Good evening. Not here to teach or lead. Just sharing information.
Pump and dump is better attributed to stocks with low amount of issued shares, or small caps. What you are seeing today for example is not a pump and dump, it is across all lithium mining companies based on approx 5% drop of lithium spot prices. A reminder also that traders are very active when Reserve Banks have some announcement to make as it creates opportunities.
If the ASX issues a speeding ticket, it usually mean risk of pump and dump but not always. As everyone knows it's a fail safe process to take a pause providing some level of caution for traders/shareholders/investors to diligence if the appreciation in value is warranted or not.
What I find interesting is that this term "pump and dump" was popularised by Game Stop or meme shares in the US. A struggle by retail investors against professional shorters, and retail won. However ask what the opposite of this and hardly anyone can tell you the answer. "Dump and pump" would've been the logical term but it's not. The conversation is, I'd argue professionally muted/squashed. You don't hear much about professional traders who aggressively short stocks, creating a dead cat bounce at their exits leaving the company usually completing a stock split if has financial backers or bankruptcy. Latest example I'm aware of is Faraday Future. I say this because it's this aggressive shorting that is often the catalyst to pump and dump a stock, which is common in US markets... but ASX doesn't really allow shorting - it's prohibited but has exceptions as it provides better liquidity. So the pump and dump in Australia is actually materially different to those found and more attributed to US markets. The common factor is that both are fuelled by hype.
That "hype" was obvious with VUL's pump and dump. When we sold at $14/share, the market was valuing the company extremely high for what it's worth at the time. It was made possible by the two things I've mentioned: low number of issued shares; and small cap (speculative) - no visibility of profitability.
AZL - I can't comment pre-October 2023 other than it looked like pump and dump to me. However, since acquisition of Prairie Lithium, I can't characterise it as such because we know the intrinsic value of Prairie project and the project's ability to realistically reach production provided the project has funding. Market's valuation only stopped appreciating and instead depreciating from when Goldman Sach released report of decreasing lithium prices with 2024 and 2025 forecasts and although this was based on Chinese market, China sets the price right now on everything to do with EVs and lithium batteries, which of course impacts raw materials. During diligence work (that takes a lot of effort/cost or otherwise follow the projects for a some years to save on effort/cost), we commission our own pro forma valuation of the companies. Evo Cap valuation I shared (one page out of many) comes from such reports.
An important reminder not to look at the share price but the market cap, to determine whether a company is overvalued or undervalued. It was bleeding obvious at 1.4/1.5c that AZL was undervalued because we know the company assets are well more than AUD50M, which was the market cap at the time.
Its also important to compare projects with their peers. I would compare Prairie Lithium more closely with Standard Lithium's project than I would E3 Lithium's Alberta but both are important peer comparisons. I say Standard Lithium perhaps prematurely though because I'm of the view that Prairie Lithium's PFS would more closely align, perhaps even exceed Standard Lithium's PFS results.
Hence my bullish outlook in reaching 20c per share. Still speculative as AZL's PFS is not yet done and such forecasts remains risk/reward calculations with "ifs and when" . The likelihood is good from my perspective, provided the suspected PFS results, once we can realistically forecast profitability. If the PFS fails to deliver, then that's a different situation and forward estimates will change with it.
My two cents are for investing not day trading. My vesting period is no less than 2yrs and often 4yrs or more. So pump and dump is not my forte. My portfolio often looks at future M&A potential for clean exits or otherwise looking to profit from dividends.
Hope this helps
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