The Lake Resources share price was never far from the headlines in Q1, but has it paid off?

Short attacks, project disputes, and lithium demand, oh my.

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Key points
  • The Lake Resources share price posted a 14% gain for the September quarter, closing the period at 90 cents
  • That was despite the company facing a scathing short attack 
  • It also revealed a dispute between it and project partner Lilac Solutions

The Lake Resources N.L. (ASX: LKE) share price was the talk of the town over the first quarter of financial year 2022. And for good reason.

Stock in the lithium developer rocketed a whopping 100% over the first seven weeks of the period. Sadly, it handed much of that gain back before the quarter was out.  

The Lake Resources share price was trading at 79 cents at the end of the last financial year. At its August peak, stock in the company was swapping hands for $1.595.

Come the final close of September, however, Lake Resources shares were worth 90 cents – marking a 13.9% quarterly gain.

For comparison, the S&P/ASX 200 Index (ASX: XJO) dumped 1.4% over the three months ended 30 September.

So, what went so right, and then so wrong, for the Lake Resources share price in the first quarter? Let's take a look.

A woman lies back and relaxes in her boat with a big smile on her face as it floats on the rising tide.

Image source: Getty Images

What drove the Lake Resources share price in Q1?

Cast your mind back to early July.

Then, Lake Resources was down a managing director after Steve Promnitz suddenly stormed off the job. He then appeared to sell his entire 10.2 million share holding in the company the following day, as my Fool colleague James reported at the time.

Additionally, it had only been a month since Goldman Sachs' bearish outlook for lithium seemingly inspired a major sell-off among ASX lithium shares.

And if the company was hoping for less drama in the new financial year, it was likely disappointed.

A short drop and a sudden stop

The Lake Resources share price was halted in mid-July following the release of a scathing report by activist short seller J Capital.

Among other things, the short seller slammed the company's plan to produce lithium using direct lithium extraction (DLE) technology – owned by partner Lilac Solutions.

Incredibly, when the company responded to the claims, it said J Capital had criticised the wrong process, calling the report "incorrect" and "inaccurate".

Remarkably, the attack didn't outwardly harm the Lake Resources share price. However, it likely helped bolster the company's short position.

It increased from 7.9% in late June to 10.2% at the end of September, making Lake Resources one of ASX's most shorted shares.

Perhaps the staunch performance of the stock was due to increasing warnings the world could soon experience a lithium shortage. Or perhaps the revelation of its new CEO and managing director David Dickson played a part.

Whatever the reason, it wasn't long before the lithium favourite faced yet another challenge.

A bone to pick with Lilac

The Lake Resources share price tumbled 16.5% in mid-September after the company acknowledged a dispute between it and Lilac Solutions.

The pair previously agreed Lilac could earn a 25% stake in the Kachi Project by achieving certain milestones by an agreed upon date. However, it seems the agreed upon date was far from agreed upon.

Lake Resources believes the deadline was 30 September, while Lilac thought it had until 30 November. The market still hasn't heard news of an outcome of the dispute.

Though, the pair are continuing to work on the Kachi Project. Onsite processing of Kachi brines was expected to begin this week.

Lake Resources share price snapshot

Sadly, the Lake Resources share price's September tumble sees it trading in the longer-term red.

The stock has fallen 6% since the start of 2022. Though, it has gained a whopping 80% since this time last year.

Meanwhile, the ASX 200 has dumped 10% year to date and 6% over the last 12 months.

Motley Fool contributor Brooke Cooper 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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