New York, Jan 27, 2026, 11:06 EST — Regular session
- Shares of USA Rare Earth dropped 4.9% to $25.42 in late morning trade, pulling back from Monday’s surge fueled by a key deal.
- The company says it holds a non-binding U.S. government letter of intent (LOI) linked to CHIPS Act funding, alongside a $1.5 billion private share sale set to close on Jan. 28.
- Investors are balancing the scale of the buildout with new equity issuance and the terms tied to the government package.
Shares of USA Rare Earth (USAR) dropped Tuesday, retreating from an earlier surge fueled by U.S. government support for a key financing deal. The stock fell roughly 4.9% to $25.42, after touching a session high of $29.50.
The shift is crucial as Washington doubles down on “critical minerals” supply chains. Rare-earth magnets are key components in defense gear, chip-making equipment, and electric motors. Investors have been eager to back anything linked to government funding — that is, until the numbers start pointing toward dilution.
The deal, as it stands, is just an LOI—not a binding contract. Plus, the conditions attached are anything but light.
On Monday, USA Rare Earth shares jumped 7.9% to close at $26.72, following the company’s announcement of proposed U.S. backing and fresh equity financing.
A regulatory filing on Monday revealed the Commerce Department LOI covers $1.6 billion, which includes $277 million in proposed awards and a $1.3 billion senior secured loan. The loan, set for a 15-year term, carries an expected rate of Treasury plus 150 basis points. The company also announced a $1.5 billion private investment in public equity (PIPE), a share sale to private investors, priced at $21.50 and slated to close on Jan. 28.
CEO Barbara Humpton described the plan in a press release as “a transformative step” toward building a domestic “mine-to-magnet” supply chain. Commerce Secretary Howard Lutnick called the project “essential” for reestablishing U.S. critical mineral independence. The release also noted that the Energy Department’s National Energy Technology Laboratory signed a letter of intent to work on separation technology connected to USA Rare Earth’s lab and its Round Top deposit. GlobeNewswire
Reuters reported the government package targets funding for a Texas mine and a magnet plant, part of a broader effort to reduce dependence on China, which dominates the market. The company clarified it won’t receive a government price floor like the one linked to an earlier MP Materials deal. Humpton told investors bluntly: “The key question everybody has to ask is, ‘What would be the cost of having access to nothing?’” Reuters
Analysts wasted no time. Canaccord’s George Gianarikas bumped his price target to $33 from $23. At the same time, Benchmark’s Subash Chandra pushed his target up sharply to $45 from $15.
Shares of MP Materials climbed roughly 3.0% on Tuesday, highlighting that the sector’s action isn’t centered on a single stock but on how Washington picks its winners—and what it expects back.
The downside is clear-cut. The government LOI doesn’t bind, funding depends on conditions, and the equity raise is hefty. Missed milestones, a rougher capital market, or slower customer growth could trigger more dilution or pushbacks.
The immediate hurdle is the Jan. 28 PIPE closing, along with any follow-up disclosures on customer memoranda and definitive CHIPS paperwork. Traders will see these as the line separating flashy headlines from actual, reliable cash.
