I needed a break from a patent that is kicking my butt. Its use of the word “embodiment” is making it next to impossible to actually pin down how a company is processing, or more precisely how they will process black mass if they ever get to commercial scale.
So I went and looked at the circulars and the trash bin (StockTwits), and I saw there are still people scratching their heads on why, after the news dropped that American Battery Technology Company ABAT got the waiver for black mass, the price tanked.
First, and this is a nitpick, but as I told someone who wanted to start covering the more technical aspects of the critical minerals market, terminology is king. Once you learn the proper lexicon, most everything else gets a lot easier.
Anyways, what ABAT was granted from the Department of Commerce was an interim license with an export allowance of $100 million in black mass. But that still seems like good news, so the question stands:
Why did the price tank on good news?
One of the reasons the share price tanked was that it spiked right after the news dropped, and that spike happened during pre-market. In my opinion, that spike was due to how all these sites now use AI to scrape and copy articles, and the AIs decided to play the old game of telephone and created some rather odd headlines. There were several versions, but this one from the Manila Times is a good example:
American Battery Technology Company Receives Approval for Sale of $100 Million of Exported Recycled Black Mass Critical Minerals with License from U.S. Department of Commerce
Those types of headlines caused the algos to go crazy for a bit. But because it was PM, the liquidity at the higher prices got thin, and that is when the shorts stepped in.
I am sure there was some profit taking, but most of the retrace was shorts working it back down. If someone had done a screen recording, they could have used it as a teaching model in a class called How to Short Momentum Stocks 101.
But why were the shorts so successful?
Investors have been waiting for the Golden September, which didn’t happen, and the Silver October, which could still happen. Those two months are the traditional months when sales surge and there is peak customer demand in China. For lithium, those are the months when the companies in the supply chain as well as the actual cell manufacturers restock ahead of Q4. This bump after what is always a slow summer has historically caused a rally in both the physical and equity markets.
The problem is due to the price of lithium going over 20K and hanging out there most of the year, many producers have been content to just buy what they need and wait for the spot prices to start dipping, which they are now doing, that is why we may still see a Silver October.
The upside, I guess, can be that we did not get a boom-bust cycle and so far just a reasonable pullback due to what looks like current capacity still outpacing demand. What to watch will be once we roll into 2027 and before the Chinese New Year. That is when we should start to see some actual procurement numbers for BESS projects, not just estimates that are being used to hold a spot in an interconnection queue.
My opinion on what that will look like is, the numbers we have been seeing in 2026 will end up being overinflated, but at the same time there really won’t be enough room to put a negative spin on those numbers due to the actual growth of ESS. So while the year-over-year growth represented in % is rather misleading without the underlying GWh, what will be listed will still be impressive.
But back to ABAT, and the short of it (see what I did there) is that those are just a few reasons why ABAT didn’t hold its gains on good news. Ironically, it mostly doesn’t really have anything to do with how the company is run, which from what I have been told is pretty damn efficient if a tad bit unorthodox due to how they compartmentalize even intra-company communications.
But rather, and this is not just lithium centric, the entire critical materials sector is weak right now even if we are seeing amazing news all the time. The problem is, and this is a word that got one retail investor’s jimmies all ruffled this week, the news is almost always the potential of something happening: an investment in a project, a pilot plant coming online, a second salsa option at the taco cart.
Very rarely, and mostly it’s just the majors that fall into this category, but rarely is it news about something happening that will immediately affect a company’s margins in a positive manner, and that is why for many the price drop after good news with ABAT was so infuriating, this was a positive that directly affected their margins.
Many know my opinion on the company, and for me the only real problem with the company, ever since they got rid of their toxic debt, is their lack of communication, and to be specific here, what I am talking about is not the send it to the moon PRs that retail is always asking for.
Rather, what I am talking about, and I know if ABAT wanted to they could do this, is to publish more frequent operational updates, updates that would allow investors to learn not only of the achievements ABAT has accomplished but also the challenges they are facing, which at times are more important than the accomplishments.
But since they use a strict milestone-driven communication strategy and only release news at or when 100% completion is all but guaranteed, and I have explained why they do this and it goes back to them missing so many deadlines, 4 of them for revenue alone. But it is this lack of progress updates that causes retail to just assume that there is nothing going on and that the shares the C-suite were awarded were inordinate and possibly negligent overcompensation for adding a second salsa option to the taco cart.
And the company is fully responsible for this kind of retail sentiment, even if the narrative fueling it is not true, but once again it is what we have come to expect from them.
So, what’s next?
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Appreciate the detailed breakdown as always, Mith.
While the short-seller thesis and the general sentiment across the critical materials sector certainly play a role, I think there is an elephant in the room that shouldn’t be overlooked: the mechanics of the S-3/A filing and the active ATM facility with Virtu Americas.
Looking closely at the PR itself, it doesn't announce new commercial contracts or immediate incremental cash flow but it essentially restores the status quo prior to the recent BIS export restrictions, allowing the company to export up to $100M in black mass under an interim license. That is certainly positive operational news to avoid an inventory bottleneck at Reno, but it is a regulatory waiver rather than new signed customer orders.
More importantly, look at the order flow: just three minutes into the regular session, volume had already surpassed 13 million shares, ending the day above 21 million while the price couldn't hold even $2.40. That level of instantaneous liquidity being fully absorbed points directly to massive supply hitting the tape. For a company managing cash burn and facing ongoing CapEx needs, utilizing an active ATM facility into a high-volume, news-driven liquidity event is standard corporate finance playbook.
Shorts may work momentum stocks down, but substantial dilution into retail volume often caps the upside before momentum can even build. Don't you think the immediate capital-raising necessity through the ATM had a much more direct impact on that price action than seasonal restocking or algo glitches?
Curious to hear your take on how much of the ATM capacity you think was tapped during that session.