Lucid could possibly be splitting its inventory quickly — however in reverse. Why?
Shares of Lucid Group (LCID -7.35%) are falling on Tuesday, down 8.8% as of two:08 p.m. ET. The drop comes because the S&P 500 (^GSPC -0.20%) and Nasdaq Composite (^IXIC -0.14%) have been each down barely.
Lucid filed a proxy assertion with the Securities and Trade Fee (SEC) to provoke a reverse inventory cut up.
Lucid desires to lift its share value
Lucid filed the assertion exhibiting that it’ll search shareholder approval for a 1-for-10 reverse inventory cut up. This could imply that after the cut up is executed, Lucid shareholders would personal a tenth of the shares they owned previous to the cut up, however every share could be value 10 occasions as a lot. To be clear, this doesn’t change the general worth of traders’ positions.
The transfer is commonly utilized by firms in peril of delisting — the Nasdaq and the NYSE require a minimal share value of $1. Although Lucid’s inventory is not in near-term hazard of this, its low-single-digit share value signifies that many institutional traders which have set guidelines round minimal inventory costs will not contemplate proudly owning Lucid inventory because it stands.
The reverse cut up might make the inventory extra enticing to a bigger set of traders. Nevertheless, a reverse cut up carries a whole lot of damaging connotations, and information of the SEC submitting led to as we speak’s drop in share value.
Picture supply: Getty Pictures.
Challenges stay
It is a crucial time for the corporate, which not too long ago launched a brand new car, the Gravity SUV. The EV has been promoting effectively in comparison with Lucid’s sedan, however the numbers have not been transformative. Lucid wants a significant increase in gross sales if it ever hopes to method profitability — the low manufacturing quantity means every car is proportionally dearer to make. Buyers with a excessive threat tolerance might wish to contemplate Lucid as a turnaround choice, however for many, I’d keep away from the inventory.
