Investors in Lucid Motors (NASDAQ:LCID) have been in for a rough ride over the past two years. Like many early-stage EV manufacturers, Lucid saw an incredible post-pandemic boom, followed by a 2022 selloff. This year, investors may have been looking for more of a rally in LCID stock, which is currently trading around flat for the year. Compared to many of its peers, that’s not impressive.
Much of this has to do with the company’s existing fundamentals and its previous production struggles. The company’s Q2 report, released earlier this week, pointed to strong growth and led to a stock price surge following the report. However, shares have given up some of those gains as investors price in the likelihood of profitable growth moving forward.
Some reports have indicated that Lucid is losing roughly $500,000 per vehicle it sells. For a car company that’s selling its EVs for more than $100,000 a pop, that’s not a great profit margin. It’s dismal.
Thus, short sellers have stepped up to the plate and picked up their short bets following this most recent surge. At the time of wiring, LCID stock has more than 20% of its float sold short, according to the limited data provided by Fintel. This has led to some calling for a potential short squeeze with Lucid.
Is LCID Stock Poised for a Short Squeeze?
There have been many high-profile short squeezes over the past two years, perhaps more than we’ve seen in many decades. Retail investors have caught the scent of beaten-down stocks with brands many retail investors can get behind and have coordinated buying activity to squeeze big-money short sellers out of positions in the past. For Lucid, a company with a $16 billion market capitalization, such a squeeze is possible. But it would take a massive coordinated effort and media campaign to get enough buyers on board to make this happen.
Lucid’s recent capital infusion, and the potential for further dilutive equity offerings, complicates matters. If retail investors swallow up the existing float and the company keeps issuing new shares, it’s difficult to create a squeeze-like environment. Thus, we’ll have to see if Lucid can get closer to breakeven on its production numbers in the third and fourth quarters. Right now, betting on a short squeeze materializing looks unlikely.
That said, anything is possible, and it is feasible that some sort of string of positive headlines released by the company could spur a wave of buying activity, forcing shorts to close their positions and resulting in a price surge higher. I guess that’s what makes markets. Indeed, this will be a fun stock to watch from here.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
