Jan 27 (Reuters) – Shares of Lucid Group (LCID.O) jumped 43% on Friday, trimming gains after doubling down on market speculation that Saudi Arabia’s Public Investment Fund (PIF) wanted buy the electric vehicle manufacturer.
The speculation stemmed from an “uncooked” alert attributed to deals website Betaville, using its term for market gossip. Lucid was the sixth most traded stock on U.S. exchanges and the third top on the Nasdaq by mid-afternoon.
PIF, the sovereign wealth fund that owns more than 65% of Newark, Calif.-based Lucid, did not immediately respond to a request for comment. Lucid declined to comment.
In 2018, PIF wanted to privatize Tesla, but the deal did not materialize. Tesla chief Elon Musk is on trial for allegedly misleading investors with his ‘funding secured’ tweet for taking the company private.
Lucid is struggling to deliver its sleek Air luxury electric vehicles after delivering 4,369 vehicles last year.
With Tesla’s price cuts, money-losing U.S. startups like Rivian Automotive Inc (RIVN.O) and Lucid will struggle to take stake in an industry competing for dwindling consumer wallets.
Lucid’s short interest as a percentage of its total float is around 37% compared to just 3.5% for Tesla. Still, in dollars, Lucid’s short interest totals $1.6 billion, compared to $15.01 billion for Musk’s automaker.
Short sellers suffered a market-to-market loss of $685 million with Lucid shares peaking on Friday, analyst firm S3 Partners added. Losses, however, only materialize if short sellers close their positions.
“With the increasing market-to-market losses of Lucid’s short sellers, we should expect short hedging to begin in earnest after today’s bloodbath,” Ihor said. Dusaniwsky, managing director of S3, adding that it has become a popular negotiating position.
A long-short fund manager who had no previous exposure to Lucid said he decided to sell it because the person believes the spike was purely based on rumours.
Reporting by Carolina Mandl in New York, Chavi Mehta in Bengaluru and Hyun Joo Jin; Editing by Maju Samuel and Josie Kao
Our standards: The Thomson Reuters Trust Principles.