For the better part of the last three years, the evolution of artificial intelligence (AI) has been the hottest stock market innovation. But AI isn't the only trend responsible for lifting the tide on Wall Street. Investor euphoria concerning stock splits in high-profile companies has also played a key role in sending the major stock indexes to new heights.
A stock split is a tool publicly traded companies have at their disposal to superficially adjust their share price and outstanding share count by the same factor. These changes are superficial in the sense that they don't alter a company's market cap or in any way impact its operating performance.
Though a stock split can move a public company's share price up or down, there's a wide gap in investor sentiment between the two types of splits.
Image source: Getty Images.
On one hand, investors tend to gravitate to businesses announcing and completing forward splits. Companies whose share price has climbed to a point where it needs to be reduced to make it more nominally affordable for everyday investors are usually firing on all cylinders from an operating standpoint and out-innovating their competition.
At the other end of the spectrum are reverse stock splits, which are typically frowned on by the investing community. This type of split is designed to increase a company's share price, often with the purpose of avoiding delisting from a major stock exchange.
Most reverse splits are undertaken by relatively unknown businesses -- but this isn't always the case. The most anticipated reverse stock split of 2025, electric-vehicle (EV) maker Lucid Group (LCID +6.30%), takes effect today (Sept. 2) before the opening bell, and there's little question it has the undivided attention of Wall Street.
Although rare, reverse stock split gems can be found
The reason reverse stock splits are typically avoided by investors has to do with the underlying operating performance of the companies undertaking them. Businesses with a declining share price are often struggling from an operating standpoint and losing money. But in rare instances, reverse stock-split stocks can be true gems.
Arguably the most-successful reverse split stock of all-time is online travel company Booking Holdings (BKNG 2.44%). Shortly after the dot-com bubble burst, Booking, which was then known as Priceline, was floundering. With its share price hovering dangerously close to $1, which is the minimum continued listing standard on the Nasdaq exchange, Booking undertook a 1-for-6 reverse split in June 2023. Since its split, shares of the company have rallied more than 22,000%!
NASDAQ: BKNG
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In September 2024, satellite-radio operator Sirius XM Holdings (SIRI 2.49%) completed a 1-for-10 reverse split. Sirius XM's split had little to do with worries about remaining listed on the Nasdaq. Rather, it was intended to increase the share price to get back on the radar of institutional investors who might be leery of buying shares of a sub-$5 company. Sirius XM remains one of America's few publicly traded legal monopolies.
There's promise that Lucid can join this elite group of prominent and profitable businesses to have conducted a reverse split.
On Aug. 21, the company announced plans to complete a 1-for-10 reverse split, which will consolidate north of 3 billion outstanding shares down to approximately 307.3 million. When complete, Lucid stock will increase from the $1.98 per share it closed at one Aug. 29 to $19.80 per share when trading commences on Sept. 2.
On paper, Lucid would appear to have a clear runway to become a premier luxury EV manufacturer. With Tesla focusing on mass-producing its more cost-friendly Model 3 sedan, rather than the luxury Model S, Lucid's Air sedan is being given the opportunity to step in as a leader in the luxury EV category.
Unfortunately, mounting headwinds have cratered Lucid stock, with shares down almost 97% since hitting their all-time high in early 2021.
Image source: Lucid Group.
A higher nominal share price won't fix what ails Lucid Group
Though a share price near $20 may encourage short-term institutional buying, a higher nominal stock price isn't going to fix some of the fundamental macro and company-specific issues plaguing Lucid.
Looking at the bigger picture, consumer enthusiasm has faded when it comes to EV ownership. The lack of widespread charging infrastructure, coupled with President Donald Trump's "Big, Beautiful Bill" doing away with automotive regulatory credits by the end of this month, have slowed demand for next-generation EVs.
These ongoing infrastructure challenges, coupled with supply chain issues (some of which originated from the COVID-19 pandemic), have led Lucid Group to lower or whiff on its production forecasts on a seemingly annual basis.
When Lucid became a public company, it estimated 90,000 units would be produced by 2024. But the company's forecast for 2024 dipped to just 9,000 EVs. For 2025, Lucid Group lowered its production outlook to between 18,000 and 20,000 EVs, which is down from a prior forecast of 20,000 vehicles. In other words, it's offered no indication that it can successfully scale its operations or meet its lofty production targets.
NASDAQ: LCID
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Lucid Group has also been hurt by its tardiness in bringing its second model, the Gravity SUV, to market. Initially slated to debut in 2024, deliveries of Gravity didn't commence until the latter half of April 2025. But with supply chain and quality control issues hampering Gravity, scaling production has proved challenging.
The other fairly obvious problem for Lucid is that it hasn't demonstrated its operating model is sustainable. To be fair, very few EV makers have been able to push to recurring profitability, with most legacy automakers also racking up multibillion-dollar losses of from their electric vehicle segments. But Lucid isn't particularly close to making money on its EVs -- and that's a big problem.
The silver lining for Lucid Group is it closed out June with more than $2.8 billion in combined cash, cash equivalents, and short-term investments, and has Saudi Arabia's Public Investment Fund as its largest financial backer. There are no immediate solvency issues here. Nevertheless, it lost over $1.5 billion through the first six months of 2025, has burned through $1.26 billion in cash from its operations in half a year, and has lost $13.8 billion since its inception.
A new chapter begins today for Lucid Group. The only question is: Will it be the company's final chapter, or the start of an amazing turnaround story?
