Why the Syrah Resources Share Price Sank Today

What Happened to the Syrah Resources Share Price?

The share price of graphite and vanadium miner Syrah Resources Ltd [ASX:SYR] tumbled by more than 11% today. The market is blowing some steam out of Syrah’s share price after the stock more than tripled in value since April last year.

Why Did This Happen to SYR Shares?

Today’s price action shows the danger of chasing a sharply rising stock.

Last week Syrah shares ran up aggressively in response to media reports that Swiss commodities giant Glencore plc [LON:GLEN] had shown an informal interest in buying out Syrah at a large premium.

Today, more sober market players have poured cold water on the rumour.

They’ve pointed out that Glencore has seldom shown interest in developing mines, and that the firm has no experience in graphite.

What’s more, it’s a little hard to believe that a hard-nosed team like Glencore would indicate a frothy takeover price on the ‘first phone call’.

When shares rise sharply for speculative reasons, they tend to attract the attention of short-sellers. Today’s price action certainly points to selling pressure from the shorts.

What Now For Syrah Resources Ltd?

Despite the cloak-and-dagger games of media leaks and volatile share price movements, Syrah shareholders still have exposure to exciting themes. Graphite is a crucial input for smartphone, tablet and laptop batteries, while vanadium is an important ingredient in high-tech energy storage.

I still believe merger and acquisition activity in this sector is a question of when, not if…but investors would do well to tone down their expectations a little.

Cheers, Tim Dohrmann
Small-Cap Analyst, Australian Small-Cap Investigator

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