The electric vehicle (EV) maker Lucid Group (LCID 5.20%) recently executed a 1-for-10 reverse stock split, which will artificially increase its share price and decrease its outstanding share count while keeping the company's market cap unchanged.
Stock splits are typically conducted for a specific reason and usually after a big move for a stock. Prior to the reverse split, shares of Lucid were down over 31% this year. Is this the catalyst the EV maker has been waiting for to get the stock back on track?
Trying to appeal to more shareholders
In a 1-for-10 reverse stock split, investors exchange every 10 shares they own in a company for one, bringing down the number of shares they own and raising a company's stock price.
Specifically, Lucid's outstanding shares fell from over 3.07 billion to 307.3 million. As of this writing, the stock price has changed from just over $2 per share to about $17.
Image source: Getty Images.
Management said it believes the reverse split "will allow the Company's common stock to be more attractive to a broader range of investors and other market participants." Other EV stocks like Tesla and Rivian trade at much higher share prices.
It's been a difficult year for the EV industry, as President Donald Trump's spending bill eliminated the $7,500 federal EV tax credit after Sept. 30. In the second quarter of the year, Lucid beat Wall Street estimates on adjusted earnings per share, but came up short on revenue, reporting only $259 million compared to $280 million in the same quarter one year ago. Lucid also lowered its guidance from producing 20,000 vehicles this year to a range of 18,000 to 20,000.
"I have never seen so many surprises within a year as this year," interim CEO Marc Winterhoff told CNBC. "So, all of those plans are still set up for where we were before, but we just want to be a little bit more cautious and, therefore, provide a range."
NASDAQ: LCID
Key Data Points
The company recently struck a partnership with Uber, in which the ride-hailing giant will invest $300 million in Lucid while the EV maker will build robotaxis for Uber, as part of the company's push to deploy 20,000 robotaxis on its platform over the next six years.
Through the first six months of 2025, Lucid has seen its expenses jump. While operating income has improved significantly, the company is still generating sizable losses.
Not a real catalyst
Reverse stock splits are frequently viewed unfavorably by investors because they can signal that management doesn't necessarily think it can drive the stock higher on its own. And Lucid is expensive. Through the first half of 2025, the company grew revenue by over 32% from the same period last year but has a market cap of over $57 billion. So the stock trades at a huge multiple, even on a price-to-sales basis.
The EV landscape doesn't look like it will get more favorable anytime soon, as the Trump administration appears to have no interest in bolstering green energy. Meanwhile, consumers are losing incentive to buy EVs with the tax credit going away and the Trump administration's decision to halt the buildout of more EV charging stations, which experts see as crucial to making EVs more ubiquitous. Tesla CEO Elon Musk acknowledged on his most recent earnings call that there could be a few tough quarters ahead.
Given all of this and Lucid's expensive valuation, I doubt the reverse split will serve as a catalyst, and I would avoid the stock at these multiples.
