Tag: Motley Fool

The Vanguard Australian Shares Index ETF (ASX: VAS) unit price is seemingly plummeting today. VAS units closed at $97.21 each yesterday. But upon market open this morning, this popular ASX exchange-traded fund (ETF) opened at just $94.91 a unit. It’s currently asking $95.08, down a nasty 2.2%.

And yet the S&P/ASX 300 Index (ASX: XKO) – the benchmark index that VAS tracks – is actually up by 0.1% today thus far. So what on earth is going on? Isn’t VAS an index fund, designed to almost exactly mirror the ASX 300?

Well, yes. But today is an exception. The Vanguard Australian Shares ETF is not falling due to some strange decoupling from its index. Rather, it is falling because this ASX ETF has just traded ex-dividend distribution for its upcoming investor payment.

VAS price falls, but thank the dividend distribution

Yes, VAS pays dividends, although they come in the form of dividend distributions due to its ETF nature. The ASX 300 is an index comprised of the 300 largest companies on the ASX by market capitalisation. That means everything from Commonwealth Bank of Australia (ASX: CBA) and Woolworths Group Ltd (ASX: WOW) to Harvey Norman Holdings Limited (ASX: HVN) and Ampol Ltd (ASX: ALD).

Since this ETF holds all 300 or so companies in the ASX 300 Index in its underlying portfolio, it receives dividends from any companies in the index that pay them. In the ASX 300’s case, that is most of them, at least when it comes to the larger holdings.

So VAS is obligated to pass these dividends on to its investors. Vanguard does this every quarter, so investors can expect a dividend distribution every three months or so.

This is what is occurring today. VAS’s upcoming distribution, covering the quarter ended 31 March 2021, has just traded ex-distribution, meaning that any new investors from today won’t receive the next payment. This is due to be doled out on 20 April. This payment will be worth 199.8517 cents per unit.

This payment brings VAS’s trailing 12-month distributions to $4.66 per unit. On current pricing, that gives the Vanguard Australian Shares Index ETF a trailing yield of 4.9%.

The post Vanguard Australian Shares ETF (ASX:VAS) plummets! What’s going on? appeared first on The Motley Fool Australia.

More reading

• Hoping to bag the next Vanguard Australian Shares Index ETF (ASX:VAS) dividend? Read this
• What kind of dividends does the Vanguard Australian Shares ETF (ASX:VAS) pay?
• VAS is the ASX’s most popular ETF. But where are the tech shares?
• Warning: Only 4 ASX shares just added to ASX 300 are profitable
• Diversification? Why VAS is really a bet on banks and miners

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Harvey Norman Holdings Ltd. The Motley Fool Australia owns and has recommended Harvey Norman Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The team at Goldman Sachs has been looking over the federal budget and has given its verdict on how it expects consumer spending to be impacted.

What did the broker say?

Goldman expects the budget to be supportive of consumer spending in the coming years. Though, it suspects that the spending may not be equal across the economy.

It commented:

“Within the robust consumption spend (~6.7% FY22-24e), we believe that a larger portion will return to services spending, with a catch up on lifestyle services (travel, entertainment etc, ~10.8% FY22-24e) post COVID, while Essential Services (~7.3% FY22-24e) and Staples Retail Goods (~4.4% FY22-24e) will remain a relatively stable share of spend. We expect Discretionary Retail Goods (Household equipment, clothing), which benefited most during COVID lock-downs, will see challenged growth (~-2.4% FY22-24e).”

With this in mind, the broker has named four ASX shares to buy:

Endeavour Group Ltd (ASX: EDV)

Goldman Sachs is positive on this drinks company and has a conviction buy rating and $8.00 price target on its shares.

It explained why it is positive, saying: “For the breadth of its consumer assets and depth of loyalty as well as more advanced digital transformation driving market share gain and faster sales growth and margin expansion. F&B retailers are also more defensive vs cost inflation and China supply chain disruptions given better bargaining power and more localized supply chain.”

Harvey Norman Holdings Limited (ASX: HVN)

The broker prefers Harvey Norman over rival JB Hi-Fi Limited (ASX: JBH). It has a buy rating and $5.80 price target on the former’s shares, whereas it has a sell rating and $39.00 price target on the latter.

Goldman explained: “We are cautious on home retailers due to exposure to China supply chain disruption and cost inflation risks, while competition from online pureplays such as Amazon are picking up speed. Between JBH and HVN, we prefer HVN due to more protection from online competition given higher regional and boomer exposure as well as lower valuation.”

Webjet Limited (ASX: WEB)

Goldman believes this online travel agent could be well-positioned for growth post-COVID. So much so, it has a buy rating and $6.90 price target on its shares.

The broker commented: “We expect WEB to benefit from the tailwind of travel recovery, offering structurally improved profitability and a strong outlook on the Bedbanks business, which we expect to resume the strong growth journey that it embarked on prior to COVID.”

Woolworths Group Ltd (ASX: WOW)

Its analysts are also bullish on retail giant Woolworths for the same reason as Endeavour. The broker likes the company due to the breadth of its consumer assets and wide-reaching loyalty program.

Goldman has a buy rating and $40.50 price target on the company’s shares.

The post Federal budget: Goldman Sachs names 4 ASX shares to buy appeared first on The Motley Fool Australia.

More reading

• Is the Webjet share price set to take off in April?
• Why Air NZ, Block, Eagers Automotive, and Harvey Norman shares are dropping
• ASX 200 (ASX:XJO) midday update: Tabcorp demerger update, BHP higher, Block tumbles
• Here’s why the Harvey Norman (ASX:HVN) share price is slipping today
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Harvey Norman Holdings Ltd. The Motley Fool Australia owns and has recommended Harvey Norman Holdings Ltd. The Motley Fool Australia has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Does the Flight Centre Travel Group Ltd (ASX: FLT) share price have a dividend reinvestment plan? Good question.

Dividend reinvestment plans (DRIPs) are often a popular option for investors if a company does offer one. A DRIP allows investors to automatically reinvest a dividend payment back into the company that pays it. This is done by election, and means that instead of receiving a dividend in the form of a cash payment, the investor is issued new shares of the company instead.

Many ASX shares, particularly blue-chip shares, offer dividend reinvestment plans. Some even come with a discount, meaning that if an investor chooses a DRIP, they will get a small bonus — the new shares issued will be worth slightly more than if the investor opted to receive the dividend in cash.

Remember, there’s no free lunch here though. If you reinvest your dividend through a DRIP, the Australian Taxation Office (ATO) usually still treats this situation as though you had received the cash. So a DRIP is certainly not some kind of legal tax dodge — your dividends are taxed the same way, whether they are received as cash or reinvested.

What about the Flight Centre dividend?

So that takes us to Flight Centre. Do Flight Centre shares offer a DRIP? Well, the answer is a definitive no.

For one, a company needs to actually pay out dividends if investors want to utilise a DRIP. And Flight Centre hasn’t paid a dividend for years now. Its last shareholder payment came back in October 2019. Flight Centre had actually announced a 2020 interim dividend, but the company was forced to cancel it due to the impacts of the COVID-19 pandemic.

But Flight Centre did not even offer a DRIP when it was paying a dividend anyway. Investors had no option but to receive their Flight Centre dividend in cash. If the company ever returns to paying out dividends, investors might well have the option of a DRIP when that does occur. But we shall have to wait for that day to come to see.

The Flight Centre share price has taken a tumble so far today. This ASX travel share is currently down by 1.07% at $19.47 a share. That still puts it up around 4.3% in 2022 so far though. At this share price, Flight Centre has a market capitalisation of $4.02 billion.

The post Do Flight Centre shares have a dividend reinvestment plan? appeared first on The Motley Fool Australia.

More reading

• Who owns Flight Centre (ASX:FLT) shares? You’ll want to read this
• Finally! 4 travel ASX shares ready to take off: expert
• Do Flight Centre shares pay dividends?
• Flight Centre share price edges lower despite ‘important step’
• These are the 10 most shorted ASX shares

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Starpharma Holdings Limited (ASX: SPL) share price is up 6% following a company announcement to the market this morning.

Starpharma has announced it will relaunch its VIRALEZE antiviral nasal spray in the UK after resolving issues raised by the regulator in June last year. Supply preparations are already underway and the product will be back online and in pharmacies over the next few weeks.

Starpharma share price spikes after regulator’s tick of approval

ASX investors have reacted strongly to the news today. The Starpharma share price is heading northwards for a fourth consecutive day. It is currently up 6% on Monday’s closing price, trading at 96 cents.

Starpharma paused the sale and promotion of VIRALEZE in the UK after the Medicines and Healthcare Products Regulatory Agency (MHRA) wrote to its UK retail partner, LloydsPharmacy querying promotional claims about VIRALEZE and its impact on COVID-19.

As my Fool colleague Kerry Sun wrote at the time, the correspondence related to “references to SARS-CoV-2 and COVID-19, and the interrelationship between these product claims and its categorisation”.

MHRA was not questioning the safety or quality of VIRALEZE. It was querying “allowable promotional claims” under the product’s categorisation as a medical device.

On the day of that announcement, the Starpharma share price nosedived by 9.4% to $1.54.

In laboratory studies, VIRALEZE has proven effective in deactivating many respiratory viruses, including influenza and multiple strains of COVID-19.

In its statement today, Starpharma told ASX investors that it had provided MHRA with “extensive technical
information” on VIRALEZE and its anti-viral agent, SPL7013. Overnight, the regulator gave the green light for Starpharma to recommence sales in the UK.

What did management say?

Starpharma CEO Dr Jackie Fairley said:

We are delighted to be relaunching VIRALEZE in the UK. We look forward to making VIRALEZE available to UK consumers again very soon. VIRALEZE is registered in more than 30 countries, and we look forward to rolling the product out into further markets this year.

VIRALEZE is registered as a medical device in the UK and countries across Europe, Asia, and the Middle East. It is not approved for sale in Australia.

Starpharma share price recap

The Starpharma share price hit a 52-week low of 79 cents in the middle of March. ASX investors who picked up Starpharma shares at this price have seen a 21% return on their investment in just over two weeks.

The post Here’s why the Starpharma (ASX:SPL) share price is having such a stellar end to the week appeared first on The Motley Fool Australia.

More reading

• 4 ASX healthcare shares at 52-week lows
• Here’s why the Starpharma (ASX:SPL) share price is tumbling 8% today

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Starpharma Holdings Limited. The Motley Fool Australia has recommended Starpharma Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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At lunch on Friday, the S&P/ASX 200 Index (ASX: XJO) is having a subdued finish to the week. The benchmark index is currently down 0.1% to 7,492 points.

Here’s what is happening on the ASX 200 today:

Allkem shares jump on lithium price update

The Allkem Ltd (ASX: AKE) share price is racing higher today after the miner released a lithium pricing update. That update reveals that strong market conditions continue to positively impact the price received for Allkem’s lithium carbonate from the Olaroz Lithium Facility. For the June quarter, the average price received for lithium carbonate is expected to be US$35,000 per tonne FOB. This is up from US$27,236 per tonne during the March quarter and is more than triple the US$11,095 per tonne commanded during the first half.

Domain to acquire Realbase for $180 million

The Domain Holdings Australia Ltd (ASX: DHG) share price is in a trading halt on Friday. This is to allow the property listings company to launch an equity raising to fund the acquisition of Realbase for $180 million. Realbase is a leading campaign management technology platform in the Australia and New Zealand region. Management believes it is a highly strategic acquisition which provides complementary Marketplace offerings that progress Domain’s strategy to deliver solutions that help agents and consumers at every stage of the property journey.

Corporate Travel Management completes acquisition

The Corporate Travel Management Ltd (ASX: CTD) share price is sliding today despite announcing the completion of an acquisition. This morning the corporate travel specialist completed the acquisition of the ANZ corporate and entertainment travel business of Helloworld Travel Limited (ASX: HLO). Corporate Travel Management is paying $175 million for the business.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Friday has been the Allkem share price with a 7.5% gain. This follows the lithium miner’s pricing update. Going the other way, the worst performer has been the NRW Holdings Limited (ASX: NWH) share price with a 4.5% decline. This follows news that its CEO and managing director, Jules Pemberton, has sold 3 million shares on-market.

The post ASX 200 (ASX:XJO) midday update: Allkem jumps on lithium pricing update: Domain to acquire Realbase appeared first on The Motley Fool Australia.

More reading

• Why is the Corporate Travel (ASX:CTD) share price slipping today?
• Domain (ASX:DHG) share price halted for $180m equity raising to fund Realbase acquisition
• These were the best performing ASX 200 shares in March
• These were the worst performing ASX 200 shares in March
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor James Mickleboro owns Orocobre Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Corporate Travel Management Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Corporate Travel Management Ltd (ASX: CTD) share price is in the red today despite the company completing a major acquisition.

The business-focused travel agency has officially taken on Helloworld Travel Ltd (ASX: HLO)’s corporate and entertainment travel businesses.

At the time of writing, the Corporate Travel share price is $23.62, 0.55% lower than its previous close.

The broader market is also struggling today. Right now, the S&P/ASX 200 Index (ASX: XJO) and the All Ordinaries Index (ASX: XAO) have both slipped 0.12%.

Let’s take a closer look at today’s news from the ASX 200 travel giant.

Corporate Travel share price slides on acquisition update

Shares in Corporate Travel are slumping on Friday after the company announced it had completed a $175 million acquisition.

In mid-December, Corporate Travel agreed to purchase Helloworld’s corporate and entertainment businesses, undergoing a capital raise to pay for them.

The company will now work to integrate former Helloworld brands including QBT, TravelEdge, APX, Atlas Travel, AOT Hotels, and Show Group into its offerings.

After adding those brands to its portfolio, Corporate Travel will service more than a quarter of the ASX 200.

The acquisition has also expanded its service and technology offerings in the government and education sectors.

The company paid $100 million in cash and approximately 3.57 million new shares for Helloworld’s corporate and entertainment legs.

The cash was raised via an institutional placement and share purchase plan conducted over December and January.

Today’s seemingly good news hasn’t boosted the Corporate Travel share price, but at least it’s not alone in the red.

It’s joined by the share prices of fellow ASX 200 travel stocks Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB). They’re currently down 1.32% and 1.96% respectively.

Meanwhile, the Helloworld share price is trading 0.84% higher than its previous close.

Today’s dip sees the Corporate Travel share price almost 3% higher than at the start of 2022. That’s compared to the ASX 200’s 1.2% slip over that same time frame.

The post Why is the Corporate Travel (ASX:CTD) share price slipping today? appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Allkem jumps on lithium pricing update: Domain to acquire Realbase
• Buy these 2 impressive ASX shares in April 2022: experts
• Finally! 4 travel ASX shares ready to take off: expert
• Top brokers name 3 ASX shares to buy next week
• Why are ASX travel shares taking off today?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Helloworld Limited. The Motley Fool Australia owns and has recommended Helloworld Limited. The Motley Fool Australia has recommended Corporate Travel Management Limited, Flight Centre Travel Group Limited, and Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Amazon (NASDAQ: AMZN) has been in the headlines the past few weeks as the investor community buzzes with news of the company’s upcoming 20-for-1 stock split. Stock splits don’t change anything fundamental about the company, but they may provide greater access to investing in the stock and make it easier for Amazon employees to manage their equity. 

This is the company’s fourth stock split since its inception and the first since 1999. While it doesn’t change anything about the company outside of having more shares on the market, does it signal a change in its approach to its business? And does this put it on a path to start paying a dividend? Let’s take a closer look. 

Why do companies pay dividends?

Typically, companies begin to issue dividends when growth slows down and the company is loaded with cash. The standard dividend company has high sales figures but low growth figures, and so paying dividends is a way to provide benefits to shareholders. 

Yet, paying a dividend doesn’t always mean that a stock price doesn’t offer the potential for gains. Very mature companies usually offer a higher yield with fewer opportunities for stock gains, and they often have a high payout ratio — that’s the amount of their cash that they pay out as dividends.

However, there’s a huge middle ground where companies pay a dividend with a lower yield and payout ratio. A growing company will usually have its payout ratio around 25%, giving shareholders a cut of its success while retaining most of the cash to plow back into the business and generate growth. 

Amazon fits the model of a company whose growth is slowing but that generates tons of cash. So far, it invests its cash back into the company to fund all of its disruptive businesses, such as its recent acquisition of MGM studios and its investment in Rivian Automotive, which it hopes will provide it a fleet of electric vehicles for its delivery services. 

Case in point: Apple

Apple is a good stock with which to compare fellow FAANG stock Amazon. While the company did pay a dividend between 1987 and 1995, founder Steve Jobs wasn’t a fan of doing so since he felt they offer no intrinsic benefit to the company. And under his leadership, Apple did not pay them out.

But a year after Tim Cook took over the CEO role in 2011, the company began to offer dividends again. Cook felt that paying a dividend would open up the company to new investors, those who actively seek dividend stocks. At the time, Cook said: “Even with … investments [in our business], we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program.”

In the past 10 years since Apple started to pay a dividend, its stock has gained more than 1,000%, solidly outperforming the broader market and delivering tremendous value for its shareholders. There was no stock split precipitating the decision to pay a dividend in that case, and the next one was two years later. 

AAPL data by YCharts

There are similarities between where Amazon is now and where Apple was when it began issuing a dividend under Cook. There was a new CEO with a different perspective, and the stock price was at a record high. It had generated tons of cash through high sales, which management decided warranted the dividend, still leaving it with excess cash to invest in growth opportunities.

Are dividend stocks better investments?

In general, dividend stocks tend to outperform other stocks, even though they’re not usually high-growth stocks. That might seem counter-intuitive, but the point is that dividend-paying stocks are typically quality businesses that generate a lot of cash. And because they’re well-established, they outperform growth stocks as a segment since the category of “growth stocks” includes many initial public offerings that never really get off the ground.

Whereas individual growth stocks may grow many times the price of slower-growing dividend stocks, the risk associated with the sector means your money grows more safely with dividend stocks in addition to the benefit of passive income.

Will Amazon stock become a dividend stock?

Management has said nothing about issuing a dividend, so this is all speculation. In the most recent earnings release, CEO Andy Jassy reiterated that the company is investing in a plethora of growth ventures, from improvements in its core retail segment and other programs to newer initiatives in digital technology and physical storefronts. “There’s a lot to look forward to in the months and years ahead,” he said. 

Amazon stock has easily outperformed the S&P 500 over the past five years while it plows money back into increasing its growth.

^SPX data by YCharts

In the current environment, Amazon is also dealing with cost and wage increases, which are affecting its free cash flow and making the present perhaps not an ideal time to start thinking about a dividend.

In the meantime, Amazon is a great stock to own with plenty of opportunities for growth. There are reasons to consider buying shares before the stock split — and down the line, in the potentially not-so-distant future, a dividend might be in the cards. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Will Amazon start paying a dividend? appeared first on The Motley Fool Australia.

More reading

• 3 differences between you and billionaires, and 1 thing you have in common
• Why Apple stock looks tasty today
• 1 investing strategy to grow your money like magic
• 2 Warren Buffett stocks to buy and hold if the market crashes
• Why Amazon stock was outperforming the market today

Jennifer Saibil has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Amazon and Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Amazon and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Telstra Corporation Ltd (ASX: TLS) share price is edging lower amid the company paying out its latest dividend today.

The telco provider’s shares are currently down 0.63% to $3.935 apiece.

In context, the S&P/ASX 200 Index (ASX: XJO) is also hovering in negative territory during Friday morning trade. The benchmark index is down 0.22% to 7,483.3 points.

Telstra pays out interim dividend

On 17 February, Telstra reported a relatively sound performance in its half-year results for the 2022 financial year.

In summary, revenue fell 4.4% to $10.5 billion when compared against the prior corresponding period.

In addition, statutory earnings before interest, tax, depreciation, and amortisation (EBITDA) backtracked 14.8% to $3.5 billion.

While both metrics represented a decline, in H1 FY21, the company’s revenue was boosted by a number of one-offs. This included the sale of the Velocity and South Brisbane exchange assets.

Nonetheless, the board declared a fully franked interim dividend of 8 cents per share to be paid on 1 April (today). This remains unchanged from the previous interim dividend distributed to shareholders last year.

When calculating against the current share price, Telstra is trailing on a dividend yield of 4.06%.

Investors who elected for the dividend reinvestment plan (DRP) will see a number of shares added to their portfolio. This was based on the volume weighted average price from 7 to 11 March, which resulted in $3.86 per share.

No DRP discount rate was offered to shareholders.

Telstra share price summary

While moving in circles during recent times, the Telstra share price has lost around 5% in 2022.

When looking at the last 12 months, its shares have travelled the other way to post a gain of 16%.

Telstra has a price-to-earnings (P/E) ratio of 26.48 and commands a market capitalisation of roughly $46.38 billion.

The post The Telstra dividend is being paid today. Here’s what you need to know appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• What helped boost the Telstra share price on Thursday?
• Here are the 3 most heavily traded ASX 200 shares this Thursday
• ASX 200 (ASX:XJO) midday update: Telstra CEO steps down, Fortescue confirms E.ON deal
• What you need to know about the new Telstra CEO

Motley Fool contributor Aaron Teboneras owns Telstra Corporation Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Lake Resources N.L. (ASX: LKE) share price is ending the week on a very positive note.

In morning trade, the lithium developer’s shares have jumped 16% to a new record high of $2.31.

Why is the Lake Resources share price racing higher?

The Lake Resources share price is storming higher today despite there being no news out of the company.

However, there has been some very positive industry news that could be getting investors excited.

This morning lithium giant Allkem Ltd (ASX: AKE) released a lithium carbonate and spodumene concentrate pricing update.

That update reveals that strong market conditions continue to positively impact the price received for Allkem’s lithium carbonate from the Olaroz Lithium Facility. For the June quarter, the average price received for lithium carbonate is expected to be approximately US$35,000 per tonne FOB.

This is up from US$27,236 per tonne during the March quarter and is more than tripled the US$11,095 per tonne commanded during the first half.

It is a similarly story for spodumene, with advanced discussions for spodumene concentrate pricing in the June quarter of approximately US$5,000 per tonne. This is more than double the US$2,218 per tonne received during the March quarter.

All in all, this paints a very positive picture for the industry right now. Though, it is worth remembering that it will still be a couple of years until Lake Resources is likely to be producing lithium.

The post Why is the Lake Resources (ASX:LKE) share price surging 16% higher to a new record high? appeared first on The Motley Fool Australia.

More reading

• The ASX 200 just had its longest winning streak since 2017. What’s doing?
• 5 ASX lithium and green metals shares hitting new 52-week highs today
• Why Block, Lake Resources, Nearmap, and Telix shares are racing higher
• Lake Resources (ASX:LKE) share price charges 8% higher on major offtake deal
• 5 ASX mining shares smashing 52-week highs today

Motley Fool contributor James Mickleboro owns Allkem Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There’s some weird stuff going on in the world of cryptocurrencies at the moment.

The company that develops Terra (CRYPTO: LUNA) and TerraUSD (CRYPTO: UST) announced that it would buy up US$10 billion ($13 billion) of Bitcoin (CRYPTO: BTC).

Why is Terraform Labs doing this?

First we need to dig into the mechanism behind Terra and TerraUSD.

Creation of TerraUSD pushes up Terra’s value

According to Coinjar head of content Luke Ryan, investors have been stepping over each other to get their hands on TerraUSD because of a guarantee of 20% returns from the decentralised finance (defi) platform Anchor Protocol.

A yield of 20% is understandably tempting to investors who can only reap near-zero from bank deposits and maybe 5% from shares if they’re lucky.

But how do you get your hands on TerraUSD? 

It needs to be converted from Terra. For each TerraUSD created, one Terra is burned.

“Right now people are minting a huge amount of UST in order to take advantage of Anchor’s almost definitely unsustainable 20% returns,” Ryan said on the Coinjar blog.

“The UST supply has gone from US$2bn to almost US$16bn since November, resulting in the destruction of hundreds of millions of LUNA tokens – and a corresponding uptick in the LUNA price.”

Indeed, Terra has doubled in value since late February.

“Since November (i.e. the start of the bear market), the amount of UST in circulation has gone up 800% and is still increasing by roughly US$100 million per day. At US$16 billion, UST is almost twice as large as Dai (CRYPTO: DAI), the second largest algorithmic stablecoin.”

What if this money-making system fails?

That’s all fantastic for owners of Terra and TerraUSD. But can this party last forever?

That’s where the massive purchase of Bitcoin comes in.

“Let’s imagine a mass panic event — say, a large-scale exploit of ANC,” said Ryan.

“Overnight, billions of UST are redeemed for LUNA. To prevent the wholesale collapse of the ecosystem, Terra sells an equivalent amount of BTC instead.”

In other words, Terraform Labs co-founder and chief executive Do Kwon is spreading the risk of the Terra-TerraUSD-Anchor relationship.

“Functionally it’s not that different from the reserve requirement that all banks are subject to,” Ryan said. 

“The Bitcoin treasury exists to cushion a bank run that could otherwise cause a LUNA-UST death spiral.”

TerraUSD is currently in hot demand because of its 20% yield. But if the Anchor Protocol ever decides to end or even reduce that return, mass withdrawals are not out of the question.

That’s where the reserve Bitcoin will come into play, to stabilise the value of Terra.

The post Another crypto is buying $13 billion of Bitcoin. Here’s why appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo owns Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Bitcoin. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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