against established players with deeper pockets.

I’d stay far away from Lucid stock. Their execution problems run deep, and this reverse split feels like rearranging deck chairs on the Titanic. Sometimes a discounted price simply reflects a company’s deteriorating fundamentals - not a bargain.

The stock advisor team at The Motley Fool evidently agrees, as Lucid didn’t make their list of top recommendations. Their track record speaks volumes - early Netflix investors could have turned $1,000 into over $661,000, while Nvidia believers might be sitting on over $1 million from the same initial investment.

When a company resorts to financial engineering rather than fixing its core business, that’s usually when I head for the exits.