Troubled electric vehicle (EV) maker Lucid Group (LCID 3.25%) has not had a good 2025 so far. Its share price is down about 31% year-to-date, with much of that drop occurring after news came out it filed for a 1-for-10 reverse stock split in mid-July.
Since the split on Sept. 2, though, the company's shares have actually risen about 17% (and 28% from the low hit on Sept. 3). That's not how stocks tend to perform after a reverse split. Could Lucid's stock buck the trend and keep gaining? Would it be worth the risk to pick up shares now?
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As predicted
Research shows that the "normal" trajectory of a stock undergoing a reverse split is almost always the same: First, there's a big drop between when the split is first announced and the day of the reverse split, as worried investors dump their shares. On the day of the reverse split (or the first trading day after it occurs), the share price usually experiences a sharp drop, followed by several months of slow and steady share price declines.
From the time Lucid's reverse split was announced through the first trading day afterward, it followed this script to a tee. After filing its paperwork for the reverse split with the SEC on July 17, shares slid 36.5% through Aug. 29, the last trading day prior to the reverse split. On Sept. 2, the first day the post-split price was in effect, shares plunged an additional 10.8%, due in large part to a sharp increase in short interest. Shares sank a further 7.6% over the following two days.
That's exactly what the research predicted would happen, but then things got a little weird.
How things got wild
By Sept. 3, the dust should have settled on the reverse split, but oddly, trading volume in LCID shares was only increasing.
As the stock was hitting its all-time split-adjusted low point of $16.16 on Sept. 3, short interest was rising. Over the next few days, short interest skyrocketed to about 80% of outstanding shares on heavy trading. Surges in short interest usually put downward pressure on a stock, but Lucid's share price rose sharply instead, indicating heavy non-short buying as well.
On Sept. 10, with Lucid's stock price up 20% from its low, the shorts threw in the towel. Short interest plunged back to about 12.8% of outstanding shares and the stock price stabilized at between $19/share and $20/share, where it's remained since.
Blip or trend
The post-reverse-split rise in Lucid's shares looks more like a one-time anomaly than an indicator of sustainable growth.
The company's 28% rise in share price wasn't supported by any game-changing news from the company. True, on Sept. 4, Lucid did announce the closing of a $300 million investment from Uber Technologies as well as a new "brand story" featuring Academy Award-nominated actor Timothée Chalamet, but both of these developments had already been announced in July, so neither was new news for investors.
Whether this was a coordinated "short squeeze" or not, it certainly played out like one: a heavily shorted stock's share prices went up, which forced out some short interest. Once those shorts were out, the share price went up further. However, without some positive signs from the business, Lucid's shares are likely to return to the historical pattern of a long, slow post-reverse-split decline. Uber's $300 million cash infusion isn't going to be the game-changer Lucid needs, given that Lucid reported more than $1 billion in negative free cash flow in its most recent quarter alone.
Despite the recent jump in price, investors would still be wise to avoid the stock.
