The Lake Resources share price has crashed 50% since joining the ASX 200 on Monday. What’s going on?

Lake Resources shares are having a disastrous week…

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Key points

  • Lake Resources' dream addition to the ASX 200 index has been a nightmare
  • The lithium developer's shares are down 50% since joining the index on Monday
  • A number of factors have been weighing on its shares

This week was supposed to be a celebratory one for the Lake Resources N.L. (ASX: LKE) share price.

On Monday, the lithium developer’s shares joined the crème de la crème when they were added to the illustrious ASX 200 index.

However, what should have been a dream week for shareholders has quickly turned into a nightmare.

With another 20% tumble to 67.5 cents on Thursday, the Lake Resources share price is now down a disastrous 56% this week.

What’s going on with the Lake Resources share price?

There have been a number of catalysts for the weakness in the Lake Resources share price this week.

The first and arguably the biggest catalyst for the selling has been the shock exit of its CEO, Steve Promnitz.

The departure of Promnitz was barely even touched on within the release, with the announcement focusing more on the appointment of chairman Stu Crow as its executive chairman.

Another ominous detail was the lack of any outgoing comments from Promnitz following his exit. Combined with the apparent sale of all of the former CEO’s 10.2 million shares the very next day, it doesn’t point to a happy exit.

What else?

Also weighing on the Lake Resources share price have been concerns over future lithium demand.

This has been driven by news that Germany is looking to backtrack from plans to ban petrol and diesel engine cars in 2035.

If this happens, then long-term electric vehicle numbers could fall short of forecasts, which would inevitably have an impact on demand for lithium.

Finally, another thing that may not have gone down well with the market is the company spruiking a research note from Red Cloud Securities on Twitter, saying “Buy opportunity on sudden stock dip post-CEO departure.”

While the company has done nothing wrong, it isn’t a good look, and it is worth highlighting that last year Red Cloud Securities was issued 1.5 million Lake options that are exercisable at 30 cents before 24 May 2023. It is also paying Red Cloud $10,000 per month in marketing fees.

So, this research report should be read with that firmly in mind.

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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