Today lithium producer Albemarle (ALB) announced that it would sell $1.75 billion in ADRs to fund capital spending during the collapse in lithium prices. The offer will be for a mandatory convertible preferred with a 7% to 7.5% coupon.

The plunge is a reaction to the company having to do a capital raise at the bottom for the lithium market. I think some investors were hoping that Albemarle might be able to cover its plans to expand production out of current cash flow. And they see the decision to go to the capital markets now as a signal that Albemarle thinks the slump in lithium demand and prices will go on for a while yet. Many investors, myself included, have been looking for signs that the market is stabilizing and headed to recovery. Benchmark lithium prices are down 70% in the past 12 months to ~$15,000 a metric ton.

If you take a sightly longer term view, which is my take on the lithium market, I’m heartened by the company’s decision to fund its future expansion plans even at the cost of current pain. I think Albemarle is right when it argues that the slump in lithium prices will drive higher cost producers out of the market and is likely to result in a supply gap when the slump in electric vehicle sales is over.

Here’s what an Albemarle bear said about the news, however, according to Seeking Alpha: “Shares are likely to be under significant pressure on this news, which in our view indicates an inability to fund these projects considering the current and possible near-term future pricing for lithium products over the next two years,” said Piper Sandler’s Charles Neivert. He rates rates Albemarle a Sell with a $122 price target.

It’s interesting to me–and to anyone looking to figure out where to buy Albemarle shares–that this bearish target of $122 is well above the March 5 $109.40 closing price.

Michael Sison at Wells Fargo offers a contrary view: “The move should bolster ALB’s balance sheet and liquidity during a period where cash flow may be tight, with no dilution until 2027.” He rates the stock Overweight with a target price of $135.

I think you’ll get the most leverage from any turn in the lithium market from owning the stock rather than the convertible preferred. But there is that 7% yield. I haven’t yet seen all the details on the conversion feature so it’s hard to know how much potential upside you’re giving up with the preferred issue. Worth digging into the details I think.

Albemarle is a member of my long term 50 Stocks portfolio. That position is up just 19.02% after today’s beating since inception on February 17, 2017.