Why are ASX lithium shares going gangbusters on Tuesday?

It's a glorious day to be invested in lithium shares!

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price

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It has been a much-needed positive session for the lithium industry on Tuesday.

In morning trade, ASX lithium shares of all shapes and sizes are recording particularly strong gains.

Here's a summary of what's happening in the industry today:

  • The Allkem Ltd (ASX: AKE) share price is up 12% to $11.38
  • The Core Lithium Ltd (ASX: CXO) share price is up 19% to 93 cents
  • The Global Lithium Resources Ltd (ASX: GL1) share price is up 13% to $1.22
  • The Liontown Resources Ltd (ASX: LTR) share price is up 51% to $2.31
  • The Pilbara Minerals Ltd (ASX: PLS) share price is up 15% to $3.96
  • The Sayona Mining Ltd (ASX: SYA) share price is up 13% to 21 cents
  • The WA1 Resources Ltd (ASX: WA1) share price is up 10% to $1.13

Why are ASX lithium shares rocketing higher?

Investors have been piling into ASX lithium shares on Tuesday after Liontown Resources revealed that it has received and rejected a takeover approach from US$26 billion industry giant Albemarle Corp (NYSE: ALB).

According to the release, after having two prior proposals rejected, this week Albemarle returned with an improved unsolicited, conditional, and non-binding indicative proposal of $2.50 per Liontown share.

But with Liontown's management labelling the offer opportunistic and believing it undervalues the company's operations, it said no for a third time.

But why are other shares rising?

While Liontown is the lithium share that is an acquisition target, the news has given the whole industry a lift.

This is because Albemarle's offer appears to indicate that it believes lithium shares are severely undervalued and that recent weakness had created a great buying opportunity.

The market is now rerating lithium shares accordingly, much to the dismay of short sellers that have been targeting the industry.

Motley Fool contributor James Mickleboro has positions in Allkem. 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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