Why Lucid Group Stock Sank This Week

Key Points

• Lucid stock fell as the company announced a 10-for-1 reverse stock split.

• Broader market headwinds, including fresh tariffs and weaker-than-expected job data, added to the pressure on Lucid shares.

• With ongoing losses and a steep climb to profitability, Lucid faces mounting operational and financial challenges.

• 10 stocks we like better than Lucid Group ›

Shares of Lucid Group (NASDAQ: LCID) are trading lower this week, down 17.1% as of 3:37 p.m. ET on Friday. The drop comes as the S&P 500 lost 2.4%, and the Nasdaq-100 lost 2.2%.

Lucid has announced plans to initiate a reverse stock split, a move often reserved for companies in danger of delisting from the Nasdaq or NYSE. Its stock is also taking a hit from today's larger macro news.

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Lucid wants to boost its stock price

Though it still needs to be approved by shareholders, Lucid announced earlier this week that it intends to initiate a 10-for-1 reverse stock split. While this won't directly affect the underlying value of investors' positions, it carries negative connotations.

A reverse stock split is most often used to keep a share price above the $1 minimum that the New York Stock Exchange and Nasdaq require. Lucid says that there is no danger of the stock falling under $1 and that this is in an attempt to make the stock more attractive to institutions, which sometimes have minimum prices for stocks they will buy.

Tariffs and weak job data spook markets

President Trump set new rates for his "reciprocal" tariffs on dozens of countries with a fresh executive order. This comes as the latest job data shows a slowdown in hiring, indicating the economic picture might be less rosy than hoped. The U.S. added just 73,000 jobs in July, well below the expected 100,000.

Image source: Getty Images.

Lucid has a long way to go

Lucid is at a critical juncture. It must grow sales and reduce costs significantly to show it can reach profitability, which it is still far from doing. I think too many hurdles lie in its way, and I would avoid Lucid stock.

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Johnny Rice 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.