Lucid Group stock has been in a strong freefall this year as the company’s future remains uncertain. It has dropped by 67% this year and by 82% in the last twelve months, with its market capitalization falling to $1.36 billion. While this sell-off may continue, the rising short interest means that it may experience a short squeeze.
Lucid Group’s short interest is rising
Lucid Group, a Saudi Arabia-backed company, has come under intense pressure this year. And at some point, there were rumors that it was considering either filing for bankruptcy or go private. In its response, the management said that it had enough liquidity to fund operations into next year. Also, it insisted that AlixPartners, its restructuring consultant, was helping it improve its operations.
At the same time, there are signs that Saudi Arabia, its main backer, is in trouble as attacks from Houthi have escalated. Houthis have attacked several important oil targets and barred tankers from the country from passing through the Bab el-Mandeb Strait. The attacks have been so intense that the kingdom decided to cancel an important investment conference.
Saudi Arabia has also suffered major setbacks. Its LIV Golf investment has failed, while The Line, the futuristic city in the desert has been scaled down. As such, investors worry that the kingdom may decide to give up on Lucid, a loss-making venture.
These factors have contributed to the rising short interest, a sign that many investors expect the stock to continue falling. Its short interest has risen to 23%, the most of any American electric vehicle company. While the rising short interest is big risk, it may also expose the company to a short squeeze.
Lucid Group’s revenue is growing, but losses are key
Lucid Group is facing major challenges. The most important one is that, while its revenue is growing, losses remain substantially high. Its last earnings report showed that its revenue rose to over $405 million in the second quarter from $259 million in the same period last year. Its half-year revenue rose to $687 million from $494 million last year.
Most of this revenue was from related parties. At the same time, the company continues to lose substantial sums of money. Its net loss in the last quarter stood at $1.03 billion, much higher than the $536 million it lost in Q2’25.
These numbers mean that the company will continue losing money in the foreseeable future. And considering that the management expects its cash to run out next year, it means that it will need to raise cash. The challenge is that Saudi Arabia may not be interested in investing in it because of its financial position. As a result, the company may decide to raise cash by selling shares.
Lucid Group stock price technical analysis
LCID stock chart | Source: TradingView
The daily chart shows that the LCID stock price has been in a strong sell-off for a long time, a move that has turned it into a fallen angel. Most recently, it dropped from a high of $8.50 on July 28 to the current $3.38.
The stock has remained below the key support level of $4.46, its lowest level in June this year. It has also dropped below all moving averages. As such, the path of the least resistance for the stock is downwards, with the next target being at $2.50.
The risk for shorting the stock, however, is that it may go through a short squeeze that may push it to as high as $5.
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