Lucid Soars 12% On ‘Suckers Rally’

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Shares of Lucid (Nasdaq:LCID) are soaring after hours on the news that Volkswagen will invest up to $5 billion in fellow EV maker Rivian (Nasdaq: RIVN)

Read more about Rivian's 50% surge here.

There is an argument that with major automakers like Ford (NYSE: F) , General Motors (NYSE: GM) , and Volkswagen themselves pulling back from EV production that the runway is now clear for upstarts like Lucid and Rivian to continue taking market share. In addition, these aging automakers may be eager for growth and may choose to redirect funds away from manufacturing their own EVs and towards investments like these in upstarts like Lucid.

But this is a suckers rally.

First, Lucid already recently secured another $1b lifeline from the Saudi Public Investment Fund so doesn't have any immediate funding concerns. But second and more importantly, they aren't selling enough vehicles today to suggest they'll be a major automaker in the future. We discussed a potential bankrupcty scenario for Lucid just yesterday, stating that:

Frankly, simply not enough to hit escape velocity. And their next forthcoming vehicle is an SUV, which faces very difficult competition from Tesla, Rivian, and others.

So this one seems like it’s destined for bankruptcy’s door, but they’ve got something in their back pocket, which is the Saudi public investment funds.

And this was the major investor in Lucid. They recently announced an additional billion dollar lifeline to them, which means that although this company has not yet hit a state velocity in terms of production and unit sales, financially they’re probably not going bankrupt because they have this large backer behind them who appears willing to continue bailing them out for the foreseeable future.

All of this is to say, Lucid shares seem to be rallying on the idea that they may get more funding, which they recently secured anyway, to extend what appears to be an inevitable demise. The company's flagship Air sedan has received positive reviews, but isn't selling anywhere near enough vehicles to hit escape velocity.

With only one vehicle the company is still a one trick (very nice, and very quick) pony. Lucid doesn't have and affordable, mass market vehicle anywhere on the horizon. Their vehicles are too expensive, and the tide is currently going out on EV demand broadly.

Don't buy the Lucid rally, it's for suckers.

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