After receiving a stake from the US government, Lithium Americas (LAC.US) surged 175%, analysts warn of overvaluation and risks of equity dilution.

This is a classic "script" that is already familiar to the market - looking for a troubled company, waiting for it to reach an agreement with the US government and get approval from President Trump, and waiting for the stock price to soar. However, in less than two weeks, after Lithium Americas (LAC.US) stock price soared by 175%, analysts began to question its high valuation and the unfavorable terms of the deal for the Canadian mining company's shareholders. Fen Ye Bank analyst Ben Isaacson bluntly stated in his report, "We did not expect the market to interpret Trump's 'magic' on critical commodities in such a crazy way," and downgraded the rating from "industry average" to "underperforming the industry." He pointed out that this "magic" would ultimately dilute shareholders' equity, and recommended investors to take profits and wait for a correction before re-entering. According to statistics, since the announcement of the agreement, four analysts have downgraded their ratings, reflecting a snapshot of the market frenzy - despite warnings from indicators tracking market frenzy, the US stock market continues to reach new highs, with the market largely ignoring these forecasts. Despite a 6.5% drop in stock price on Monday, the stock is still close to a two-year high and more than 40% higher than the average target price of analysts. According to the terms of the agreement, the US will hold 5% of the Vancouver-based company's shares and 5% of its Thacker Pass mining project in Nevada, while Lithium Americas will receive a $435 million loan from the U.S. Energy Corp., with $182 million of debt repayable over the first five years. This can be considered one of the few transactions finalized by this administration since the $400 million equity investment in MP Materials (MP.US) in July - the rare earth magnet producer's stock price has risen over 375% this year. Since the disclosure in mid-August that the government holds nearly 10% of the shares, the stock price of Intel Corporation (INTC.US) has risen over 50%, and on Monday evening, the White House announced an investment in another mining company, Trilogy Metals (TMQ.US). According to Jefferies analysts, if Lithium Americas makes similar concessions for each additional loan drawdown in the future, existing shareholders' equity could be diluted by about 40% in the coming years. Cormark Securities analyst MacMurray Whale, when downgrading the rating from "buy" to "market perform" after the agreement, stated: "Investors should take profits if they witness a doubling in stock price within a few months. I tend to recommend waiting for a correction before observing." Lithium Americas' stock price has doubled this year, with a market capitalization exceeding $2 billion on Monday. After the stock price surpassed the target price, Morningstar Research also downgraded the rating from "buy" to "hold." The bank's analyst, Seth Goldstein, said, "The market has shifted from overly pessimistic to overly optimistic about this stock, and now is not a good time to buy." JPMorgan analysts believe that such transactions will occur more in the future, and potential candidates for revised Energy Department loans include top US charging company EVgo Inc. and hydrogen producer Plug Power Inc.