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

https://www.reuters.com/

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.”

For the rest of this article: https://www.reuters.com/article/us-lithium-supply/battery-boom-skeptics-seen-driving-short-holdings-in-lithium-miners-idUSKBN1KO0IX

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