Short Lucid Group Stock (LCID) In February, Here’s Why…

The last two years have seriously outlined the reality of EV speculation. Slippery SPAC mergers have revealed fraud allegations, retail traders have overhyped public trading debut’s, and still, Tesla dominates EV market share. The Chinese market has proved a critical landscape for sales as the country continues its decarbonization journey one step ahead of the U.S, and EV charging companies are slowly depreciating as demand isn’t quite where it needs to be. 

All in all, it’s been an exciting time for the emerging market, but I can’t help wondering how far down the line will we see profitability from the fresh faces on the scene. After all, it should take a little more than ambitious projections to win the bids of investors; especially when the company has next to no data to prove it.

Lucid Group – a promising EV manufacturer that does have potential, but in my opinion, not in the short term. Running through some overall technicals, Lucid is still up 168% since its merger in 2020, after reaching prominent heights late last year the stock has continued to drop; now sitting 35% down since the start of the year. 

So not a great start to 2022, and there are numerous reasons for this. Unfortunately for the company, due to a hawkish monetary policy, investors are rotating out of high-growth tech stocks amidst rising interest rates and inflationary worries – spurring a wide sell-off across the board. 

We would love to see this as nothing but a temporary hurdle; but with the fed expected to increase rates multiple times throughout the year, uncertainty is wreaking havoc in the markets with sentiment wavering on a bearish outlook. 

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Yet this certainly isn’t the key reason you should be looking to short Lucid. We haven’t really seen much fundamental change in Lucid’s pragmatism; just rose-tinted projections met with hollow deadlines. The Lucid Air, which was expected to reach the market in Spring 2021, still hasn’t gone further than, well… anywhere really. Sure, reservations are apparently increasing, but the company still has nothing to show for itself apart from consistent delays, as well as cutting back 2021’’s delivery targets from 6,000 to a mere 520. 

A further red flag late last year, Lucid issued a convertible note offering in a $1.75B debt financing agreement. This is by no means shocking when it comes to new company’s, and although it can result in stock dilution further down the line, generally isn’t a problem. In the case of Lucid, stock dropped 10% following the agreement, alluding to the fact that investors were clearly worried about the company’s financial stability amidst its bold projections with little actual backing.

The only place where Lucid seems to be gaining fundamental traction is the Middle East. January 19th marked the lockup expiration for Lucid; meaning shareholders are able to sell off unwanted stock. Whilst this normally provokes a sharp downside in the market, Lucid stock is being held up by The Saudi Public Investment Fund, which holds a 62.7% stake in Lucid and held its stake following the lockup expiration. It seems that Lucid does hold a strong position in Saudi’s transformation efforts; with Lucid in advanced talks to establish manufacturing units. 

Once again, projections, expectations, and rumors have been the sole catalyst for Lucid’s sustainability, but I’m not convinced this will last long, unless we see actual production targets being met, and unless Lucid has the capability to deliver on their well-polished outlook. Although the financial outlook is an important crux of an investment decision; when it comes to Lucid Group, that is all they seem to have. Further market headwinds could increase with the looming conflict in Ukraine, but that isn’t for certain. 

Lucid Group has the potential to capitalize on a portion of market share should they start meeting their targets and continue to impress in the Middle East. In the meantime, however, based on the company’s position, financial stability, and other market headwinds, I can’t see Lucid stock finding much support, especially in the next month or so.