Lucid Group’s (LCID.O) shares rose 43% on Friday, reducing gains after doubling on market speculation that Saudi Arabia’s Public Investment Fund (PIF) planned to acquire the electric vehicle maker.
The speculation arose from an “uncooked” alert ascribed to deals website Betaville, using its term for market gossip. Lucid was the third top mover on the Nasdaq mid-afternoon and the sixth-most traded stock on U.S. exchanges.
Saudi PIF, the sovereign wealth fund that holds more than a 65% stake in Newark, California-based Lucid, did not immediately reply to a request for comment. Lucid would not comment.
In 2018, PIF was interested in acquiring Tesla, but the deal did not take place. Tesla chief Elon Musk is under trial for allegedly misdirecting investors with his tweet “funding secured” for taking the company private.
Lucid has been struggling to produce its sleek Air luxury EVs after delivering 4,369 vehicles in 2022. With Tesla’s price cuts, money-losing U.S. startups like Lucid and Rivian Automotive Inc (RIVN.O) will find it hard to capture share in an industry competing for contracting consumer wallets.
Lucid’s short interest as a percentage of its total float is about 37% compared with only 3.5% for Tesla. Still, in dollar amounts, Lucid’s short interest amounts to $1.6 billion, compared with $15.01 billion of Musk’s car maker.
Short sellers suffered a mark-to-market loss of $685 million with Lucid’s shares spike on Friday, analytics firm S3 Partners added. Losses, however, only happen if short sellers close out their positions.
“With Lucid short sellers’ mark-to-market losses climbing, we should expect short covering to begin in earnest after today’s short-side blood bath,” said Ihor Dusaniwsky, managing director of S3, adding it has become a popular trading position.
One long-short fund manager who had no prior exposure to Lucid said it decided to short it as this person thinks the spike was only based on rumors.