Lithium Americas (LAC) stock price has dived: buy the dip?

Lithium Americas (NYSE: LAC) stock price was one of the top laggards in Wall Street as the company announced a new fundraising plan. It crashed by over 27%, its biggest single-day crash since April 2022. 

Fresh dilution risks

Lithium Americas has been under intense pressure for a long time. As a result, its stock has now crashed by over 81% from its all-time high in November 2021. 

This crash coincided with two main events. First, the price of lithium has plunged hard in the past few months because of oversupply concerns.

Second, there are signs that the demand of electric vehicles is going down. In the US, many vehicle dealers have warned that EVs are not selling as fast as they did before. As a result, many of them have continued to focus on Internal Combustion Engine (ICE) vehicles.

On the positive side, Lithium Americas has completed a spin-off of its operations into two companies: Lithium Argentina and Lithium Americas. This was an important decision as it allowed the company to simplify its operations.

Also, the company made a big discovery in Nevada that will become the biggest lithium mine in the United States in 2026. It is now developing the mine with the support of the Biden administration, which has agreed to provide $2.26 billion. 

The LAC stock price crashed hard after the management decided to raise $275 million, a move that will dilute its shareholders. These funds will go towards the development of the Thacker Mine in Nevada. 

Lithium Americas investors believe that the company will benefit from the ongoing energy transition. As an American company, it will also benefit from the friendly terms offered by the government through the Inflation Reduction Act (IRA).

Still, there are risks to this thesis now that lithium we are living in an era of lithium abundance. Countries like Australia, Chile, Argentina, China, and Brazil are all boosting their lithium production. More countries will likely come to the market, leading to an oversupply.

Lithium Americas stock price forecast

LAC chart by TradingView

The daily chart shows that the LAC share price bottomed at $3.80 in February and then bounced back to $7.73 this month where it formed a double-top pattern. It has now crashed below all moving averages and the 23.6% Fibonacci Retracement level.

The stock has now formed a down-gap and moved below the Ichimoku cloud indicator. Therefore, I suspect that it will continue falling as sellers target the key support at $3.80, its lowest level this year.

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