American Battery Technology Co (NASDAQ: ABAT) crashed as much as 40% late on Wednesday following surprise announcement that the Department of Energy (DOE) has rescinded a previously announced grant.
The government agency has revoked its $52 million grant to ABAT aimed at supporting its lithium hydroxide refinery project – raising serious questions about the company’s operational credibility and its overall path forward.
ABAT shares have been in favour with retail investors this year. Despite the aforementioned nose-dive, therefore, they’re trading at more than 6x their price in early April.
Why is the DOE news a major blow for ABAT stock
American Battery shares tanked on the DOE news primarily because the grant wasn’t just symbolic for the company – it was the financial backbone of its lithium hydroxide refinery ambitions.
The federal grant, originally announced in 2023, was meant to accelerate domestic battery material production and reduce reliance on foreign supply chains.
Losing it now, after months of investor optimism and project planning, is, therefore, a major blow.
It indicates potential compliance or execution issues and strips ABAT stock of a major non-dilutive funding source. For a pre-revenue firm in a capital-intensive sector, that could prove catastrophic.
Investors are now left wondering whether American Battery can secure alternative financing – or if it will resort to dilutive equity raises just to stay afloat.
Should you buy American Battery shares on the pullback?
Despite the recent plunge, ABAT’s fundamentals do not currently justify a contrarian bet.
The company lacks meaningful revenue, has negative cash flow, and rather limited visibility into commercial-scale production. Its valuation – previously inflated by speculative hype – still lacks grounding in tangible metrics.
Losing the DOE award doesn’t only delay its refinery timeline but also increased the likelihood of shareholder dilution. Plus, lithium market itself is under duress from oversupply and falling prices, which could compress margins even if American Battery eventually scales.
Until this firm demonstrates operational execution, secures new funding, and proves its technology at scale, the risk-reward profile in ABAT shares remains skewed to the downside.
ABAT shares are flashing red light
The meteoric increase in ABAT stock price in recent months has been attributed primarily to retail investors. But sudden suspension of federal support has exposed the fragility of that momentum.
While clean energy remains a long-term megatrend – investors should practice caution in chasing speculative names without revenue, cash flow, or execution history.
In American Battery’s case, the crash isn’t just a bump in the road – it’s a flashing red light. Until the company rebuilds trust and secures new financing, this dip looks more like a value trap than a buying opportunity.
That’s perhaps why Wall Street seems to have no interest in ABAT shares. At the time of writing, only one analyst covers the Nasdaq-listed firm and even they have a $6.0 price target, reinforcing a lack of meaningful upside from here.
The post What made ABAT stock crash and is the dip worth buying? appeared first on Invezz
