Why Standard Lithium Stock Soared Today

Key Points

• Reuters reports the U.S. government may take a 10% stake in Lithium Americas.

• That stock nearly doubled when the news broke, and investors are hoping for something similar from Standard Lithium stock.

• 10 stocks we like better than Standard Lithium ›

Lithium Americas (NYSE: LAC) stock exploded Wednesday morning after Reuters reported that the start-up miner of lithium for electric car batteries may be in line for a big investment from the U.S. government.

No sooner had this happened than Standard Lithium (NYSEMKT: SLI), a completely different lithium miner, saw its stock jump too -- up 18.5% through 11:05 a.m. ET.

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The two stocks are not the same...but the reason they're rising is.

Image source: Getty Images.

What Reuters said about Lithium Americas

The U.S. government plans to "renegotiate" a $2.3 billion loan to Lithium Americas, says Reuters, requiring the company to hand over a 10% stake in exchange for the loan. Investors love the idea, probably presuming it will make Lithium Americas, if not "too big to fail," then perhaps too important for the government to allow it to fail.

This, in a nutshell, is why they're bidding up Lithium Americas stock. But why are they bidding up Standard Lithium stock as well?

I'm hypothesizing here, but presumably the reason is they're assuming the same logic underlying a U.S. investment in Lithium Americas (to secure America's supply of lithium) might lead to a similar government investment in Standard Lithium.

Is Standard Lithium stock a buy?

It's not the craziest theory I've ever heard. Both companies are based in Canada, but Lithium Americas' big Thacker Pass mine is located in Nevada, while Standard Lithium's operations are run out of Arkansas. They both have substantial U.S. ties. It makes sense the U.S. government might want a piece of them both. Lithium Americas is expected to begin producing revenue a year sooner than Standard Lithium, though, in 2027 instead of 2028, making it a marginally better bet.

Both businesses are still years away from becoming viable, and it's unclear how profitable they might become. Caveat investor.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.