Introduction
In the world of gambling, there comes a time to fold rather than face heavy losses. Australia's recent referendum may just be a precedent for the fate of two pivotal lithium mergers. Dryblower examines the parallels.
The Failed Referendum: An Embarrassment
The referendum's failure, which was evident by mid-year, was an unwelcome outcome. Perhaps it would've been wiser to delay it until consensus was reached, rather than rush into a hurtful conclusion.
Lithium Mergers: An Uncertain Bet
Albemarle's recent bid of $3 per Liontown share had seemingly taken the same trajectory as the referendum, and the impending Allkem-Livent merger seems to be treading a similar path. The heart of the problem? A substantial decrease in lithium prices, much like the dwindling 'yes' votes leading up to the referendum.
Lessons from ‘The Gambler’
Kenny Rogers' classic song, "The Gambler," offers relevant advice:
"You got to know when to hold ‘em, know when to fold ‘em Know when to walk away and know when to run."
Despite the increasing odds, the Australian government persisted with its well-meaning but flawed referendum. Likewise, Albemarle clung to its overpriced bid for Liontown even when lithium's market value took a dive.
Changing Times and Lithium Prices
The dwindling value of lithium, coupled with Morgan Stanley's projection of even lower prices in the coming years, indicates it might be a wise time to reconsider these deals. Albemarle may have finally withdrawn its bid due to this decline, coupled with potential competition from iron ore magnate Gina Rinehart.
The Allkem-Livent Equation
The Allkem-Livent merger's complexities arise when comparing the shifting share values between the two markets, especially amid such volatile lithium prices. While an Allkem shareholder meeting will soon provide clarity on the merger's status, current indicators don't bode well, with both companies facing significant share price reductions since the merger announcement.
In Summary: A Play on Values
Lithium's fluctuating prices and the recent fall in the A-dollar exchange rate have raised questions on the actual value of the Allkem-Livent merger. Kenny Rogers’ lyrics once again might provide the needed wisdom:
"Every gambler knows that the secret to survivin Is knowing what to throw away and knowing what to keep Cause every hand's a winner and every hand's a loser And the best that you can hope for is to die in your sleep."
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