Why Lithium Americas Stock Almost Doubled Today

Key Points

• Reuters reports that the U.S. government may take a 10% stake in Lithium Americas stock.

• Shares of the Canadian lithium miner nearly doubled on the news.

• Lithium Americas is a start-up that won't begin producing lithium for years.

• 10 stocks we like better than Lithium Americas ›

Lithium Americas (NYSE: LAC) stock soared 90.9% through 10 a.m. ET this morning after Reuters reported the start-up miner of lithium for electric car batteries may be in line for a big investment from the U.S. government.

Image source: Getty Images.

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Lithium Americas the United States of America

The U.S. government wants to "renegotiate" a $2.3 billion loan to Lithium Americas to help the latter get its Thacker Pass lithium mine up and running, says Reuters. In exchange for the funds, the Trump administration apparently wants a 10% stake in the miner.

General Motors (NYSE: GM) invested $625 million in the mine (which is technically a Lithium Americas subsidiary) last year, in exchange for a 38% stake in it, and for the right to buy some or all of the next 20 years' worth of lithium extracted from the mine.

It's unclear if the Trump administration plans to convert its loan into payment for the 10% stake, or if Lithium Americas will be expected to simply hand over 10% of its shares as a condition of winning the loan.

Is Lithium Americas stock a buy?

A couple of points are worth touching upon here.

First, this deal is both unconfirmed and surprising, if true, because it seems this is the first time the Trump administration has tried to gain an equity stake in a foreign company. (Lithium Americas is a Canadian company based in Vancouver!)

I wonder if the Canadian government might have something to say about that.

Second, and just as important to investors, Lithium Americas is a start-up with no revenue, and no plan to begin producing lithium before 2028, at which point President Trump will be preparing to leave office.

Bear that in mind as you consider whether you want to invest in this news.

Should you invest $1,000 in Lithium Americas right now?

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.