MP Materials raises an upsized US$650m
MP Materials extended its funding roll by raising an upsized US$650m late Wednesday from an overnight stock sale, adding to the US$200m collected under a supply agreement with Apple it entered earlier in the week and the US$400m investment from the US government a week ago.
JP Morgan, Goldman Sachs and Morgan Stanley priced 11.8m shares at US$55.00, the lower half of the US$54.50–$56.00 range marketing range and a 6.1% discount to the US$58.55 Wednesday closing price.
The banks, which had marketed toward a fixed US$500m sum after an earlier wall cross, allocated 60% of the offering to the top 10 institutional investors.
Early in Thursday’s session, the rare earth minerals miner’s shares were trading at US$55.15 or just above offer.
The need to wall cross was hardly surprising given the company's heavy news flow and the fact this was a stock that traded as low at US$33.27 entering the month.
At launch, MP Materials revealed it had received US$200m from Apple as part of a US$500m agreement announced Tuesday to make rare earth magnets from recycled materials.
The Apple agreement comes a week after the US Department of Defense agreed to invest US$400m and extend a US$150m low-cost 10-year loan. The DoD investment is in the form of convertible preferred stock and warrants with a fixed conversion price of US$30.03 and 10-year warrants exercisable at US$30.03.
Assuming a full conversion and warrant exercise, the DoD is MP Materials' largest shareholder with a 15% stake, though that stake has since been diluted.
Under the DoD agreement, MP Materials is building a 10X rare earth magnet facility with an annual capacity of 7,000 tons and is adding another 3,000 tons of capacity at an existing facility.
The DoD agreed to purchase all the capacity from 10X under a cost-plus-pricing model that guarantees a minimum of US$140m of Ebitda, estimated analysts at Morgan Stanley in a note to clients last week.
“We believe that the Trump Administration’s decision to remove statutory requirements in the (Defense Production Act of 1950) was opening the door for the US government to pay above market pricing for critical materials,” the Morgan Stanley analysts wrote.