What's going on with the Vulcan Energy (ASX:VUL) share price today?

Here's what's going on with the lithium explorer's stock.

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The Vulcan Energy Resources Ltd (ASX: VUL) share price has been put in the freezer after the lithium explorer was targeted by an activist research organisation.

J Capital launched a report on Vulcan and its Zero Carbon Lithium Project overnight. It claims the project's pre-feasibility study is misleading.

Vulcan disputed the claims before the market opened this morning.

The company said the report published by J Capital contained inaccuracies and pointed out the publication admitted to being biased and profiting off the short-selling of stocks it reports on. Vulcan also pointed to the fact J Capital doesn't hold an Australian Financial Services License. Therefore, the publication can't give investment advice in the nation.

Right now, the Vulcan share price is $14.99. It has entered a trading halt while the company prepares another response to an online report. The company hasn't clarified if its second response will be to the same report.

Let's take a closer look at the J Capital allegations.

Vulcan share price halted after short seller's damning report

The Vulcan share price has been frozen amid allegations its cornerstone project's pre-feasibility study contains misleading data.

Vulcan's Zero Carbon Lithium Project's pre-feasibility study assumes the project's geothermal brine will have a flow rate of between 100 litres and 120 litres per second. It also expects a lithium recovery rate of 90%.

However, according to J Capital, it's unlikely the project will achieve those figures.

The publication states other nearby projects have seen flow rates of approximately 8 litres to 80 litres.

J Capital predicts the project will probably see a flow rate of around 70 litres per second. It also predicts a 70% lithium recovery rate.

The publication stated that if its assertions proved true, the amount of lithium extracted from the project would be roughly half of what Vulcan has predicted and the project would "fail commercially".

Additionally, the publication questions the legitimacy of the independent consultants hired by Vulcan to complete the pre-feasibility study. It alleges Vulcan's senior management either owned the consultants or acquired them shortly after they provided the study's data.

Finally, J Capital claims the company is understating the risks associated with community backlash to the project. It commented that other projects in Germany's Upper Rhine Valley have previously been halted due to community opposition.

Vulcan expects its share price will be halted until it either releases the pending response or the ASX opens on Friday.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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