Why Shares of Lucid Group Sank 22% This Week
Key Points
Lucid Group had a CEO transition this week.
The company is in a rough patch and could run out of money this year.
The stock looks very risky with major liquidity concerns and a failure to scale up its electric vehicle manufacturing.
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Shares of Lucid Group (NASDAQ: LCID) fell 22% this week, according to data from S&P Global Market Intelligence. An electric vehicle (EV) brand that once had a market cap of over $75 billion in late 2021, Lucid is now teetering on the brink after another poor quarter and an abrupt CEO transition this week. It is also trying to raise funds to stem the holes in its balance sheet.
Here's why the stock was falling this week, and whether investors should consider buying the dip.
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More cash burn and a CEO transition
The bad news just continues for Lucid Group. On June 1st, the company announced that Silvio Napoli, previously announced as the CEO on April 14th, had immediately taken the reins as the leader of the business. The tone of the announcement was a slight surprise, especially given the context around Lucid's business.
A luxury EV brand, Lucid has failed to gain traction worldwide, delivering just 3,000 vehicles last quarter. Over the last twelve months, its free cash flow was negative $4.6 billion. At the end of last quarter, it had just $700 million in cash on its balance sheet, meaning it is very close to running out of money.
Image source: Getty Images.
Should you buy the dip?
Management has raised $1 billion from Uber Technologies and the Saudi Arabian investment fund PIF. However, even with this cash infusion -- which is highly dilutive to shareholders -- the company is liable to run out of money before the end of this year. Avoid buying the dip on Lucid Group stock.
Should you buy stock in Lucid Group right now?
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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