A Tesla vehicle. Piedmont Lithium will supply the metal to the car company.
Joe Raedle/Getty Images
The mining company Piedmont Lithium is raising cash because it can.
Tuesday evening, the company announced plans to sell about 1.8 million American depository receipts—essentially U.S.-traded stock in a foreign company. Piedmont (ticker: PLL) has U.S. operations but its primary listing is in Australia.
The share offering, which will bring in roughly $130 million, is a way for Piedmont to capitalize on a strong stock-price performance. The shares are up about 160% year to date and have risen almost 1,400% over the past year.
Lithium metal is a key component in rechargeable batteries for electric vehicles, so enthusiasm among investors about the shift to EVs has led to excitement over the outlook for demand and prices. Stock in Albemarle (ALB), a large, established lithium miner, is up about 150% over the past year.
Piedmont stock is also doing well because the company struck a deal in September to supply Tesla (TSLA) with lithium. Tesla has plans to manufacture its own batteries, as well as buying them from third-party suppliers, so Elon Musk ‘s company is eager to secure supplies of the metal.
New of the offering dragged Piedmont shares lower on Wednesday. The stock was down about 22% in morning trading, while the S&P 500 was up about 0.6%.
The shares are down because investors never like to see their stakes diluted by new stock sales. The stock sale is also a reminder that start-up companies like Piedmont need cash to build facilities before they can fund operations out of internally generated cash flow.
Piedmont’s lithium mine is in North Carolina and is due to start production in 2022. The project is estimated to cost about $170 million. Piedmont ended 2020 with about $71 million on its balance sheet, so the fact that the company is raising capital may not have been a total surprise.
Still, the stock is down a lot. Stock in Albemarle and other lithium miners isn’t moving as dramatically. Albemarle shares were up 1.7%, while shares of SQM (SQM) gained about 0.4%.
Shares of smaller lithium miners were weaker. Livent (LTHM) stock fell more than 3% and shares of Lithium Americas (LAC) lost almost 4%.
Piedmont is the most popular lithium stock among Wall Street analysts. All six of the analysts covering the company rate the shares at Buy, while the average Buy- rating ratio for stocks in the Dow Jones Industrial Average is about 60%.
The average target for the stock price, however, is about $62. Piedmont stock was at about $64 even after Wednesday’s plunge.
Write to Al Root at [email protected]
