'Spinmeisters': JCapital takes another stab at Lake Resources' project financing

Notorious activist short seller J Capital has taken another stab at Lake Resources (ASX: LKE) for misleading investors about its project financing from UK Export Finance.

J Capital's first short attack on Lake Resources was published on 11 July 2022 where it scrutinised the company for paying advisory businesses to produce favourable research and questioned its direct lithium extraction technology.

'Spinmeisters'

The new report argues that Lake Resources has exaggerated its funding commitments from UK Export Finance (UKEF).

On 11 August 2021, Lake said it received a "formal expression of interest" from the UKEF to cover approximately 70% of the total Kachi project funding requirements, subject to standard project finance conditions.

J Capital dug a little deeper, exercising a Freedom of Information Act application to the UK government to verify Lake's claim about the funding.

Documents released by the UKEF under the Freedom of Information Act flagged criticism about Lake's misinterpretation about the expression of interest.

"UKEF appears to be critical of Lake’s press release for characterising the EOI as a “strong” expression of interest and has instructed Lake not to say that the EOI is an endorsement of the Kachi project's ESG benefits," notes the short report.

"UKEF says that Lake is just at the start of the application process."

5 million performance rights on the line

Lake's Chairman Stuart Crow has 5 million performance rights subject to signing agreements to finance the Kachi Project.

The company's 2022 annual report has vested these performance rights because it considers the a 100% probability that funding has been achieved via international credit agencies (70%) and equity (30%).

"Unless there have been some recent undisclosed developments, Lake is aware the financing from UKEF is not “confirmed," said J Capital.

J Capital's short position

J Capital remains short on Lake Resources.

The initial report on 11 July triggered a -10.4% selloff for Lake. But the stock managed to recoup those losses just 4-5 days later.

The stock is now 70% above where it was before the first short report was published.

Still, the profitability of J Capital's short depends on when it started accumulating the short position.

Lake is down around -56% from its 5 April all-time high. The stock also sold off extremely aggressively following its inclusion into the ASX 200. Between 16-23 June, it fell -58% from $1.67 to just 70 cents.

Lake Resources share price chart