Short Sellers Continue to Target EV Maker Lucid Group

Short interest data can help investors manage risk. Short sellers tend to do their research. If they’re shorting a stock, there’s usually a good reason they are doing so.

In this report, we are going to analyze the short interest data on Lucid Group (LCID:US). Founded in 2007, Lucid is an automotive company that manufactures high-spec, premium electric vehicles (EVs). The company is listed on the Nasdaq and currently has a market cap of approximately $14.48 billion.

Lucid Short Interest Data

We last covered Lucid in early January. At the time, we noted that short interest was very high at around 39%.

Since then, the stock has moved higher. In January, it surged from $7 to $13 on the back of speculation over a buyout by its largest backer, Saudi Arabia's Public Investment Fund. 

What’s interesting, however, is that the short sellers have not backed away from the stock.

Currently, 240.50 million Lucid shares are on loan, which represents about 37.58% of the free float. Utilization – a measure of demand from short sellers – is 100% while the cost to borrow stock is 13.46%. 

This tells us that short sellers are still very active here. Clearly, they believe the stock is set to fall.

What’s Behind the Short Interest?

As for why the short sellers are targeting Lucid right now, there are several issues they could be focused on.

One is lower demand from consumers. With car finance interest rates now significantly higher than they were in the recent past, demand for new vehicles is weakening. Price cuts from Tesla and the emergence of new, cheaper EVs will not be helping Lucid here. It’s worth noting that in February, Lucid reported a slump in its reservations and said that it would not disclose the number of reservations going forward.

Operational challenges are another issue the short sellers could be focused on. Across the automotive industry, many companies are still experiencing supply chain issues. This is impacting production and delivery numbers. In February, Lucid provided 2023 production guidance of 10,000 to 14,000 vehicles – well below the consensus forecast of 21,815 vehicles.

Of course, it could simply be a valuation issue. A market cap of $14.5 billion is quite high given that the EV company is only expected to generate revenue of $1.3 billion this year and not expected to make a profit until 2027.

Whatever it is the short sellers are focused on here, we think caution is warranted towards the stock. In our view, the high level of short interest is a red flag.