Six months ago, the company known as MP Materials [MP 9.85%] received what appeared to be a substantial endorsement from the United States government. The Department of Defense committed $400 million to preferred convertible stock. More significantly, a ten-year supply agreement was signed, guaranteeing the purchase of all rare-earth metals MP could produce, with a price floor of at least $110 per kilogram for neodymium-praseodymium. It was presented as a bolstering of domestic supply, a matter of national security, and, naturally, a boon for investors.
Today, the stock price has fallen – a decline of 9.4% as of 1:15 p.m. ET – prompted by anxieties that this price guarantee may not be as ironclad as initially believed. The market, it seems, is belatedly applying a degree of skepticism.
The Shifting Sands of Governmental Promise
The source of this unease, as reported by Reuters, lies in a reconsideration of policy regarding price guarantees for critical minerals projects. The Trump administration, it appears, is retreating from the practice, citing a lack of congressional funding and the inherent difficulties in dictating market prices. It is a tacit admission that promises made in the realm of industrial policy are often contingent, subject to the whims of circumstance and the realities of budgetary constraint.
However, the situation with MP Materials is not precisely analogous. The guarantees extended to MP Materials were, ostensibly, embedded within the contract itself. This suggests a binding obligation, at least on paper. It is reasonable to assume, therefore, that the current market reaction is, to some extent, an overcorrection. The government is unlikely to unilaterally breach a contract without incurring significant legal and political costs. But to rely on that alone is to mistake legal formalism for genuine security.
A Valuation Detached From Reality
Even if the price guarantee remains intact, this does not necessarily render MP Materials stock a prudent investment. The company has, thus far, demonstrated a consistent inability to generate profit. Losses were recorded in both 2024 and 2025, and current projections estimate earnings of a mere $0.31 per share in 2026. At a share price exceeding $60, this translates to a price-to-earnings ratio approaching 200. Such a valuation is not based on present earnings, but on speculation about future growth.
The company must achieve an extraordinary rate of earnings expansion to justify this price. Until concrete evidence of such growth emerges, the stock appears significantly overpriced. It is a classic example of the market anticipating prosperity, rather than reflecting it. Investors are, in effect, paying for a promise, a promise that may or may not be fulfilled. And in the realm of finance, as in most things, hope is a notoriously unreliable foundation.
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2026-01-29 21:44