Atlas Lithium (ATLX): Here Comes The Dump
Earlier this year, we wrote about Atlas Lithium (ATLX), a former gold and diamond miner in Brazil that turned to lithium mining when lithium became a hot topic. Our initial thesis laid out in our report revolved around three main points.
CEO Marc Fogassa previously worked at Hunter Wise Securities, which took Atlas Lithium public and was later fined over $100 million for selling gold they didn’t have.
Atlas Lithium was previously known as Brazil Minerals, a paid stock promotion that ended with shares down 99%. After promises of immense riches, Brazil Minerals generated just $1.4 million in revenue, losing $17.8 million between 2013 and 2021, when it rebranded to Atlas Lithium.
Atlas Lithium was (and continues to be) one of the most overvalued lithium miners in the world based on known reserves.
Last Friday, Atlas Lithium filed a $75 million shelf offering. We think the end of the Atlas Lithium’s run is near. On the day of our initial report, Atlas Lithium fell about 40%. Since then, shares have traded mostly sideways. We have news of the offering as well as some other key points we think the market and the primarily retail shareholders of Atlas Lithium should be aware of. Atlas Lithium has a ~$250 million market cap and $20.1 million of cash, having burned $13.8 million this year.
Initital Disclosure: Bleecker Street Capital is short shares of Atlas Lithium. Please see full disclaimer below.
What Should Investors Know Now:
This year Atlas Lithium has invested more in non-exploration activities such as stock-based compensation and SG&A than it has on actual exploration.
CEO Dr. Marc Fogassa has an aggressive pay package that comes from monthly options grants. This has netted him about $700k a month on average this year, diluting shareholders.
Filings and interviews done by Dr. Marc Fogassa claim that he worked at Goldman Sachs. We have confirmed that he was merely a summer intern there in 1997.
Brazil Minerals’ stock promotion ended with shares down 90%. Atlas Lithium just registered a $75 million shelf offering, allowing it to dilute shareholders by up to 30% when effective.
Fogassas’s Monthly Dilution Machine
Atlas Lithium’s CEO has been richly compensated this year. Every month since February, Fogassa has granted himself deeply discounted options to purchase 2,500 Series D shares, which are convertible into 33,300 common shares. These shares are immediately convertible into Atlas Lithium common stock.
“Each share of Series D Convertible Prefered Stock is immediately convertible into 13 and ⅓ shares of Common Stock of the Issuer. Each share of Series D Convertible Preferred Stock is immediately convertible into Common Stock of the Issuer.”
CEO Fogassa has diluted shareholders by ~2.25% for just half a year of work and put nearly $5m into his pocket.
SEC filings for three of these Series D conversions were not submitted promptly, something Atlas Lithium has had trouble doing this year. In Atlas Lithium’s proxy, there are almost two full pages of late Form 4’s that Atlas Lithium failed to file mainly related to these Series D share conversions.
Dr. Fogassas’s 1997 Summer Internship
In SEC filings and in multiple interviews Dr. Fogassa has claimed to have worked at Goldman Sachs. We noted his exceptional educational background (Undergrad double major at MIT, and then Harvard MDs and MBAs - we checked, he went there).
However, in early filings and later interviews Dr. Fogassa has alluded to working at Goldman Sachs. In a 2014 interview:
DIN: Very impressive. What is your background?
MF: I’m originally from Brazil, and I grew up in a middle-class family. I left Brazil after high school to attend MIT and I did very well there — I ended up double majoring. But growing up I wanted to be a doctor, so I went to medical school at Harvard. I did well at Harvard as well; I learned about finance, small companies, private equity, venture capital, and I fell in love with the idea of taking my knowledge of healthcare and medicine and applying it to business. I ended up joining Goldman Sachs (NYSE:GS) after receiving my MD, but then went back to Harvard and was elected president of the private equity club. From that position I was introduced to many venture capitalists and private equity investors.
And in SEC filings:
“Mr. Fogassa has worked at Goldman Sachs & Co.
As it turns out, Dr. Fogassa was only a summer intern at Goldman Sachs. A Goldman Sachs spokesperson told us that “a person by this name was employed as a summer employee (intern) in 1997.”
Atlas Lithium’s Paltry Spending On Exploration: Way Less Than Spending On Executives And Main Competitor
Atlas Lithium’s financials show where the focus really lies. So far this year, the company has spent $8.2 million on non-exploration costs compared to just $5.6m on exploration.
Looming Dilution From Shelf Offering
The offering, once effective, will allow Atlas Lithium to sell up to $75m worth of stock, significantly diluting shareholders.
In our initial piece, we showed how Atlas Lithium evolved from Brazil Minerals, a small pump and dump in the early 2010s.
As of Q2’23 Atlas Lithium had $20.1 million in cash on its balance sheet. It has lost $13.8 million in the first six months of this year. We think the company will actually need to use the shelf offering to raise money. We are short shares of Atlas Lithium. Please see the full disclaimer blow.
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