LCID - Stock Split Is a Red Flag Warning ?

JC888
08-28

Previously.

On 12 Aug 2025, I shared a post on $Lucid Group Inc(LCID)$ where its Q2 2025 earnings were shared and more importantly, its prospect going into H2 2025 and Q3 2025.

Click here ! for the details in the original post.

Everything seems to be going swell for this ‘forgotten’ luxury EV maker.

Even its ad for the soon-to-be launched the Gravity mid-range SUV has been hitting online as planned.

Everything except an item that I have inserted last minute into my post. (see below)

It was reported on 10 Aug 2025, that a “1-for-10” reverse-stock split has been filed by LCID.

Shareholders would be voting on 18 Aug 2025 to either abandon the motion or proceed with the reverse stock split action.

18 Aug 2025 came and went.

Latest Update.

On Thu, 21 Aug 2025, LCID confirmed the split via a PRNewswire press release and news distribution.

Answering a user’s question (on “X”) about why the reverse split is good, LCID’s Head of communications, Nick Twork:

  • Referenced what CFO Taoufiq Boussaid mentioned during Q2 2025 earnings conference.

  • The reverse stock split is not a cosmetic action.

  • It is a deliberate and targeted measure to ensure LCID’s equity remains accessible to a broader universe of long-only institutional investors.

  • Lastly, the move also matched LCID’s share price with company’s growth plans as it prepares to expand operations and increase investors’ engagement.

Just for the record, interim CEO Marc Winterhoff had defended the reverse split:

  • Denying that it was due to delisting fears.

  • Confirming the measure was designed to strengthen LCID’s market position.

The company first announced plans for the reverse split on 17 Jul 2025, minutes before unveiling a robotaxi deal with $Uber(UBER)$ and self-driving startup Nuro.

According to a regulatory filing, on 18 Aug 2025, LCID shareholders overwhelmingly approved the split with nearly 98.5% of votes cast in favour.

When & When.

The reverse stock split will take effect on Fri, 29 Aug 2025, after US market has closed for the week.

On 02 Sep 2025, when market reopens for trading, LCID shares will begin trading based on the split-adjusted basis.

My viewpoints: (mine only)

Based on my limited knowledge and experience, this is what I think personally will happen.

Historically and academically, reverse stock splits often result in a temporary boost to the stock price (in proportion to the split) but tend to show a downward drift in price over time, after the split exercise.

Market reaction to LCID’s announced reverse split has been mixed and somewhat skeptical, reflecting concerns about the company's unresolved financial challenges and production issues.

LCID stock price has declined about -31.35% YTD, amid these concerns. (see above)

Why LCID Might Fall After Exercise.

Below are key points why LCID might decline following the reverse split exercise:

  • LCID’s stock price was trading around $2.08-$2.15 before the split.

  • Post-split the nominal price will be about 10x higher compared to pre-split.

  • However, LCID’s market cap remains unchanged, so the valuation does not improve inherently.

  • Reverse splits are often perceived by investors as a warning signal or a liquidity crisis sign, that can prompt selling pressure initially.

  • Academic research indicates that stock prices tend to adjust to split announcements well before the effective date and generally exhibit a downward drift after a reverse stock split.

  • LCID is facing pressure from (a) lowered production forecasts and (b) expiry of EV tax incentives in September 2025, may dampen investor confidence and increase downward price risk post-split.

  • Technical and analyst forecasts for LCID remain mixed, with short-term buy signals but overall bearish sentiment and volatility heightened.

Case Study - $Globalstar(GSAT)$

Globalstar Inc has undergone a similar 1-for-15 voluntary reverse stock split in February 2025.

When US market closed on 10 Feb 2025, GSAT’s closing price was $2.34 per share.

On 11 Feb 2025, when trading resumed, GSAT stock price rose marginally.

However, overtime it trended downwards and remained ‘depressed’ until July 2025 when its Q2 2025 earnings were the catalyst that helped GSAT’s turnaround.

This is my first-hand account.

If history repeats itself, then there is no rush to buy into LCID now but watch closely, wait patiently until LCID proves that it can succeed in its operations and finances.

Remember to check out my other posts. (See below). Help to Repost ok, Thanks.

Must Read: Click on below titles to access. Repost to share, Like as encouragement ok. Thanks.

  • Do you think LCID will be a good buy in the future ’?

  • Do you think reverse stock split is necessary vs forward stock split that is, so that a stock becomes ‘affordable’ for smaller investors to buy ?

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