Battery boom skeptics seen driving short holdings in lithium miners – by Melanie Burton (Reuters U.S. – August 3, 2018)

MELBOURNE (Reuters) – Short selling of shares in lithium miners SQM, Albemarle, Galaxy and Orocobre has ballooned this year, reflecting what fund managers say is a sign of growing scepticism of an imminent battery boom.

The heavy shorting of the stocks puts investors at risk of a short squeeze if project timelines meet or beat expectations, or if near-term oversupply of battery chemicals proves to be more seasonal than structural, fund managers and analysts said.

Short selling entails a bearish investor selling shares he or she does not own in the hope of profitably buying them back at a lower price in the future. If the shares rose instead, an investor would need to close, or “cover”, their position by buying back the shares for a loss.

“There’s a raft of reasons why people will short a name, but I’d say today it would be a perception that in the short term there’s a bit of oversupply, the price of lithium could fall,” said Darko Kuzmanovic, portfolio manager at Janus Henderson Investors in Sydney.

“People might say, ‘If I’m a shorter, maybe there’s a risk that it takes longer, it costs more, they don’t achieve the criteria that they say they will,’ so maybe the stock won’t perform as well.”

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