U.S. Rare Earth Stake Deal Dims TMC's Federal Funding Hopes, Stock Plunges 17.7%

What happened

TMC's stock dropped sharply after the U.S. government reached a deal with USA Rare Earth, taking a 15% stake and deflating TMC's prospects for direct federal investment. This move undermines a key assumption in TMC's bull case, which relies on active U.S. policy support for deep-sea mining to secure permits and financing. The DeepValue report highlights TMC as a pre-revenue developer with negative equity and structural encumbrances, dependent on uncertain regulatory approvals. By favoring an established terrestrial miner, the deal signals reduced political backing for TMC's speculative seabed projects, amplifying funding and permitting risks. This event aligns with the report's bear scenario, where delays and dilutive equity raises could drive the stock towards its $3.50 implied value.

Implication

The loss of a potential federal funding source pushes TMC towards more equity raises, likely dilutive and eroding per-share value, as warned in the DeepValue report. Reduced political backing weakens TMC's case for fast-tracked U.S. permits, heightening the risk of delays that dominate the bear scenario. This development reprices the stock closer to the report's base case value of $7.00, with downside skew from funding stress and regulatory headwinds. Consequently, investors should trim exposure, as the thesis now favors caution over near-term upside from policy catalysts. Monitoring for dilutive raises or permit setbacks becomes critical, with the report's 90-day checkpoints on funding stress now more relevant.

Thesis delta

The U.S. government's investment in USA Rare Earth directly weakens TMC's bull case by removing a key policy catalyst for federal support. This shifts probability weighting towards the bear scenario, where permitting delays and dilutive funding risks are exacerbated. While the long-term deep-sea mining thesis remains, near-term execution hurdles have escalated, justifying a more defensive investment stance.