May 29, 2022

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Why Lucid Stock Dropped 5.5% Today

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What happened

Rumors that Apple (NASDAQ:AAPL) might hire electric car start-up Lucid Group (NASDAQ:LCID) to build it an Apple-branded electric car sparked a rally in Lucid stock Friday. But you may recall that I warned you that this rumor seemed unsound, that Lucid stock would not in fact “skyrocket to new highs,” as the author suggested — and that in fact Lucid’s “stock price bump will not last long.”

Surprise, surprise. As of noon Tuesday, Lucid stock is down 5.5%, having given back all of Friday’s gains and more.

Big red arrow going down over a stock chart.

Image source: Getty Images.

So what

Why is Lucid tumbling today? My strong suspicion is that it’s because of an article that appeared on automotive news site TorqueNews.com — the same site that reported the original Apple-Lucid rumor — over the weekend. In that second article, Torque admitted that its first article had been “very speculative.” (The original article contained no mention that it was speculative — “very” or otherwise). There was really no basis for thinking Apple was in the process of hiring Lucid, and, by extension, no particular reason to expect Lucid stock to “skyrocket,” either.

The second article also mentioned something that is more fact than speculation: that tomorrow, Jan. 19, “approximately 1.2 Billion shares of Lucid Motors are about to unlock” and become available for sale to the public.

Now what

Torque says that this tidal wave of Lucid shares could cause the stock to become “very volatile” — another fact that wasn’t mentioned in the original article — before speculating further that adding new shares to Lucid’s float might actually create a “short squeeze.”

Suffice it to say that this rumor, too, seems to have no basis in fact. To the contrary, making hundreds of millions of Lucid shares available to trade tomorrow seems more likely to dilute demand for the stock and push the stock price down. And as a matter of fact, that’s the direction that Lucid stock is heading in today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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