Lucid Is Doing a 1-for-10 Reverse Stock Split. What That Means for Shares.

A Lucid Air Pure. The company is on track to sell about 17,000 cars this year and generate $1.3 billion in sales. (Courtesy Lucid)

Lucid wants a higher stock price. A rare reverse stock split will make it happen.

Late Thursday, the electric-vehicle start-up said it “will proceed” with a one-for-10 reverse stock split. Shares will trade at the new price on Sept. 2.

The stock closed at $2.09 on Thursday, flat on the day.

Shares traded as low as $1.98 early Friday until Federal Reserve Chair Jerome Powell’s Jackson Hole speech gave the market a boost. They traded into the green after that, but closed at $2.03, down 2.9%. The S&P 500 and Dow Jones Industrial Average rose 1.5% and 1.9%, respectively.

Traders sometimes see reverse stock splits as a sign that a share price will fall further, just as they see traditional stock splits as a source of upside.

Traditional stock splits are supposed to signal to investors that management sees additional gains in the future. That might be true, but splits are pretty standard for most businesses. Microsoft has split shares nine times, the first coming in 1987.

There are outliers such as Berkshire Hathaway Class A shares, which trade just north of $733,000 each. But in general, investors don’t like giant stock prices. The average share price for an S&P 500 stock is about $227.

Lucid isn’t in the S&P 500. The one-for-10 split won’t get shares near the $227 mark.

As for how shares will trade, the reverse split doesn’t reveal much about the company’s outlook. Things have been tough for Lucid investors for a while. Shares closed at a record $58.05 in February 2021, according to Nasdaq.

Wall Street was much more optimistic about EV start-ups at that time. Back then, analysts projected 2025 sales of roughly $15 billion from sales of roughly 100,000 EVs, according to FactSet. Lucid is on track to sell about 17,000 cars this year and generate $1.3 billion in sales.

It has simply been harder to sell EVs than Wall Street envisioned. Currently, EVs account for roughly 7% to 8% of new-car sales in the U.S. That is about half the amount in Europe and about one-quarter the level in China.

Lucid and all other EV makers have also had to deal with more competition. In 2021, nine EV models sold more than 10,000 vehicles in the U.S. In 2024, there were more than 30 with that kind of sales volume.

All that has made investors less positive. Through Thursday trading, Lucid shares were down 31% year to date and off 42% over the past 12 months.

Write to Al Root at allen.root@dowjones.com