Lithium Americas shares doubled because of the White House. Why are they being advised to sell?

Canadian investment bank Canaccord Genuity downgraded shares of mining company Lithium Americas and now advises to sell them. This is despite the fact that the company's securities more than doubled in price due to the decision of the White House to become its shareholder. Canaccord believes that growth of quotations is excessive, while other analysts, on the contrary, continue to advise to buy shares due to participation of the US government.

Canaccord Genuity downgraded shares of Lithium Americas to "sell" (Sell) with a target price of $6.5 Canadian ($4.7 U.S.), which implies a 32% decline from the last closing price, CNBC writes.

Analysts say President Donald Trump's administration's decision to buy a stake in Lithium Americas is a disadvantage for the company. That said, the stock has more than doubled since the White House first announced plans to invest in it.

"We believe the recent rise in quotes is excessive and does not reflect a realistic valuation given the revised agreement with the U.S. Department of Energy," analyst Cathie Lachapelle wrote.

The company's shares were down more than 4% at one point in U.S. trading on Oct. 2. But compared to the beginning of 2025, they are now worth 131% more.

The U.S. Department of Energy will receive a 5% stake in Lithium Americas and a 5% economic interest in the Tucker Pass mine in Nevada, one of the largest in the country. This project is being implemented jointly with the American auto concern General Motors, which owns a minority stake and has agreed to buy out the production, CNBC writes.

Donald Trump's administration has received shares as part of a renegotiation of the terms of a $2.2 billion Department of Energy loan made back during Joe Biden's presidency to support the Tucker Pass project. The U.S. government agreed to defer $182 million in payments over the first five years in exchange for the stake.

According to Canaccord, the loan modifications were minimal. They give Lithium Americas short-term financial flexibility, but require the company to deposit $120 million within a year into a special government reserve account. That requirement, according to Lachapelle, negates the benefits of the renegotiation.

In addition, the Trump administration's equity involvement threatens to dilute Lithium Americas shares, Canaccord warned. The stake was issued through warrants with an exercise price of just $0.01 per share.

"We also note that unlike the deal with U.S. rare earth materials producer MP Materials, there are no meaningful additional benefits here, such as a minimum above-market buyout price," Lachapelle noted.

In July, the U.S. Department of Defense took a stake in MP Materials, giving the company a price floor and agreeing to purchase products from the new plant, CNBC recalls.

Deutsche Bank set the target price of shares of Lithium Americas at $6.3, while maintaining a Hold rating (advice to hold). According to the bank's estimates, quotes may decline by about 10% relative to the closing price on October 1.

Also BMO Capital Markets maintained a hold recommendation on shares of Lithium Americas (Market Perform rating) and raised the target price to $5. This target implies securities falling by 28.6%.

But analyst Stifel Canada maintained a Buy recommendation on the mining company's shares amid news of the U.S. government's entry into the company's capital and left the target price at $7. This forecast coincides with the closing price on October 1.

This article was AI-translated and verified by a human editor