Lake Resources (ASX: LKE) (OTC: LLKKF) shares are down 13.5% this morning on the Australian market. While the Lake share price has been weak for a year now the latest fall is driven by insider selling. This is usually taken to be not a good sign for a corporate share price. If the people running the company think that it's time to sell then what about the rest of us out here? Corporate management does, after all, have more information about future prospects than we do.
It is also true that said management - here it's the Chairman, Stu Crow - have their own financial lives to lead. So sales might happen for nothing to do with corporate reasons but for personal. Some even require liquidity in personal finances perhaps. Even then significant insider sales are looked at somewhat askance. Significant belief in near or immediate price improvements in the shares would mean such personal requirements would be met by borrowing against the security of the shares held, not by selling them.
Lake Resources share price from ASX
The announcement to the market of the share sale is here. It does indeed say that the share sale is for personal financial reasons. Also, that no further sales are expected from that same source in the near future. On the other hand the sale was of 7 million shares and change, leaving a stake of some 10 million. So the stake was cut by 40%, which is a fair old chunk for a corporate chairman to cut his stake by. Must be some significant personal bills to pay there.
As we've said about Lake Resources just recently the geology of where Lake Resources is hoping to mine seems entirely sensible. To a great extent it's like the SQM operations just over the border in Chile. However, there are two substantial risks. One is just doing business in Argentina - who knows what the government is going to do there next. The other is that the lithium price is coming off - down 40% or so in recent months - making all lithium miners less attractive. Further, this effect is larger for those not producing as yet simply because everything does depend upon those future revenues and nothing upon current producing profits.