Lucid denies bankruptcy talk after stock volatility

Lucid shares fell more than 40% at one point Tuesday and were halted multiple times for volatility after a report said the electric-vehicle maker was considering major strategic options. For retail investors, the key issue is whether this was a liquidity scare, a misunderstood advisory role, or both.

An EV-focused website called EV reported Tuesday that Lucid was weighing possibilities that could include going private or seeking Chapter 11 bankruptcy protection. Chapter 11 is a court-supervised process that lets a company keep operating while it reorganizes its debts. Going private would mean removing the company’s shares from public markets, usually through a buyout or similar transaction.

Lucid rejected the report. In a statement, the company said “the rumors are completely false.”

The company also said it has enough liquidity to keep running “well into next year,” citing its latest quarterly filings. Liquidity means the cash and available funding a company can use to pay bills, build products and cover operating losses.

What the report said

EV reported that Lucid had asked AlixPartners to review options and present findings to Lucid’s board before its next meeting. The site also said AlixPartners had urged the board to consider more restructuring in the U.S. and Europe and to put more focus on Lucid’s Gravity SUV.

AlixPartners told CNBC it had no comment on the report.

Lucid said it had not created a special board committee to study the scenarios described in the EV report. The company said AlixPartners is helping with execution and operations, and said the advisory firm has not recommended bankruptcy to management or the board.

“Our focus is on improving execution, strengthening operations, and positioning Lucid to realize the full potential of its technology, products, and innovation,” Lucid said in its statement.

Why investors reacted so strongly

Bankruptcy speculation can hit a stock fast because common shareholders usually sit near the end of the line in a restructuring. If a company goes through Chapter 11, lenders and other creditors often have priority over equity holders. A going-private transaction can also create uncertainty because public investors may not know the terms, timing or whether a deal will happen.

The sharp move also lands during a difficult period for Lucid and the broader EV market. CNBC reported that Lucid has been dealing with slower-than-expected EV adoption and regulatory changes under the Trump administration, including the removal of a $7,500 federal incentive for EV purchases.

Lucid, which is heavily backed by Saudi Arabia’s Public Investment Fund, said last month that it would lay off 18% of its U.S. workforce as part of a cost-cutting plan.

The company also missed Wall Street expectations for second-quarter deliveries earlier this month, CNBC reported. Around the same time, new CEO Silvio Napoli announced changes to Lucid’s leadership team, saying the goal was to simplify the company’s structure.

In May, Lucid suspended its production guidance after Napoli said he was reviewing the company’s business decisions and needed to reduce what he called “elevated inventory” of vehicles.

This story draws on original reporting from CNBC.