Why Sigma Lithium Stock Soared 15% on Wednesday

What happened

Shares of Sigma Lithium (NASDAQ:SGML), the Brazilian start-up lithium miner, exploded 15.4% higher through 1:40 p.m. ET on Wednesday.

Enthusiasm over producers of lithium for electric car batteries sent Sigma Lithium shares soaring last year -- up triple in 12 months. Earlier this year, Sigma Lithium was further linked to mergers & acquisitions activity with Tesla (NASDAQ:TSLA) as the purported buyer.

Today, those rumors are getting a refresh as Sigma Lithium confirms it may be for sale.

So what

In a press release this morning, Sigma Lithium's Board of Directors announced that it has received "multiple strategic proposals" to acquire it either in whole or in part. Among the interested bidders, furthermore, Sigma Lithium noted it has seen offers from "global industry leaders in the energy, auto, batteries and lithium refining industries" (emphasis added).

And that bit about automotive and battery companies bidding for Sigma Lithium almost certainly is reminding investors of Tesla's reported earlier interest.

Now what

Mind you, Sigma Lithium still isn't saying "Tesla" by name. Tesla might not even be bidding at all. But if it is, well, at last report, S&P Global Market Intelligence listed Tesla as having more than $23 billion in its bank account and an additional $6 billion in positive free cash flowing into its coffers annually.

With cash like that, Tesla could swallow a $4 billion lithium minnow like Sigma Lithium without batting an eye, or -- perhaps even better news for Sigma Lithium investors -- ignite a bidding war with other interested partners that would drive Sigma Lithium's stock price even higher.

Heck, for that matter, just the suspicion that Tesla might be among the companies bidding for Sigma Lithium seems to have been good for a 15% bump in Sigma Lithium's share price already today. If and when we learn the confirmed identities of the buyers, this stock could go even higher.

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