Lucid (LCID) shares soared as much as 88% on Friday and were repeatedly halted for volatility following speculation that Saudi Arabia's Public Investment Fund (PIF) is considering buying a remaining stake in the luxury electric vehicle startup.
The spike came after a potential deal alert from the website Betaville. Shares closed 43% higher, their biggest one day gain on record.
The stock's parabolic move was likely exacerbated by investors covering short positions.
"The Lucid rumor really underscores the risk of being involved in EV equities at the moment," Garrett Nelson, VP and senior equity analyst at CFRA Research, told Yahoo Finance.
"Short interest across the space has surged and is at dangerously high levels following a disastrous year of EV equity performance, making stocks such as LCID prone to short squeezes (LCID’s current short interest is over 25% of the float)."
The PIF already owns 65% of Lucid, which produced 7,180 vehicles in 2022.
"If the Saudis buy the remainder of the company, we think they would likely invest more heavily in fixing the operational issues which have constrained its production growth and it likely provides a greater degree of viability for the company over the long-term," said Nelson.
The analyst notes LCID was only producing vehicles at a rate of about 38 units per day, "which is nowhere near achieving mass production." By comparison, Tesla’s (TSLA) Q4 production rate was 4,779 units/day.
Lucid is up 86% since the beginning of January amid a broader rally in EV stocks. Last year, Lucid shares declined more than 80%, underperforming the broader market.
Yahoo Finance reached out to Lucid and did not receive a reply at the time of this publication.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre