Short Selling

Short Selling Report: Lucid Group Inc (LCID:US)

A silver-colored car, product of Lucid Group Inc, is travelling down on a road.
Lucid Group Inc
(LCID:US)
12 months:
N/A
Activity:
Bullish
Pattern:
Rising short interest
News:
Strong Q3 results
Lucid Group Inc
(LCID:US)
12 months:
N/A
Activity:
Bullish
Pattern:
Rising short interest
News:
Strong Q3 results

Short selling data can help active investors manage risk. Short sellers tend to be very smart, high-conviction traders. If they’re shorting a stock, there’s usually a good reason they’re doing so.

In this report, we are going to examine the short selling data on Lucid Group Inc (LCID:US). Lucid is an American electric vehicle (EV) manufacturer that specializes in premium EVs. Its flagship model, the Lucid Air, is a high-spec EV that looks set to go head-to-head with Tesla’s Model S Plaid. The company is listed on the NASDAQ Global Select Market and currently has a market capitalization of $77.8 billion.

Lucid Group Inc: Short Selling Data

Looking at the short selling data on Lucid, we can see that at present, 55.1 million shares on loan. This is not too concerning, in our view, as Lucid’s free float is around 1,585.2 million shares. So, short interest is only about 3.5%, which is relatively low. There are many other EV stocks that have a much higher level of short interest. Fisker, for example, currently has short interest of around 34.0%. Lordstown Motors, meanwhile, has short interest of around 34.6%.

Having said that, there is one small red flag here and that is that short interest has risen significantly since the start of November. Back on November 1, the number of shares on loan was 40.3 million. However, since then, the number of shares on loan has risen to 55.1 million, which represents an increase of 37%. That is quite a substantial increase.

Over this period, we have also seen a substantial increase in the number of daily transactions on the short side. Our data shows that on November 1, 336 short selling transactions were registered. However, on December 3, there were 446 short selling transactions. That represents an increase of 33%.

This chart illustrates several short-selling metrics including price, utilizing rate, borrowing cost and units.

This sharp rise in short selling activity is a bit concerning, in our view. Research shows that when stocks see a sudden increase in short interest, they often go on to underperform in the near term.

Share Price Rise

As for why Lucid has seen an increase in short selling activity recently, we can see two obvious reasons.

The first is the recent share price rise. Back in mid-October, Lucid shares were changing hands for $24. However, in November, they rose as high as $58. This share price rise pushed the market cap up to a very high level. At the end of November, Lucid’s market cap was $87 billion – which seems excessive given that the company has only just begun delivering its vehicles. It’s worth noting that Morgan Stanley analyst Adam Jonas still has a $12 price target for the stock.

The second is that the company recently received a subpoena from the US Securities and Exchange Commission (SEC) in relation to its SPAC merger with Churchill Capital Corp. "The investigation appears to concern the business combination between the Company and Atieva Inc and certain projections and statements," the company said in a regulatory filing. This subpoena adds some uncertainty to the investment case.

Whatever the short sellers are focusing on, we think a little bit of caution is warranted here. While the short interest figure doesn’t look so concerning, the sharp rise in short interest is a red flag.

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