👉 Background: J Capital Research is an activist investor that likes to look for fishy stuff no one else has noticed. Lake Resources is an ASX-listed 'clean lithium' developer working on a big project in Argentina's Lithium Triangle.

👉 What happened: J Capital reckon there's no proof that Lake Resources' lithium extraction tech will actually work. And they also allege Lake paid a business to produce favourable research... At the same time that insiders at the company sold their shares.

👉 What else: These allegations are pretty spicy, but this kind of thing is all in a day’s work for activist short sellers like J Capital.

What's the key learning?

💡Short selling is an investment strategy that speculates on the price of a stock going down instead of up ⤵️. Investors borrow stock and sell it with the hope of buying it back cheaper. Then they return the stock back and pocket the diff.

💡Regular short sellers might not tell everyone about their position, but activist short sellers definitely will. They get their name from taking action to drive down prices by releasing reports criticising a company's financials or practices.

💡There have been some hits and some misses... But in all cases, the share price of the targeted company takes an initial whack. Lake's shares fell 6.3% after J Capital's report, so it will be interesting to see how this one lands.

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