by Lucid firmly denies bankruptcy rumors and sues the publication
Lucid has categorically denied speculation about a possible bankruptcy, even sending a cease-and-desist letter to the publication that claimed the automaker was considering Chapter 11 creditor protection or a buyout deal. The company’s reaction was extremely harsh for an issue it says has no basis, escalating within days from a public denial to lawsuits and regulatory filings.
It all started earlier this week when media outlet @EV_carba (Electric-Vehicles.com) reported that, based on unnamed sources, it had learned of Lucid’s talks with consultants from AlixPartners. According to the publication, the consultants allegedly recommended the company restructure in the US and Europe, and focus on producing the Gravity crossover. This could have signaled a bankruptcy filing or a privatization triggered by the stock’s decline and pressure from Saudi investors.
The CEO’s response
Lucid quickly responded to the report. On LinkedIn, CEO Silvio Napoli called the reports “fake,” though he did not deny that the EV maker works with external advisors to improve the situation.
“Lucid is not considering bankruptcy or a company privatization deal. These reports are fake. The Board of Directors has not considered any of these scenarios. Period. As stated in our latest quarterly report, Lucid has sufficient liquidity to fund its operations into next year.”
“We work with external advisors to improve operational efficiency and execute our plans. They are not advising Lucid on privatization or bankruptcy, and any suggestion that they have recommended either of these options to management or the board of directors is false.”
Screenshots of the cease-and-desist letter Lucid sent to the electric-vehicles website that published the report have appeared online. The letter stated that “publishing inaccurate factual statements about a public company is an extremely serious matter,” as it “undermines investor confidence, creates unnecessary uncertainty, and can materially distort the company’s market valuation.”
Shares plunged sharply, then recovered
Lucid also directly blamed the report for causing the selloff of its shares, noting that the price fell from $5.51 to $2.37, causing “serious harm to many investors.” The stock lost more than half its value at its intraday lows on Tuesday and was halted several times for volatility, before the denial reduced the losses, leaving the decline at about 16% at the close.
However, the recovery was swift. According to The Motley Fool, on Wednesday, the stock soared 28.8% and closed at $5.95, slightly above the price before the report’s publication, on trading volume of 55.6 million shares, roughly 169% above the three-month average. The recovery continued into a second day: on Thursday, shares rose another 12% to $6.69, returning above the 50-day moving average for the first time since the rumors emerged.
Regardless of where the truth lies, it is clear that things are not going very well for Lucid. In June, the company announced it was laying off 18% of its US employees, just four months after a separate round of cuts that reduced its local workforce by 12%.
It is worth noting that Lucid’s aggressive reaction to the rumors highlights the market’s high sensitivity to any negative signals surrounding EV manufacturers. Despite the denial, the very fact of the layoffs and the collaboration with crisis consultants indicates that the company is in a difficult financial position, typical of many players in the electric vehicle market trying to achieve profitability amid fierce competition and declining demand.
