⚡️⚡️⚡️
With energy prices rising, switch to a cheaper plan
💡
Compare Prices Now
⚡️⚡️⚡️

Why is the Lake Resources (LKE) share price under pressure?

Posted: 22 June 2022 12:54 pm
News
LKE-shares-22June_1800x1000_Finder

Despite the slide in the last few days, the lithium explorer's shares have doubled in value over the last 12 months.

Lake Resources (ASX: LKE) is among the worst-performing shares on the ASX, continuing its slide over the last few days that has seen the lithium explorer lose nearly 40% of its value in the last 2 sessions.

At the time of writing, the stock was down another 11.6% to 86 cents.

Why has the LKE stock price tanked?

The recent drop in Lake Resources shares comes after the company on Monday made the shock announcement about the exit of its pivotal managing director Steve Promnitz.

In a statement to the ASX, the company said Mr Promnitz, who had led the company since 2016, left with immediate effect but did not include any statement from him over his departure.

Lake Resources said Stu Crow will serve as executive chairman for an interim period of 6 months and oversee the transition to serve the company's critical North American and Asian supply chains. He will be responsible for hiring a new CEO and board members, as well as setting up the company's offices in the US.

"We are now establishing a North American presence to serve our offtake customers, continue to work with our US-based technology partner and engage capital markets," the company said in the statement.

"As part of this transition ... managing director Steve Promnitz will depart after establishing Lake's dominant position in Argentina."

Part of the nervousness over the company's stock price is on account of the fact that Mr Promnitz held more than 10.2 million shares in Lake. His sudden departure followed by a large block trade in the stock on Tuesday spooked investors.

Transformation

But much of it comes due to the belief that Lake Resources's transformation was led by Mr Promnitz. He has been CEO and managing director for nearly 6 years and will be hard to replace.

His exit comes less than 2 months after the junior lithium explorer signed a major new offtake agreement with global car giant Ford Motor Company (NYSE: F) in April.

Under the non-binding memorandum of understanding (MOU) signed between the 2 firms, Ford will buy about 25,000 tonnes a year of lithium from Lake's flagship Kachi Project in Argentina, which sits in the middle of South America's so-called "lithium triangle" hub.

Lake had also signed a similar agreement with Japan's Hanwa Co Ltd in March to supply up to 25,000 tonnes per annum of lithium carbonate from the Kachi Project.

The 2 deals underlined the company's growing status as a supplier to the global electric vehicles (EV) supply chain, which in turn helped reduce the risk of its Kachi project and 3 other under-development projects in Argentina for financiers and investors.

The decision also comes at a bad time for the battery minerals sector as a whole, which has been at the receiving end of negative sentiment amid rapidly rising interest rates and slowing economic growth that could crimp growth prospects for the EV industry.

Indeed, shares in rival ASX-listed explorers Core Lithium (ASX: CXO) and Pilbara Minerals (ASX: PLS) have also suffered in recent weeks and were down 8% and 2% respectively on Wednesday.

Serious about investing? Here's your new unfair advantage

Ticker Nerd uses advanced software to track hundreds of signals and data points to find stocks before they blow up. Don't miss out!
Get started for free

Considering buying LKE shares?

If you are keen to buy Lake Resources shares, you should consider investing through an online share trading platform.

Keep in mind that not all platforms offer the same list of stocks. Some offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

Get more from Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site