Short Sellers Beware! Arcadium Lithium’s Stock Surge Could Spark a Massive Squeeze
Arcadium Lithium (NYSE: ALTM) has been making news lately due to its recent stock explosion. Exciting news: a huge $6.7 billion takeover agreement with mining behemoth Rio Tinto might change the lithium market.
Although a lot of investors are applauding the stock’s rise, short sellers are placing large bets that it will plummet.
Why is the hysteria being fueled? Why do some traders think this surge won’t continue? What implications does this have for Arcadium Lithium’s future? Let’s have a look at it.
Rio Tinto’s $6.7 Billion Lithium Power Play
In October 2024, Rio Tinto announced plans to acquire Arcadium Lithium for $5.85 per share in cash, a 90% premium over its stock price at the time.
Rio Tinto is focused on securing its position in the rapidly expanding lithium industry. The need for lithium, a crucial component in EV batteries, is rising in tandem with the manufacturing of electric vehicles (EVs). Arcadium is a desirable candidate for purchase since it possesses significant lithium holdings in Argentina, Australia, Canada, and the United States.
Jakob Stausholm, the CEO of Rio Tinto, described the transaction as a “game-changer” for the business, establishing it as a frontrunner in the lithium race. Paul Graves, CEO of Arcadium, also commended the transaction, stating that it gives stockholders “full and fair value.”
Investors flocked in, as was to be expected, and Arcadium’s stock price surged.
Shareholders Love the Deal—But It’s Not a Done Deal Yet
With such a huge premium, Arcadium shareholders overwhelmingly approved the acquisition, with 98% voting in favor on December 23, 2024.
But here’s the catch—the deal still needs regulatory approval.
Governments in Australia, Canada, and Italy must give the green light before the transaction can close. And in the U.S., regulators were particularly interested in Rio Tinto’s ties to China’s Chinalco, a state-owned entity with a stake in the company.
Despite concerns over foreign influence, the U.S. Committee on Foreign Investment (CFIUS) gave its approval, determining that there were no national security risks. That was a big win for the deal, but the final regulatory approvals are still pending.
Until everything is officially cleared, there’s still some uncertainty hanging over this acquisition.
Stock Price Surges—But Here’s Where It Gets Interesting
After the deal was announced, Arcadium’s stock price exploded, jumping nearly 30% in premarket trading and hitting $5.55 per share.
By March 6, 2025, it was trading at $5.84 per share, just a penny below the buyout price of $5.85. That means the market is almost fully pricing in that the deal will go through.
But not everyone is convinced.
Short Sellers Are Betting Against Arcadium—Why?
While many investors are buying up Arcadium shares, a growing number of traders are shorting the stock, meaning they’re betting the price will drop.
As of February 14, 2025, short interest in Arcadium had climbed to 58.41 million shares, or 5.65% of the stock’s public float. That’s a 29.4% increase in just two weeks!
So why are short sellers suddenly piling in? Here are a few possible reasons:
- Regulatory Uncertainty – While the U.S. has cleared the deal, other countries could still raise concerns and delay or even block the acquisition.
- Profit-Taking – Arcadium’s stock is already trading near the buyout price, meaning there may not be much room for further gains. Some traders expect investors to cash out soon, sending shares lower.
- Market Volatility – Lithium prices have been all over the place, and some believe Arcadium might not be worth what Rio Tinto is paying if the market cools down.
Then there’s the short squeeze factor.
If short interest keeps rising and the stock price continues to climb, short sellers may be forced to buy back their shares to cut losses—pushing the price even higher.
That’s what happened with GameStop in 2021 and AMC in 2022. Could Arcadium be the next short squeeze target? It’s a long shot, but traders are keeping a close eye on it.
So, What Happens Next?
Arcadium Lithium’s future is still up in the air.
As the transaction proceeds, the stock is expected to remain at $5.85 per share if regulators approve the deal. However, the stock may fall if there are problems or delays since uncertainty may return.
Additionally, if enough short sellers are caught in the wrong side of the deal, the market may quickly become turbulent.
Investors are currently keeping a careful eye on how this deal’s last details come together.
