This week has seen Albemarle (ALB US) walk away from its $3 bid for Liontown Resources (LTR) and the lithium sector fall from grace after BofA joined the downgrading party. The latter appeared to hinder UBS, who were initially looking for $400m in fresh equity with bids between $2.20 – $2.60. However, overnight stock was being offered at $1.80 with news this am that they have raised $376mn, a painful 35% to LTR’s last traded price but still 17% above its price pre-Albemarle’s bid – rumours are Gina was fairly tough, as you would expect, in talking down the raise price, after all, she is averaging a 19.9% stake the majority of which was purchased ~$3.
There are a number of interesting facets at play here, with the LTR chief executive getting his desire “that no one will be getting this company on the cheap.” time will tell if $3 was cheap:
- Gina is left holding her significant $1.3bn position, which will undoubtedly be significantly underwater when the stock reopens.
- However, Gina and Albemarle believed the stock was worth ~$3 last week, suggesting it’s a bargain at under $2!
- From a corporate perspective, LTR has been able to raise funds at a far better price than they could have before the bid from Albemarle.
- The 10% short position in LTR might buy into the capital raise to grab a quick profit, although the huge position in PLS suggests traders aren’t keen on the sector.
Gina’s intentions are hard to interpret at this stage, leaving us on the fence. She might have simply made a foray into the lithium space and will now sit back and see if her preferred vehicle will enjoy the anticipated trend of EV growth, i.e. a takeover is no guarantee.
- We can see the LTR share price tracking the lithium sector into 2024.
MM is neutral LTR short-term
Add To Hit List
