Morgan Stanley reiterated its Underweight rating and $5 price target on Lucid, estimating the EV maker will burn through $3.7 billion this year.
The firm published the note on Wednesday morning, a day after EV reported on Lucid’s strategic options — an account the company has publicly denied as “completely false.”
Analyst Andrew Percoco wrote that Lucid shares fell as much as roughly 50% before paring the drop to close down 16%, after the company denied the report.
Based on Lucid‘s closing price of $4.62 on Tuesday, Morgan Stanley’s reaffirmed price target implies an upside of about 8.2%.
He said several of the operational steps the report described “make sense” for a company that needs to preserve capital, but “refrained from commenting on any hypothetical Chapter 11 or take-private proceedings.”
The note, obtained by EV, is one of the first detailed sell-side reactions to the report and to Lucid‘s denial of it. Cantor Fitzgerald also reacted earlier on Wednesday in a client note.
Morgan Stanley’s Note
Percoco noted that Lucid has confirmed the engagement with AlixPartners while disputing the characterisation of its scope.
On Tuesday, hours after EV‘s report, Bloomberg wrote that “consultant AlixPartners has been engaged to examine all aspects of Lucid’s operations,” citing “people familiar with the matter.”
Of the items mentioned in EV‘s report, Percoco singled out de-emphasising Europe and the Air as steps that “make sense,” given what he described as Lucid‘s need to stay in capital-preservation mode ahead of its midsize launch.
The analyst did not endorse the take-private or bankruptcy scenarios, and said only that Lucid would need to raise significant capital to fund the midsize ramp.
Lucid’s denial and cease-and-desist
Lucid has confirmed that it retained AlixPartners as an outside adviser but has rejected the strategic-review claims.
In an 8-K filing, the company said “the rumors are completely false,” adding that it “has sufficient liquidity to carry its operations well into next year” and “has not formed any special Board committee to explore the scenarios reported.”
The company said AlixPartners “is assisting the Company in that and nothing else and has not recommended bankruptcy to management or the Board of Directors,” describing the adviser’s remit as improving execution, strengthening operations and realising the value of Lucid’s technology and products.
Percoco quoted the statement in full and did not take a position on the disputed scenarios.
Lucid has since escalated the dispute.
On late Tuesday, it sent a cease-and-desist letter to CARBA, the company that owns EV, demanding a correction or retraction, and published the letter on X through the account of its chief communications officer, Nick Twork.
The letter goes further than the 8-K on AlixPartners. It states that the firm “is not advising the Company regarding bankruptcy and has not recommended bankruptcy to management or the Board,” and that it was not “engaged to evaluate, analyze, or present those alternatives to management or the Board.”
Lucid added that, however the options were characterised — as a “recommendation,” a “scenario,” or an alternative being “weighed” — it denies the premise that it and AlixPartners were evaluating bankruptcy or a transaction to take the company private.
[Note: CARBA received the letter and has answered Lucid’s Chief Legal Counser Mr. Brian Tomkiel, making EV a party to the dispute the note engages with.]
The cash-burn math
Setting the report aside, the bulk of the note was Percoco’s own financial analysis.
The firm expects Lucid to burn about $3.7 billion in 2026 and raise roughly $2.5 billion of debt and about $1 billion of equity during the year.
“For context, we estimate Lucid will burn $3.7bn in 2026 and raise ~ $2.5bn of debt and ~$1bn of equity during the year,” the analyst wrote.
Percoco noted Lucid has drawn about $1.3 billion under its delayed-draw term loan facility — roughly $500 million in April and about $800 million in July — and announced a $1.05 billion capital raise from the Saudi Public Investment Fund, Uber and a registered public offering in April.
Giving effect to those steps, management has said Lucid would have had about $4.7 billion of total liquidity at the end of the first quarter.
The analyst forecast a further $2 billion of equity and $500 million of debt in 2027, which he said increases dilution risk, and expects Lucid to remain free-cash-flow negative through 2030, approaching breakeven late in the decade.
The additional liquidity, he said, is meant to support the Gravity ramp and the coming midsize vehicle.
A company in overhaul
The note lands during the deepest restructuring of Lucid’s short history.
The company cut about 18% of its US workforcein June, its second mass layoff of the year and one that eliminated the chief operating officer role, and EV exclusively reported that its board is slowing European expansion and weighing cuts of up to 40% of regional staff by the end of September.
As of Wednesday, Lucid has neither confirmed nor refuted EV‘s reports on the European slowdown.
The upheaval has reached the top of the company.
Lucid missed second-quarter delivery expectations, lost its chief financial officer as shares plunged and replaced much of its leadership under new chief executive Silvio Napoli.
Percoco struck a similar note on the direction of travel, writing that Lucid’s new management team is “keenly focused on strengthening the business and reducing cash burn” ahead of the midsize launch, even as he kept his rating and target unchanged.
Lucid is expected to give a fuller account of its finances at its next quarterly results, on August 4.
As of publication time, Lucid shares were trading 3.03% lower during Tuesday’s pre-market session at $4.48.
