Lucid Group Comeback Makes Short Sellers Lose Millions Of Dollars

Lucid Group

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

Newark, California-based electric vehicle manufacturer Lucid Group, Inc's battle against investors who have bet against its share price on the stock market continues to fluctuate. Lucid's share price took a sharp downward turn last month when factors including the expiration of a share selling lockup period expired. This resulted in the short-sellers significantly extending their gains despite having taken losses earlier on. Now, after an upward rally that kicked off this month, the company's short-sellers have lost some of these gains by the close of trading on Monday, reveals fresh data.

Lucid Group Short Sellers Lost 13% Of Their Gains As Share Price Jumped Earlier This Month

According to fresh data shared by S3 Partners, LLC, year-to-date gains for Lucid Group's short sellers stood at $263 million shortly before the close of trading on Monday. This reveals that a price increase that ended yesterday saw the bearish investors reverse roughly 13% of the gains in a little less than two weeks since these gains had stood at a high of $302 million by midday on the 3rd of this month. Lucid's shares opened at $17.79 this month and closed at $20.06 on Monday, for 11% price growth.

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Additionally, it also appears as if after extending their gains by the start of this month, some of the short-sellers decided to call it quits. S3's data shows that over the course of the last week, Lucid Group's short interest shares dropped by 377,000 to stand at a total of 43.7 million shares sold short. This reveals an interesting fact, hinting that perhaps the short sellers were content with their gains made during August and were eager to avoid an upward price run that kicked off earlier this month.

This is because 'shortly' after midday on the 3rd, the short interest shares stood at 46.4 million, and if, as S3 suggests, they dropped by 377,000 last week, then in the week before that, the short sellers reduced their bets by millions of shares.

Price and short interest data for Lucid Motors (NASDAQ: LCID) for the period starting from August and ending in mid-September. Image: S3 Partners, LLC

Data that listed down the short interest shares by the 3rd of this month had shown that the amount stood at 46.4 million just as September kicked off. This implies that more than two million short interest shares have been removed from the market since then. However, this amount is significantly higher than the data shared by S3 that we have mentioned above.

The reduction in the shorted shares has also significantly brought down the borrow fees for them. Short sellers generally borrow a company's shares, in this case, Lucid Group's shares, and then sell them on the market. Once the share price drops, they repurchase a larger number of the shares through the amount generated through their sale and keep the excess amount after returning the borrowed stock.

This borrowing comes with a fee, which stood at a high of 17.8% at the start of this month. This in itself was a significant drop from the 33% fee by the end of August. The fee has now dropped to a low 3.32%, indicating that the market for borrowing shares for short selling has become more liquid than before. As an added highlight, the fee stood at an eye-popping 74.3% during trading on the 27th of August.

Lucid Group is in a race with time to gear up its electric vehicle production and start deliveries.  The company's Lucid Air is expected to have a longer driving range over its competitors, but it will also come at a higher price point, which will target the luxury segment of the market. The company is one of the handful of electric vehicle manufacturers in the United States who have entered the market following increased government and consumer interest in the sector.

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