Shares of electric vehicle maker Lucid Group (LCID.O) skyrocketed 43% on Friday, following rumors that Saudi Arabia's Public Investment Fund (PIF) was looking to acquire the company. The speculation, which originated from an unverified alert from deals website Betaville, caused Lucid to become the sixth-most traded stock on U.S. exchanges and the third top mover on the Nasdaq. The PIF, which already owns more than 65% of Lucid, did not comment on the rumors.
In 2018, the PIF expressed interest in taking Tesla private, however, the deal never came to fruition. Lucid has been facing challenges in delivering its luxury EVs, the Air, after only delivering 4,369 vehicles last year. The company is also facing competition from other money-losing U.S. startups such as Rivian Automotive Inc (RIVN.O) and is dealing with a shrinking consumer market due to Tesla's price cuts.
Lucid's short interest as a percentage of its total float is around 37%, compared to just 3.5% for Tesla. In dollar amounts, Lucid's short interest totals $1.6 billion, compared to $15.01 billion for Tesla. Due to the spike in shares, short sellers experienced a mark-to-market loss of $685 million. However, these losses will only materialize if short sellers close out their positions.
One long-short fund manager who had no previous exposure to Lucid said it decided to short it as this person believes the spike was solely based on rumors. Managing Director of S3, Ihor Dusaniwsky, commented on the situation saying “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,” adding that it has become a popular trading position.