Stillwater Magnet Plant Deal Sparks Controversy – SPAC Scheme Enriches Wall Street, Risks Undermine U.S. Rare Earth Goals, But What Do You Expect?

Highlights

• USA Rare Earth’s Stillwater magnet facility deal involves a SPAC structure potentially favoring hedge funds over local economic interests
• The project raises concerns about transparency, financial engineering, and the effectiveness of economic development incentives
• Questions emerge about whether the deal truly advances U.S. rare earth independence and strategic mineral supply chain resilience

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The much-celebrated Stillwater magnet facility deal, led by USA Rare Earth (opens in a new tab) and backed by SPAC partner Inflection Point Acquisition Corp. II (opens in a new tab) (NASDAQ: IPAX), is under intense scrutiny following explosive reporting by Robbie Robertson writing for The Oklahoma Post. (opens in a new tab) Behind the patriotic branding lies a Cayman Islands-registered SPAC structure offering hedge funds like L1 Capital (opens in a new tab) and Harraden Circle (opens in a new tab) risk-free gains, while exposing Oklahoma taxpayers to massive downside with no enforceable job guarantees or equity protections. Despite $7 million in city incentives, the project lacks binding local benefit provisions and shows signs of public-private financial inversion—where speculative finance supplants industrial policy.

Of course, this all needs to be further vetted, but the investigative reporting represents a vital transparency function.

According to the piece from an investor standpoint, retail backers and local stakeholders face asymmetric risk. Preferred shareholders receive guaranteed 12% dividends and liquidation preference, while public equity may be diluted and local jobs remain speculative. The structure favors hedge fund exit liquidity over long-term operational growth, undermining fundamentals. The use of shell LLCs for insider compensation and forward purchase options compounds concerns of excessive insider enrichment absent transparency or performance metrics.

Is this a scenario yet again where finance capital trumps Main Street and national interests?

For U.S. and state governments, this deal raises red flags about the misuse of economic development incentives and the vulnerability of industrial policy to financial engineering in places like the United States.

National security rhetoric is being co-opted—former Secretary of State Mike Pompeo (opens in a new tab) is linked via undisclosed compensation structures—as SPAC insiders bypass traditional IPO scrutiny to tap taxpayer support. According to the account, the model undermines President Trump’s stated objective of rare earth independence by prioritizing financial arbitrage over domestic supply chain resilience.

How about on strategic terms: does this Stillwater deal strengthen Western and American rare earth resilience?

One argument would be that without clear commitments to source critical minerals domestically, invest in processing infrastructure, or retain intellectual property onshore, the project risks becoming another case of optics over substance. The U.S. needs enforceable, transparent, production-based partnerships. 

The executives of US Rare Earths are certainly committed to the cause of resilience.  Rare Earth Exchanges (REEx) interviewed Joshua Ballard (opens in a new tab), CEO of USA Rare Earth, who discussed the company’s journey in the rare earth industry, including their mining and magnet manufacturing strategies. He was quite frank about the challenges faced in mining, the importance of government support, and the need for a domestic supply chain.

A Paradox—What Else Do You Expect?

It’s a paradox. On the one hand, financial engineering brings downside risk. Speculative shell mergers with preferences emphasizing short-term gain opportunities for finances may not be the best pathway to decouple from Chinese magnet dominance.  On the other hand, the lack of an orchestrated, integrated rare earth industrial policy forces entrepreneurs and operators to depend on creative financing.

What are your thoughts?  Should Congress and the DOD investigate and redefine the eligibility criteria for industrial incentives tied to national security supply chains?  On the other hand, without a proper industrial policy and left to the creativity of the financial community in America, what else is expected? 

Go to the Rare Earth Exchanges Forum (opens in a new tab) to discuss.