Ground Breakers: Vulcan shares tumble on return after short report

Shares in Vulcan Energy (ASX:VUL) have been heavily sold in morning trade, wiping more than $260 million in value off the ASX 300 company.

It came as the lithium developer and market darling returned to trade for the first time since a report from short seller J Capital on Tuesday night.

Titled ‘Vulcan: God of Empty Promises’, J Capital’s Tim Murray claimed the company painted a falsely rosy picture of its Zero Carbon Lithium Project and criticised assumptions about flow rates and production he claimed came from consultancies friendly to the company.

Vulcan initially issued a brief response to J Capital on Wednesday morning, noting the short seller openly admitted it was set to profit off a dive in the stock’s value, before hitting back with a detailed response to the claims immediately after yesterday’s market close.

Vulcan shares are down 15.34% or $2.30 to $12.69 this morning, still more thsn 60 times the rocketing company’s value early last year before fever around its ‘zero carbon’ geothermal lithium project took off.

Vulcan Energy share price today:

What did Vulcan and J Capital say?

Vulcan issued a detailed response claiming J Capital and report author Tim Murray made a series of claims that amounted to disinformation.

Stockhead’s Sam Jacobs has the details here.

And here’s the full statement.

Suffice it to say they don’t agree. The retort ranges from the funny – that a picture in J Cap’s report claiming to be Vulcan co-founder Horst Kreuter is anyone but – to the serious.

Vulcan claims J Capital, which is based overseas, violated ASIC’s guidelines on producing short reports by not sending questions through to the company in advance, which would have given the company the opportunity to respond to statements it thought were false or misleading.

Vulcan also said J Capital misrepresented its position on the lithium cost curve and erred in claims Vulcan had made falsely positive assumptions of the geothermal wells it will use to extract lithium and renewable energy from deep, hot brines in Germany’s Upper Rhine Valley.

The company said the ‘wrong and misleading statements in the report a are too numerous to mention’, insisting it had advised investors on 11 occasions in its PFS that given the nature of geothermal wells there are risks around flow rates.

Vulcan believes it “has an appropriate level of confidence around its assumptions surrounding flow rates, based on the experience of its team, and state-of-the-art scientific tools, data and studies as elaborated below.”

It says J Capital messed up the numbers around the zero carbon’s operating costs, confusing lithium carbonate, which Vulcan will not be producing, with lithium hydroxide, and that Horst Kreuter did not sell $10 million of shares after dropping off the company’s board, as JCap claimed.

Shorter J Capital, which anknowledges in a note that is stands to benefit from stocks it reports on losing their value, has previously reported on Aussie tech stocks Nearmap (ASX:NEA) and WiseTech (ASX:WTC) with little success.

Did JCap respond?

Why yes, yes it did. Murray issued this post in response to Vulcan’s response.

“Vulcan’s response to our report, though full of innuendo, fails to call out any significant “falsehoods and inaccuracies” that it claims are in our work,” he wrote.

“Instead, Vulcan tries to justify the conflicts of interest behind unrealistic forecasts by claiming that acquiring the companies that made rosy forecasts gave “Vulcan a unique market advantage.””

He reiterated claims about the Vulcan’s flow rate, that Vulcan has not publicly revealed the sorbent it will use in the direct lithium extraction process it will use to extract lithium from the brine and community opposition in Germany, all of which Vulcan refuted in its response.

Grab your popcorn though, because it is all going off on Twitter where known Vulcan sceptics like lithium market commentator Joe Lowry and users supportive of Vulcan are teeing off.

A couple Twitter users posted a screencap of an email claimed to be from Next Investors, a stock promotion newsletter produced by S3 Consortium which according to Vulcan’s annual report owns 0.6% of its stock, suggesting a Gamestop style short squeeze would be on.