Lake Resources’ calamitous first week as a top 200 ASX company is yet another demonstration of retail hubris and institutional apathy.
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.
The hedge funds can finally act on their sceptical views by shorting the shares, when it was previously not possible or prohibitively expensive.That’s exactly what happened in the case of Lake. Short interest ramped up dramatically in the lead-up to the index date, with 45 million shares sold short. Demand is so strong the fee to borrow is about 20 per cent a year.
The promotion has nevertheless continued. On Wednesday, LKE’s official Twitter account tweeted out research from Red Cloud, which is paid by the company in cash and options, informing investors of a “Buy opportunity on sudden stock dip post-CEO departure”.
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