Quick overview

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The Trump administration will invest $1.6 billion in Oklahoma-based USA Rare Earth as part of the White House’s ongoing investments in publicly traded businesses.

 

This could give the government an equity stake of more than 15%. Since Trump began his second term, the federal government has acquired ownership—or the right to purchase shares—in at least ten companies. A “golden share” in a U is one of them. The S. business that Nippon Steel owns.

The largest investor in MP Materials, USA Rare Earth’s rival, is S. Steel.  Trump is increasingly taking on the role of CEO amid a wave of dealmaking.

Rare earths are included in the critical minerals sector, which accounts for six of the ten. China’s monopoly on this sector, which is crucial to the manufacture of everything from high-end computers and data centers to military hardware and cars, is being challenged by the United States. China has exploited its superiority in the manufacturing of strong magnets.

According to an SEC filing from January, the government’s ownership stake may vary from 8% to 16%, depending on whether all of the warrants are executed.

A $1.3 billion loan via the CHIPS Act and $277 million in direct federal funding are part of the agreement. Additionally, USAR announced a $1.5 billion PIPE (private investment in public equity) deal headed by major mutual fund companies.

Public companies raise money through PIPE deals by selling securities directly to institutional and private investors at a negotiated price, usually at a discount. In a note, industry analyst Neal Dingmann of William Blair stated that other businesses are probably under the “assumption that there is more government rare earth funding to come.”

The US government received a nearly 31 percent discount on its shares compared to January as a result of the USAR deal.