What happened

Standard Lithium (SLI 2.86%) stock absolutely crushed the market in 2021, rallying by a jaw-dropping 338.9%, according to data provided by S&P Global Market Intelligence. The small-cap lithium stock raced past its peers and emerged as the top-performing stock in its industry last year -- and all of those gains came in the second half. So what sent Standard Lithium soaring into space, and what could its 2022 look like?

So what

The first big trigger for Standard Lithium came when the stock debuted on the New York Stock Exchange on July 13. Previously, it was only listed on the Toronto Stock Exchange. CEO Robert Mintak called joining the NYSE a "significant achievement" for the Canada-based company.

The ride thereafter was a choppy one for Standard Lithium stock until the next big leg of its rally -- it jumped by 120% in September and October following an early-September announcement from the company about the installation of a lithium carbonate plant at its flagship project in southern Arkansas.

A person looking at a rising stock price chart on a smartphone.

Image source: Getty Images.

To summarize briefly: Standard Lithium doesn't mine lithium. It uses a proprietary ceramic material to extract it from saltwater brine -- specifically, brine pumped out of the Smackover Formation in Arkansas, which is also a petroleum resource. It is developing a project in Arkansas in partnership with German chemical company Lanxess, and claims the plant it installed at the Lanxess site can produce lithium compounds at 99.9% purity suitable for use in the lithium-ion batteries that power electric vehicles.

In an interview on CNBC later in September, CEO Robert Mintak said the project's strategic location should help the company target manufacturers in both the U.S. and European electric vehicle markets.

Standard Lithium shares popped again in October after the company revealed promising preliminary economic assessment results for another one of its projects, also in southern Arkansas, under which the company is exploring brine in a region owned by Tetra Technologies. Among other things, Standard Lithium said that project could potentially produce lithium hydroxide monohydrate at an operating cost as low as $2,599 per metric ton. With the price of battery-grade lithium hydroxide monohydrate skyrocketing, Standard Lithium stock received at least a couple of analyst upgrades soon after that announcement.

Unfortunately for shareholders, what followed were days ripe with speculation and volatility as the company came under fire from a short-seller. Activist investing firm Blue Orca Capital made multiple allegations against Standard Lithium, even questioning the very viability of its method of lithium extraction. Although management refuted some of Blue Orca's claims, the short-seller rubbished Standard Lithium's responses.

Now what

Although Standard Lithium ended 2021 as a three-bagger, the stock has been under considerable pressure since Blue Orca's attacks began -- and it's down by 18.5% since the start of 2022. Standard Lithium also recently picked up the backing of a private equity firm that reportedly sees promise in its technology, but investors appear to be erring on the side of caution now. The electric vehicle industry might be booming, but Standard Lithium is still far from producing commercial quantities of its in-demand commodity. That makes the stock especially prone to volatility, which is something that investors looking for portfolio exposure to lithium will want to keep in mind.