Should you buy lucid actions before its inverted stock fraction 1 per 10?

• Lucid implements a reverse stock division 1 for 10 on August 29.

• Research indicates that the course of action should fall more after the reverse division.

• The company may be worth planning after the reverse split.

• 10 actions that we love better than the lucid group ›

Electric vehicle manufacturer (EV) Lucid group (Nasdaq: Lcid) Make big titles again … but not nice investors like to see.

The manufacturer of Luxury Lucid Air Sedan and Lucid Gravity SUV implements an inverted division of 1 per 10, at empty at 5 p.m. Friday, August 29. The inverted divisions often mean a company in difficulty, and indeed, the course of the action has dropped by more than 30% since the company announced the reverse split on July 17.

But with the action which is now negotiating at its lowest levels of all time, could there be an advantage to buy before the inverted division?

Often, an inverted split is used to maintain the share of a company greater than at least 1 $ 1 that the Nasdaq stock market needs for registration, but it does not seem that Lucid’s shares are in immediate danger of lowering so low. Rather, the company says that it is trying to stay above the internal minimums fixed by certain institutional buyers.

The inverted division 1 per 10 of Lucid will not affect the total value of the participation of an investor. After the split, instead of having, say, 100 actions worth around $ 2 each (for a total value of around $ 200), a shareholder would have 10 actions worth around $ 20 each (for a total value of around $ 200). In theory, the company’s market capitalization – currently about $ 6.3 billion – will not change, unless there is a wave of purchase or sale immediately after the reverse split.

But a burst of sale can be exactly what will happen.

Research indicates that actions which undergo an inverted division are likely to undergo a drop in price, including a clear drop when the opposite fraction occurs, and another “drift down” during the following months.

This can be the result of the liquidation of unpaid sharing lots. Given that Lucid’s reverse split consists in negotiating an “new” action for 10 “old” shares “, investors who hold less than 10 shares will have these imposed shares automatically liquidated in exchange for liquidity. It is possible that this liquidation triggers a movement down in the course of action. Other research suggests that an increase in short -term sales as a result of the inverse split is to blame.

Whatever the cause, this is exactly what happened to Lucid’s electric vehicle company, CanoO. CanoO – which has since filed a record – carried out an inverted division of 1 for 20 of its shares on December 24, 2024. The course of action dropped by 7% on the day of the reverse split and derived more than 20% more down in the coming weeks.