Lucid Group stock has crashed amid bankruptcy fears: Is it safe to buy the dip?

Lucid Group stock is attempting to rebound today, July 15, after plunging more than 40% in the previous session. LCID rose by about 2% in premarket trading to $4.73, recovering modestly from its lowest level of the week.

Lucid Group stock rises after denying it’s going bankrupt or private

LCID stock crawled back after a report by an electric vehicle blog said that it had hired restructuring advisors. It added that the company was considering either going private or filing for bankruptcy protections. In a separate report, Bloomberg said that it had hired AlixPartners, a popular restructuring specialist.

In a statement, Lucid denied these allegations and maintained that it had adequate liquidity to carry out its operations well into next year. The statement added that:

“The company has sufficient liquidity to carry its operations well into next year, as recently published in its last quarterly filings, and it has not formed any special Board committee to explore the scenarios reported today.”

Instead, the company plans to use AlixPartners for advice on execution, strengthening its operations, and positioning itself to realize the full potential. The statement added that:

“AlixPartners is assisting us in that and nothing else and has not recommended bankruptcy to management or the Board.”

Lucid Group’s business remains in trouble

Still, despite the assurance, the company’s business remains under pressure, with profitability remaining elusive. The most recent results showed that its loss from operations soared to over $989 million in Q1 from $691 million in the same period last year. 

Its net loss soared to over $1.02 billion from $366 million in Q1’25. This surge happened as its operational costs, including research and development, selling, general and administrative (SG&A) costs, jumped. 

Lucid has never made a profit, and analysts expect that its path to profitability remains elusive. Its total loss last year was over $2.7 billion and is burning about $1 billion a quarter. 

Analysts do not expect the company to become profitable over the next few years. According to Yahoo Finance estimates, it is projected to post a loss of $7.97 per share this year, an improvement from the $10.00 per share loss reported last year. 

Losses are expected to narrow further to $4.75 per share next year, signaling progress toward profitability despite the company remaining in the red.

Lucid ended the last quarter with $700 million in cash and cash equivalents and $1.46 billion worth of inventories. As a result, with the company burning at least $1 billion a quarter, it will need to raise additional capital. 

Lucid has always raised cash from Saudi Arabia’s PIF, which owns a 45.38% stake in the company. It has also raised cash through equity issuances, which has pushed its outstanding shares to 390 million from 164 million in 2021. 

This dilution will likely continue as it continues to boost its balance sheet and turnaround efforts. These efforts have included layoffs, and AlixPartners has recommended more measures, including slowing its European expansion and accelerating its relationship with Uber. Uber holds a 3.51% stake in the company.

What next for LCID stock?

Looking ahead, Lucid Group's stock is likely to remain highly volatile. Historically, sharp sell-offs are often followed by dip-buying as investors look to capitalize on the decline. 

However, these initial rebounds can sometimes turn out to be a dead-cat bounce—a temporary recovery in the price of a stock that is otherwise in a sustained downtrend.

The alternative scenario is where the stock continues falling as investors dump the stock as bankruptcy fears rise.