Comstock Mining Inc (NYSEAMERICAN: LODE) is flying in the market this morning after announcing that it has secured a majority stake in a battery recycling company. The exciting news has retail investors diving in and squeezing the shorts out of their positions.
Here’s what’s going on:
Skip to What You Want to Read
- Comstock Mining Secures Majority Stake
- Management Commentary
- A Short Squeeze in Action
- What Analysts Think About LODE Stock
- Risks to Consider Before Buying LODE Stock
- Final Thoughts
Comstock Mining Secures Majority Stake
In a press release issued early this morning, Comstock Mining said that it secured the rights to a majority equity stake in LINICO Corporation. LINICO is a lithium-ion battery recycling company that recently acquired a state-of-the-art battery metal recycling facility from Aqua Metals.
The facility is located in the Tahoe Reno Industrial Center in Nevada.
In the press release, LODE said that it will pay $4.5 million in cash and 3 million shares of restricted common stock for the purchase of the majority stake in LINICO. All told, the transaction represents a value of $10.75 million in exchange for about 64% ownership in LINICO.
Moreover, Aqua Metals is also investing $2 million in order to purchase a 10% stake in the company.
In the release, LODE said that LINICO will use the proceeds to increase its direct strategic investment in Green Li-ion Pte, Ltd. It will also be purchasing Green Li-ion’s patented process equipment with exclusive rights for the United States market. Importantly, this equipment enables the production of 99.9% pure lithium-ion cathodes.
Comstock Mining went on to explain that LINICO’s facility was designed to receive, crush, and separate battery materials into black mass. The company’s technology has proven to convert black mass into rejuvenated, high purity, battery grade metals and essentially pure cathodes for a fraction of the cost and time of conventional solutions.
Of course, this is an overwhelmingly exciting play as many expect that demand for lithium ion batteries will continue to skyrocket with the increase of demand for electric vehicles.
In the press release, LINICO’s CEO and founder, Michael Vogel, had the following to offer:
Our agreements accelerate the race towards reducing carbon emissions by valorizing critical metals and supporting the increasingly high demand for electric vehicles (“EVs”). Aligning ourselves with Comstock, Green Li-ion and Aqua Metals creates a unique ecosystem of complimentary companies.
A Short Squeeze in Action
While the news is exciting, the dramatic gains in the value of LODE stock this morning seem to be the result of a short squeeze triggered by the news. Prior to today’s session, Comstock Mining traded with a short volume ratio of around 28%. That’s massive.
Of course, as prices start ticking up, short sellers abandon their positions, leading to dramatic price appreciation on incredible volume. That seems to be the case today.
Moreover, the run could be far from over.
Not only is short interest heavy on the stock, LODE only has a public float of around 60 million shares. So, the demand caused by the short squeeze, coupled with the limited supply, means that the sky’s the limit here. This thing could fly far further.
What Analysts Think About LODE Stock
While there aren’t many analysts covering Comstock Mining stock, what it lacks in quantity, it makes up for in quality. The one analyst covering the stock rates it a Buy with a price target of $4.50 per share.
While that price target represents the potential for 100% growth over yesterday’s closing price, I’m expecting that it will be revised upward as it doesn’t take today’s announcement into account.
Risks to Consider Before Buying LODE Stock
Investing comes with risk no matter what you invest in. So naturally, there are risks to consider before diving into LODE stock. Some of the most significant risks include:
- Pennies. First and foremost, LODE stock is a penny stock. As a result, it’s subject to high levels of volatility that could make it difficult to time entrance and exit positions, which may lead to significant losses.
- Speculation. There’s quite a bit of excitement circling Comstock Mining this morning. However, that excitement is based on the notion that demand for electric vehicles and the batteries that run them will continue to skyrocket. While this is the likely scenario, it is a speculative bet. Should demand fall flat, the stock could see dramatic declines.
- Short Squeeze. Finally, there’s a clear short squeeze taking place at the moment. Sure, that’s exciting news, but short squeezes are unpredictable. Although there may be room for more growth ahead, traders could also start taking profits, which would lead to significant declines over a very short period of time. As such, it’s not wise to play the LODE stock short squeeze, or any other short squeeze, unless you have experience in the market and understand the inner workings of the short squeeze.
Sure, there are risks to consider here, there’s always risks when it comes to investing. Nonetheless, Comstock Mining stock is one that’s hard to ignore.
With the acquisition of the majority stake in this battery recycling company, LODE is entering into a massive market, which will likely result in significant gains in revenue and profitability. While there will be some volatility in the short squeeze, the news makes LODE stock one to watch for long-run potential.