Reverse Split

[californiaboy935]

…but that’s not how math works. If you buy 100 shares at $10, or 1000 shares at $1, you’ve still spent $1000 total, and the number of shares you own is irrelevant, as you don’t actually care about “number of shares held” as the number that matters to you, but the actual realized or unrealized gains (or losses) in actual USD.

If you had 1000 shares pre-split, you’ll now own 100 shares at 10x the per-share cost. Your overall cost basis and gains/losses don’t change at all. The only thing that happens is you’re moving a decimal point in two places (canceling each other out).

I fail to see how this is bad for retail investors. The only way it could be is that the obvious reason for a reverse split is worries about delisting, which isn’t a good look. It makes the stock more attractive to other institutional investors, but I don’t see how it harms retail investors.

Educate me if I’m wrong or misunderstanding something please.

You are right.

 

[californiaboy935]

We're still quite a way away from delisting! Have faith.

I defer to the board’s recommendation. (Whom as board members have a duty to our/Lucid’s best interests)

The opportunity to have larger investors who have stock price minimums (for AUM) is enticing.

We need to raise capital, and this is a way to do that and make the offer enticing to these institutional investors.

 

[Babyrocko1908]

…but that’s not how math works. If you buy 100 shares at $10, or 1000 shares at $1, you’ve still spent $1000 total, and the number of shares you own is irrelevant, as you don’t actually care about “number of shares held” as the number that matters to you, but the actual realized or unrealized gains (or losses) in actual USD.

If you had 1000 shares pre-split, you’ll now own 100 shares at 10x the per-share cost. Your overall cost basis and gains/losses don’t change at all. The only thing that happens is you’re moving a decimal point in two places (canceling each other out).

I fail to see how this is bad for retail investors. The only way it could be is that the obvious reason for a reverse split is worries about delisting, which isn’t a good look. It makes the stock more attractive to other institutional investors, but I don’t see how it harms retail investors.

Educate me if I’m wrong or misunderstanding something please.

I never said one word about VALUE! I said the number of my shares or how many I want to continue to buy is reduced. That is my issue. What you are suggesting is that the value of my shares will remain once the split goes through. I never once debated that. What happens is when I continue to accumulate more shares it will cost more so if I buy 1,000 more at $2.25 now those same 1,000 will now cost me 10x more and I should be okay with that or just buy 100? I don't want 100, I want 1,000 like I've been buying.

Finally, there's an issue of my now reduced to 100 shares losing their value. Shareholders don't want to invest at $2.50 but now they'll invest when the shares are 10x more expensive?

 

[Babyrocko1908]

You are right.

Don't speak for me!

 

[Pragmatic]

Not sure why the number of shares is important.

 

[Babyrocko1908]

Not sure why the number of shares is important.

The number of shares is important for me and for me that's all that matters.

 

[borski]

The number of shares is important for me and for me that's all that matters.

That's... not all that matters. The only thing I can think of is a 'pride' thing? As in, 'I own thousands or millions of shares' or something like that? You're suggesting that the number of shares being lower somehow hurts retail investors, which is why your desire for a higher number of shares isn't actually 'all that matters,' as you'd need to provide some kind of evidence that this hurts retail investors, rather than just 'your feelings.' Your feelings are valid, but not 'all that matters' in this discussion.

I never said one word about VALUE! I said the number of my shares or how many I want to continue to buy is reduced. That is my issue. What you are suggesting is that the value of my shares will remain once the split goes through. I never once debated that. What happens is when I continue to accumulate more shares it will cost more so if I buy 1,000 more at $2.25 now those same 1,000 will now cost me 10x more and I should be okay with that or just buy 100? I don't want 100, I want 1,000 like I've been buying.

I understand what you're saying - but you are missing my one-word question - why? Why do you care about having 10x the number of shares? Yes, in this case you'd buy 100 shares, but have precisely the same value.

Otherwise, there are literally thousands of penny stocks you can go buy millions of shares in right now. But they'd still be worthless. Does that make sense?

Finally, there's an issue of my now reduced to 100 shares losing their value. Shareholders don't want to invest at $2.50 but now they'll invest when the shares are 10x more expensive?

All shares can lose value. Whether you have 100 losing value or 1000 shares losing 10% of the same value does not change your math at all.

Also, yes - institutional investors are generally very nervous about share prices in the low single digits because of the risk of delisting (even just due to a short squeeze), and thus that makes the stock less attractive to institutional investors. By raising the per-share price, it derisks the company a bit, since it's less likely to get delisted from the exchange.

 

[segbrk]

To be clear, this also doesn't change the infinitesimally small percentage of the company that you own. 1,000 shares out of 3,070,000,000 just becomes 100 out of 307,000,000. Still 0.00003%!

 

[Babyrocko1908]

That's... not all that matters. The only thing I can think of is a 'pride' thing? As in, 'I own thousands or millions of shares' or something like that? You're suggesting that the number of shares being lower somehow hurts retail investors, which is why your desire for a higher number of shares isn't actually 'all that matters,' as you'd need to provide some kind of evidence that this hurts retail investors, rather than just 'your feelings.' Your feelings are valid, but not 'all that matters' in this discussion.

I stand by what I wrote. It's important for ME, and for ME, that's all that matters! I'd rather have my 1,000 shares instead of 100.

I understand what you're saying - but you are missing my one-word question - why? Why do you care about having 10x the number of shares? Yes, in this case you'd buy 100 shares, but have precisely the same value.

Otherwise, there are literally thousands of penny stocks you can go buy millions of shares in right now. But they'd still be worthless. Does that make sense?

Hmm, I remember when I originally started investing in Dogecoin back in 2014-2015ish. My cash out was lucrative (because I kept accumulating when it was worth 100ths of of a penny) when it peaked at $0.682 cents. So yeah, I can see the benefit of accumulating the right penny stocks. Are you following me yet?

All shares can lose value. Whether you have 100 losing value or 1000 shares losing 10% of the same value does not change your math at all.

You keep referring to "value" I want accumulation of the number shares I own. And yes, retail investors are hurt because the amount of shares that I can continue to accumulate is diminished with this split because they will cost me 10x more. So basic math, 10 shares now cost $21.90, those same 10 shares will cost $211.90 after the split. Recall, I'm a retail investor.

Also, yes - institutional investors are generally very nervous about share prices in the low single digits because of the risk of delisting (even just due to a short squeeze), and thus that makes the stock less attractive to institutional investors. By raising the per-share price, it derisks the company a bit, since it's less likely to get delisted from the exchange.

Understood now and I understood this before. Which is why I understand Lucid's reasoning for doing it. Doesn't mean I have to like it and voted accordingly.

 

[Babyrocko1908]

To be clear, this also doesn't change the infinitesimally small percentage of the company that you own. 1,000 shares out of 3,070,000,000 just becomes 100 out of 307,000,000. Still 0.00003%!

No debate here.

 

[pjdcorp]

…but that’s not how math works. If you buy 100 shares at $10, or 1000 shares at $1, you’ve still spent $1000 total, and the number of shares you own is irrelevant, as you don’t actually care about “number of shares held” as the number that matters to you, but the actual realized or unrealized gains (or losses) in actual USD.

If you had 1000 shares pre-split, you’ll now own 100 shares at 10x the per-share cost. Your overall cost basis and gains/losses don’t change at all. The only thing that happens is you’re moving a decimal point in two places (canceling each other out).

I fail to see how this is bad for retail investors. The only way it could be is that the obvious reason for a reverse split is worries about delisting, which isn’t a good look. It makes the stock more attractive to other institutional investors, but I don’t see how it harms retail investors.

Educate me if I’m wrong or misunderstanding something please.

Agreed. The math really is pretty simple & the real issue is avoiding delisting.

 

[Babyrocko1908]

Agreed. The math really is pretty simple & the real issue is avoiding delisting.

Now here's a question that I do have because I don't know enough about this but could Lucid do something else other than reverse splitting to avoid a potential delisting?

 

[WildRide47]

The number of shares is important for me and for me that's all that matters.

Rationally, your argument makes no sense at all as the value is unchanged. Emotionally, the number of shares you own is apparently very important to you. Can't argue you with that

 

[NoseyReporter]

The real fear with an RS is continued dilution. Which in reality, lets be honest, is going to happen. They need to continue raising till mid size becomes successful. Which is going to include all sorts of costs for tooling and such.

I don't buy the minimum price required for institutional investors story. There are more than enough BIG institutional investors who have purchased LCID shares sub 5. The potential true narrative is the ability to raise capital at a higher share price, then dilute it down. Its a lot easier to execute an RS to $20, then dilute to whatever, vs try to raise capital and dilute at a share price of $2. Let's rephrase the minimum price required for intuitional investors. What they really mean is they can't keep dilution because eventually none the price will be driven so low that institutional investors won't touch the stock.

Frankly if Lucid had something in its pocket that it could have done to raise share price, they would have done it. It doesn't benefit them to have a low share price, because they still need to raise capital. They've run out of cards to play so its RS time.

Finally, I was probably the first to say it, and I'll continue to say it. The 20K target makes no freaking sense. This new revised 18-20K target, still makes no freaking sense. I'm calling it here, watch out for a RS, then in Q3 a downward revision of the target. If Lucid hit 15k for the year, I'd probably be satisfied.

 

[LucidfanAZ]

I’m with @Babyrocko1908. I had 1234 shares in one account in honor of Sapphires HP and I always thought “one day this amount will help me buy a Sapphire”. After split I’ll have 123…. I’m aware it makes no real difference, its just not as cool.

 

[SaratogaLefty]

I’m with @Babyrocko1908. I had 1234 shares in one account in honor of Sapphires HP and I always thought “one day this amount will help me buy a Sapphire”. After split I’ll have 123…. I’m aware it makes no real difference, its just not as cool.

I wouldn't say it doesn't make any difference. My fear is the "shorts" will go crazy after the split.

 

[tarator]

I’m with @Babyrocko1908. I had 1234 shares in one account in honor of Sapphires HP and I always thought “one day this amount will help me buy a Sapphire”. After split I’ll have 123…. I’m aware it makes no real difference, its just not as cool.

The way the share price is going so far, one day you might be able to buy a 123.4 HP vehicle with your shares.

 

[LucidfanAZ]

I wouldn't say it doesn't make any difference. My fear is the "shorts" will go crazy after the split.

Agreed. I meant more related to the value of the shares staying the same.

The downtrend in share price will more than likely continue without any substantial positive news from the company. If your position on lucid is long term, save some dry powder for after the RS is effective if the stock reaches new (pre-split) lows around $19($1.90) or less to average down more.

 

[joec]

I generally don’t invest in a company unless I believe in what it’s doing and that the board knows what it’s doing.

Thus, I very rarely vote against any measures suggested by any board of any company of which I hold shares.

If I didn’t think the board knew better than I do what is good for the company, I’d sell my shares and find another company.

Just my two cents. But voting against the board, with rare exceptions, makes little sense to me.

 

[TahoeMichael]

The challenge with the stock market is that one can do a rational financial analysis, but it's very hard to predict the how the market may move on irrational factors (sometimes known as "market psychology"). As we see with Babyrocko1908, surprising things affect investor's decisions. I hesitate to guess how the market might react to a reverse split. Purely rationally, I'd say that keeping the stock price high enough to avoid flirting with delisting is a good idea. But obviously not everyone agrees.