Liontown shares are down 17% in a month: What's going on?

This lithium share has failed to roar in recent weeks.

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Liontown Resources Ltd (ASX: LTR) shares are edging higher on Wednesday.

In morning trade, the lithium developer's shares are up 0.5% to $1.37.

However, that doesn't change much on a monthly basis, with Liontown shares still down almost 17% since time last month.

What's going on with Liontown shares?

Investors have been selling the company's shares in recent weeks in response to falling lithium prices.

Though, it is worth noting that it isn't just Liontown that has taken a tumble. Over the same period, Core Lithium Ltd (ASX: CXO) shares are down 11%, Sayona Mining Ltd (ASX: SYA) shares are down 16%, Lake Resources N.L. (ASX: LKE) shares are down 12%, and Allkem Ltd (ASX: AKE) shares are down 10%.

This weakness is particularly disappointing for anyone who took part in Liontown's recent capital raising.

Last month, the company raised $365 million through an institutional placement at $1.80 per new share. Despite this bring a deep discount to the prevailing share price, its shares are now trading 24% below the offer price.

Also nursing a paper loss are investors who took part in the company's share purchase plan. Those funds were raised at $1.47 per new share.

Though, with the share purchase plan only raising $10.8 million of its $45 million target, it seems that most retail shareholders have managed to avoid this loss.

What's next for the company's shares?

While short interest is down from its record levels, it has been creeping higher in recent weeks.

At present, 7.5% of Liontown's shares are held short according to data from ASIC. This is the equivalent of $250 million being bet on its shares falling in value from current levels.

Clearly, there's quite a bit of smart money that feels bearish on the company.

Though, that doesn't mean that everyone is bearish. Earlier this month, Macquarie put an outperform rating and $2.70 price target on its shares. This suggests that they could almost double in value over the next 12 months.

Time will tell whether the bulls or bears made the right call.

Motley Fool contributor James Mickleboro has positions in Allkem. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. 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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