Sigma Lithium Short Seller Says Forget About Tesla Buyout, Projects 50%-75% Downside

Zinger Key Points
  • Grizzly Research rejects SGML takeover rumors and predicts a 50%-75% share decline.
  • The company has nothing to do with "greentech" and "green mining" and lacks environmental permits, short seller says.

Grizzly Research LLC has issued a short report on Sigma Lithium Corp SGML, estimating a 50%-75% drop in the share price and shooting down acquisition rumors.

The Short Report: The company's share price rose by more than 180% in the last year, driven by rumors of acquisition offers made before production started.

Among these, Tesla TSLA's interest in acquiring SGML, as reported by Bloomberg in February, has lately sparked the greatest excitement among investors.

Grizzly Research said Elon Musk's possible interest in SGML is unlikely on the grounds of inadequate technical innovation, alleging that SGML has nothing to do with "greentech" and "green mining." 

"The company has spent essentially nothing on R&D in its entire existence" and "lacks the leadership and technical expertise necessary to effectively run the mine," according to the short report. 

Benzinga has contacted Sigma Lithium for comment on the short report. 

Sigma's Brazil Operations: Sigma Lithium is involved in the exploration and development of lithium resources in Brazil. It owns 100% of the Grota do Cirilo, Genipapo, Santa Clara and So José properties, which consist of 27 mineral rights spanning an area of roughly 191 square kilometers in the Araçua and Itinga areas of the Brazilian state of Minas Gerais.

In addition, local mining specialists in Brazil who were consulted by Grizzly Research said SGML is still in need of important environmental permissions in order to reach its April 2023 production deadline, the report said. 

Sigma Lithium Overvalued For Takeover? SGML's market price is too expensive to pique the interest of potential buyers, the short seller said. Rio Tinto RIO is said to have rejected SGML because of the firm's exorbitant pricing.

Grizzly Research said it aggred with the actions of insiders who sold 924,100 shares in the second half of last year and so far this year, generating profits of CAD29.3 million ($21.34 million). Lastly, the short seller said that SGML shares might decline by 50%-75%.

SGML Price Action: Sigma Lithium shares were trading down 2.44% at $35.61 midday Tuesday. 

Photo via Shutterstock.

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