February 21, 2023

Why Sigma Lithium Stock Popped on Its Tesla News

Posted By: ndeeney

Why Sigma Lithium Stock Popped on Its Tesla News

© Provided by The Motley Fool
Why Sigma Lithium Stock Popped on Its Tesla News

What happened

Shares of Brazilian lithium production start-up Sigma Lithium (NASDAQ: SGML) surged 13.1% through 10:25 a.m. ET on Tuesday morning, the first trading day since Bloomberg reported that electric car giant Tesla (NASDAQ: TSLA) may buy the company.

Load Error

So what

“Rampant demand” for lithium to produce electric car batteries lies behind Tesla’s bid, reports Bloomberg. Also helpful is the fact that Sigma Lithium’s biggest shareholder, private-equity fund A10 Investimentos, is reportedly looking to exit its investment and seeking a buyer for its 46% stake in the company. And yet, a sale is not assured.

Although Tesla declined to comment on Bloomberg’s story, the news agency reported that Tesla is actually considering several lithium investments in addition to (or as an alternative to) Sigma Lithium. Meanwhile, Sigma Lithium shares have already tripled in price over the past year, a fact that may incentivize Tesla to keep on looking in hopes of finding a cheaper way to get the lithium it needs.

Now what

All of this is to say that Sigma Lithium shareholders perhaps shouldn’t go counting chickens before they’re hatched. At the present time, this rumor of a Tesla buyout is just that — a rumor that may never come to fruition.

And consider the risks if a buyout does not happen. Valued in excess of $3 billion today, Sigma Lithium doesn’t actually have much to value its stock on: no revenue and no profits, naturally. Instead, Sigma Lithium lost more than $45 million over the last 12 reported months and burned through $62 million in negative free cash flow. Meanwhile, the stock has only $63 million in the bank and will probably be out of cash before the year is over.

That gives plenty of reason for A10 Investimentos to want to sell Sigma Lithium. But I’m not sure that it gives other investors much reason to want to buy Sigma Lithium stock.

SPONSORED:

10 stocks we like better than Sigma Lithium

When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now… and Sigma Lithium wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of February 8, 2023

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

Continue Reading

wealthiestinvestornews.com is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of wealthiestinvestornews.com are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.

The sender of this email makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.

The content on any of wealthiestinvestornews.com websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options.

The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.

Disclaimer: Past performance is no guarantee of future performance. This product is for educational purposes only. Practical application of the products herein are at your own risk and wealthiestinvestornews.com, its partners, representatives and employees assume no responsibility or liability for any use or mis-use of the product. Please contact your financial advisor for specific financial advice tailored to your personal circumstances. Any trades shown are hypothetical example and do not represent actual trades. Actual results may differ. Nothing here in constitutes a recommendation respecting the particular security illustrated.