Short selling data can be a very effective risk management tool. If short sellers are targeting 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 a manufacturer of high-spec, premium electric vehicles (EVs). Founded in 2007, it produced its first EVs in 2021. The company is listed on the NASDAQ Global Select Market and currently has a market capitalization of $32.14 billion.
Lucid Group Inc: Short Selling Data
Looking at the short selling data on Lucid Group, we see two major red flags.
The first is that short interest is sky-high. At present, 207.3 million Lucid shares are on loan, which represents approximately 37.03% of the free float. This tells us that there are plenty of Lucid bears out there.
The second red flag is that the number of shares on loan has risen dramatically recently. When we last covered Lucid, in December 2021, there were 55.1 million shares on loan. However, since then, the figure has risen by around 280%. Meanwhile, the utilization rate and the cost to borrow have also surged over this period. This tells us that interest from short sellers has increased significantly.
Why Are Short Sellers Targeting Lucid Now?
As for why institutions are shorting Lucid now, it’s mostly likely down to supply chain issues and the possibility that the group may not be able to meet its production targets.
Earlier this month, Lucid CEO Peter Rawlinson said he was concerned about chip supplies from China due to the recent Covid-19 lockdowns. "My biggest concern probably is semiconductors from China and the impact of Covid in that part of the world," he said at a conference.
Meanwhile, many EV makers are struggling to source lithium for their batteries at the moment. Right now, demand is far greater than supply and this has pushed prices up to what Tesla CEO Elon Musk has described as “insane levels.”
Of course, the short sellers are most likely also looking at the valuation here. At present, Lucid is expected to generate revenue of just $1.3 billion for 2022. This means that at the current market cap of $32.14 billion, the forward-looking price-to-sales ratio is 22.6. That’s very high, especially in the current environment, where unprofitable companies such as Lucid are very much out of favor.
Whatever it is the short sellers are focused on here, we think caution is warranted towards the stock. The high level of short interest suggests that many sophisticated investors see downside risk.