Short sellers have been clamouring onboard Lake Resources N.L. (ASX: LKE) in 2022, likely on the assumption its share price will soon fall.
The stock's short position has increased from around 0.1% at the start of the year to sit at 10% at last count.
The Lake Resources share price has fallen 16% over the same period to trade at 91 cents today.
For context, the S&P/ASX 200 Index (ASX: XJO) has also dumped 15% year to date.
So, could short sellers be right about the future of the Lake Resources share price? Let's take a look.
Short sellers sceptical of Lake Resources share price
The Lake Resources share price has faced increasing pessimism over recent months, with short interest in the stock increasing around 10,000% year to date.
And such cynicism likely wasn't helped by a scathing attack from activist short seller J Capital in July.
J Capital authored a report which stated, among many critiques, that the direct lithium extraction technology intended to be used at the company's Kachi Project wouldn't work as predicted. It also took aim at the company's management, saying insiders had been selling millions of dollars of stock.
The company clapped back against such claims, but its response seemingly hasn't been enough to appease short sellers.
Additionally, the company's former managing director Steve Promnitz abruptly abandoned the company in June, seemingly selling all his stock in the lithium hopeful. As an aside, Promnitz has today been appointed managing director of lithium and gold developer Qx Resources Ltd (ASX: QRX).
And now, the company is in a dispute with its project partner Lilac Solutions over the details of an earn in agreement.
Of course, all of the above has likely rang alarm bells for Lake Resources investors. And many of the happenings were also a red flag for experts.
TMS Capital's Ben Clark and Marcus Today's Henry Jennings dubbed Lake Resources' shares a sell rating last month, Livewire reports.
Commenting on the bearish outlook, Clark said, courtesy of the publication:
It's got a mine in Argentina, which will probably need close to a billion dollars spent on it to get it into production. It's still some years away from production and who knows what the lithium price is by then?
Jennings continued, reportedly saying:
[Promnitz] went off into the sunset, selling his … shares almost instantly. That doesn't usually happen. Usually, they make some personal reasons.
So for me, there are much better lithium stocks to play, so at the moment, it's a sell.
