Why has the Lake Resources share price tumbled 17% in a week?

A number of macro and company-specific headwinds have battered the Lake Resources share price over the past week.

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Key points
  • Short sellers have continued to attack the Lake Resources share price over the past week in anticipation that it will fall lower
  • One research firm suggested that short sellers are motivated by the claim that Lake Resource's direct lithium extraction technology is ineffective and will produce toxic waste
  • Meanwhile, a number of macro headwinds may have culminated in creating a very volatile trading environment over the past week

The Lake Resources NL (ASX: LKE) share price has fallen 17.4% this week from the close of trade on 23 September to the time of writing today.

That's considerably more than the loss posted by the S&P/ASX 200 Materials Index (ASX: XMJ), which only dipped 1.41% over the same period.

Other ASX lithium shares are also down during this time, including Pilbara Minerals Ltd (ASX: PLS), which is down 8.7% of its value. Allkem Ltd (ASX: AKE) also took a beating, losing 12.7%.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has lost 3.29%.

There's no news from the company to make sense of the decline in the Lake Resources share price. However, some developments in the market unfolded. Let's cover the highlights.

A sad Carnaby Resources miner holds his head in his hands

Image source: Getty Images

What's going on with the Lake Resources share price?

On Monday, the Motley Fool reported that Lake Resources was among the top ten most shorted shares on the ASX, with a short interest ratio of 9.9% when the article was published.

This follows insight in early September from research firm J Capital into why the Lake Resources share price might be targeted by short sellers. It claimed Lake Resources' direct lithium extraction (DLE) technology was reportedly unproven and may not produce lithium in the clean way that the company expected, potentially producing toxic waste instead.

Although my colleague James notes that Lake Resources has refuted J Capital's claims, this negative commentary may still have a grip on the company's share price, amid it falling to lower levels this week.

More broadly, Lake Resources and other lithium shares could be feeling the bite of the prospect of interest rates rising even further, as well as the possibility that a 'soft landing' will not eventuate as the Fed hopes.

My Fool colleague Tristian notes that these headwinds and others might culminate in a maelstrom of volatility we've witnessed over the past week.

Lake Resources share price snapshot

Shares in the company are currently trading for 87.5 cents apiece. Earlier today, shares made an intraday high of 90 cents and a low of 87 cents.

The Lake Resources share price is down 13.12% year to date. Meanwhile, the ASX 200 has fallen 12.96%.

The company's market capitalisation is around. $1.22 billion.

Motley Fool contributor Matthew Farley 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 Scott Phillips.

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