Why Lucid Spiked Nearly 100% In One Day

Key Points

• Lucid Group shares shot up nearly 100% in a single session on rumors of a takeover. 
• Saudi Arabia's Public Investment Fund may be buying the company. 
• This is good news for EV stocks across the board. 

Shares of Lucid Group (NASDAQ: LCID) rocketed up by almost 100% in one day on speculation it would be taken over. The rumor centers on Saudi Arabia’s Public Investment Fund, which owns more than 60% of the company. According to reports, the fund is working with a major bank, possibly JPMorgan, on a deal for the cash.

This is on top of growing speculation the fund, which has been very supportive of its investments in the past, would take on a more substantial role, and it looks like that is a real possibility. The stock was halted numerous times due to the sharp spike in volatility which is the only thing we can be certain of.

Whether or not the rumor is true, this stock is due for some volatility, and other EV start-ups like Rivian (NASDAQ: RIVN) and Mullen Automotive (NASDAQ: MULN) are already getting caught up in action. 

Lucid, A Short-Squeeze Is On 

The EV market, and the start-up EV market, in particular, has been in the crosshairs of the bears and short-sellers for many quarters. The amount of cash it takes to get an EV to market, the hurdles to production and the mounting competition from industry leaders like Tesla have the scales tilted against their success and the short sellers selling en masse.

The short interest in Lucid Motors was running over 25% ahead of this latest rumor and sparked a massive surge in volume. Mind you that is the official short interest because Fintel.io is listing the off-exchange short interest at over 55%. The takeaway here is that Lucid motors are set up for a short squeeze, and others like it, and all it takes is the right news to set it off. 

Mullen Automotive is also running a high short interest. Its official figure is nearly 12% which is far less than Lucid, and Lucid is producing cars. However, the off-exchange short interest in Mullen, which includes dark pool activity and high-frequency trading volume, is running closer to 50%, and there are potential catalysts here as well.

Mullen just approved several shareholder measures that should help it raise capital in the near term and get its production and share price above $1 before the NASDAQ deadline in March.

While sales of shares will dilute shareholder value, the capital raised will help start production while investors wait for the first revenue from I-Go sales to come in from Europe. 

The Analysts Sentiment Was Slipping …. 

The analysts are rating Lucid at a firm Hold with a price target that is still more than 30% above its price action (with prices near $12). However, the sentiment had been slipping, so there could be a change in the winds and this rumor to drive the stock. With production on the rise, the company could see the analyst's sentiment bottom and shift toward the upside.

Citigroup is among the more bullish analysts and recently reiterated its buy rating. Their analyst Itay Michaeli says they “like the company’s technology and product positioning in the EV race, (the) key focus areas now include the continued production ramp of the Air, upcoming reservation/demand updates, the company’s go-forward pricing strategy, 2023 gross margin outlook and Gravity launch milestones.”

The Technical Outlook: Lucid Rocks Higher, Gains Capped 

Shares of Lucid rocketed higher on the rumor but the gains were capped and trimmed in the wake. The price action is now consolidating near a key resistance target and may remain at this level until more news emerges. If Saudi Arabia’s Public Investment Fund does make an offer, it could be off to the races once more. If not, expect to see the short interest get even larger.