Why is the Lake Resources share price crashing 25% today?

Lake Resources shares have been sold off on Tuesday…

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A man in a suit face palms at the downturn happening with shares today.

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Key points

  • Lake Resources' shares have been hammered on Tuesday
  • This appears to have been driven by the shock exit of its CEO
  • Lake's former CEO appears to have also sold all his shares after the sudden exit

The Lake Resources N.L. (ASX: LKE) share price has come under significant pressure on Tuesday afternoon.

While the lithium developer’s shares were trading lower for much of the day, they suddenly collapsed after lunch.

At the time of writing, the Lake Resources share price is down 25% to 99 cents.

Why is the Lake Resources share price crashing?

The Lake Resources share price has come under pressure this week following the shock exit of its CEO and managing director, Steve Promnitz.

Promnitz had been leading the company since 2016 and left with immediate effect on Monday. The former CEO made no comments in the announcement, which is rather ominous.

He also left the company with 10.2 million Lake Resources shares in his portfolio.

Though, judging by a large block trade of 10.2 million shares at $1.19 per share for $12.138 million just after lunch, Promnitz could have already sold off his holding.

In light of this, investors appear to be panicking that something is wrong at the company and have been selling down the Lake Resources share price today.

One group of investors that will be pleased with this decline is short sellers. While Lake isn’t anywhere near to being the most shorted share on the Australian share market, recent data from ASIC shows that short interest has been rising strongly over the last few months.

What’s next?

Given the sharp and sudden decline by the Lake Resources share price, the company is likely to be hit with a price query from the ASX.

If that’s happens, it will have to give an explanation for the decline and, if that reveals that nothing is wrong behind the scenes, the selling pressure could ease.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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