Shares of electric vehicle maker Lucid Group Inc, once seen as a promising challenger to Tesla, plunged by a record 55% during intraday trading following reports of potential bankruptcy or privatization, prompting the company to issue a swift denial.

The company stated that rumors regarding bankruptcy or going private are "categorically false" and clarified that no special board committee has been formed to evaluate such options.

According to a Bloomberg report, Lucid has engaged consulting firm AlixPartners to conduct a comprehensive review of all aspects of its operations. The review aims to optimize the business, reduce costs, and ensure the successful launch of a new mid-size vehicle model.

An industry media outlet reported on Tuesday, citing an unnamed source, that strategic options under consideration by Lucid included taking the company private or filing for Chapter 11 bankruptcy protection.

The stock's dramatic decline triggered multiple trading halts due to extreme volatility before recovering slightly after the company's clarification.

Lucid further explained that AlixPartners' role is solely to assist in improving operational execution and that the firm has not advised Lucid to file for bankruptcy. The company had previously declined to comment on the speculation when contacted by Bloomberg.

It remains unclear whether Lucid would consider more significant measures if its current business improvement initiatives fail to yield results.

Comprehensive Operational Review Underway

AlixPartners has been hired to perform a full-scale examination of Lucid's operations. The individuals familiar with the matter were not authorized to speak publicly.

The company's objectives include streamlining its business structure, cutting costs, and ensuring a smooth rollout for its upcoming mid-size vehicle.

Lucid has stated it possesses sufficient cash to fund operations into the second half of next year. The company continues to rely on financial support from its largest shareholder, Saudi Arabia's Public Investment Fund, to sustain operations during its new product launch phase.

Ongoing Challenges Prompt Management Restructuring

This incident is the latest in a series of difficulties for Lucid. The company has recently suspended its production guidance, initiated an operational review, and announced significant workforce reductions.

Newly appointed CEO Silvio Napoli is leading a management overhaul, which includes eliminating the chief operating officer role and appointing a new chief financial officer.

For investors, the central challenge facing Lucid is whether it can achieve operational normalization through internal reforms and successfully commercialize new vehicle models while remaining dependent on continuous funding from the Saudi sovereign wealth fund. The outcome of this process will be critical in determining the company's future trajectory.