4 reasons why Lake Resources plummeted -28% on Tuesday
4 factors that might have created the perfect storm for an abrupt -28% meltdown for Lake Resoruces
Source: iStock
Mentioned
KEY POINTS
- Lake Resources was trading around -4% around noon
- The stock abruptly started to selloff around 1:15 pm AEST
- 4 compounding variables that might've driven the selloff
Lake Resources (ASX: LKE) abruptly started to selloff around 1:15 pm AEST on Tuesday, where a -4% day turned into -28.8%.
The past few weeks has been turbulent for the once euphoric lithium and broader green metals market. The prospect of rising interest rates and its impact on growth stocks, recession fears and bearish investor sentiment has witnessed many high-flying lithium names dip 20-30% from recent all-time highs.
It's difficult to pinpoint why Lake Resources would experience a selloff of this magnitude. Though there are a few compounding variables that might've contributed to today's meltdown.
1 Managing director departure
Lake Resources shares sold off -13.7% on Monday after announcing the departure of company-making Managing Director Steve Promnitz.
Promnitz was holding (according to June 20 Final Director's Interest Notice):
10.2m ordinary shares
1.13m additional bonus options (expiry date 15 June and exercise price of 75 cents)
2.5m 2019 performance rights
Does Promnitz want to hold these shares? Or is he selling them?
2 Massive cross trade at noon
A massive cross trade was executed around 1:00 pm AEST for 10.2m shares at $1.19.
10.2m shares in a block trade (Source: Spark)
3 ASX200 inclusion euphoria finished
Lake Resources was included into the ASX 200 Index on Monday, June 20.
Interestingly, Lake Resources shares rallied 13.6% on June 14. A day where the broader ASX 200 sold off -3.6%.
With no market sensitive announcements or lithium-related catalysts, it is believed that index buying was the catalyst behind the abrupt outperformance.
With the inclusion euphoria coming to an end, today's selloff could represent mean reversion for the lithium darling, reverting back in-line with how the broader lithium sector is performing.
Its also worth considering that inclusion into the ASX 200 provides a stock with more borrow capacity and larger stakeholders can open short positions.
4 Option conversion
On 3 and 10 June, a respective 7.6m and 15.2m options were converted to shares at an issue price of 75 cents per share.
This puts more shares in the register and those options are immediately in-the-money.
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Lake Resources intraday chart
