Yet again, a stock promotor’s playground has turned into a hedge fund happy house where the fun is fed by retail hubris and institutional apathy.
So how did this fiasco play out? It starts with the heavy promotion ofLake Resources, which has billed itself as a future top five lithium producer, on social media platforms such as Twitter to a cohort of retail punters.
Lithium sector hubris
The promotion was aided by favourable research reports in which the brokers and the authors are paid in stock and options. Social media posts do not always articulate the arrangement.
(In a response to questions, the company said it expected “any firm that chooses to write research on us to make the proper disclosures in their research notes to the market – as they are required to do under their various licenses”.)
This (paid for) enthusiasm for Lake andgeneral hubris in the lithium sectorhelped catapult the market capitalisation to a peak of $3 billion, and eventual eligibility for inclusion on the S&P/ASX 200.
And so, on June 3, S&P Dow Jones Indices announced that effective June 20, Lake, along with another retail favourite BrainChip, plus Core Lithium and New Hope would replace Appen, Codan, Polynovo, Platinum and Tyro in the main benchmark index.
