The legal playbook behind America’s new industrial equity deals

April 2026  |  SPECIAL REPORT: INFRASTRUCTURE & PROJECT FINANCE

Financier Worldwide Magazine

April 2026 Issue

The US government has entered into an unprecedented string of complex transactions securing equity stakes in industries including rare earth mining, semiconductors, steel and energy. A broad array of governmental powers has been deployed in innovative ways to execute these deals. The legal architecture behind these moves may predict where this interventionist framework is headed next.

The most intricate of the deals to date has been the 10 July 2025 MP Materials (MPM) deal, where the government used several different powers to provide loans to MPM, establish a modified price floor for the rare earth material neodymium-praseodymium oxide (NdPr), fund the construction of a new NdPr magnet factory and purchase its entire production, and acquire $400m of stock, plus a 10-year warrant providing a potential significant increase to its equity stake.

Many of the powers used in the MPM deal derive from the Defense Production Act (DPA), which “provides the President with an array of authorities to shape national defense preparedness programs and to take appropriate steps to maintain and enhance the domestic industrial base”. This authority must be used in the name of “national defense”, currently broadly defined to encompass programmes for military and energy production or construction, military or critical infrastructure assistance to any foreign nation, homeland security, stockpiling, space and any directly related activity. Such term includes emergency preparedness activities and critical infrastructure protection and restoration.

Pertinent to the MPM deal, DPA Title III grants the president tools to “provide appropriate incentives to develop, maintain, modernize, restore, and expand the productive capacities of domestic sources for critical components, critical technology items, materials, and industrial resources essential for the execution of the national security strategy of the United States”. These include loans and loan guarantees, purchasing and making purchase commitments of industrial resources and critical technology items, encouraging the exploration, development and mining of critical and strategic materials, funding the development of production capabilities, and installing government owned equipment in privately held industrial facilities.

Utilising a different power under the DPA, President Trump conditioned Nippon Steel’s investment in US Steel on the government’s receipt of a so-called “golden share” – equity granting the president a veto over key aspects of US Steel’s operations. This deal was negotiated within the framework of review by the Committee on Foreign Investment in the United States (CFIUS), a body established pursuant to DPA Title VII which assesses the national security implications of certain foreign investment transactions. For certain transactions where national security risks are identified, CFIUS has the power to “negotiate, enter into or impose, and enforce any agreement or condition with any party to the covered transaction in order to mitigate any risk to the national security of the United States that arises as a result of the covered transaction”. An initial CFIUS review under the Biden administration blocked the acquisition, but Nippon Steel altered its proposed deal, leading President Trump to order an unprecedented de novo re-review. This reassessment found national security risks could be mitigated by Nippon Steel and the government entering into a ‘National Security Agreement’ implementing the golden share.

Equity deals on existing, outstanding government assistance are also in the news. The Lithium Americas deal, for example, involved a renegotiation of a previous $2.26bn loan issued by the Department of Energy’s (DOE’s) Loan Programme Office. The DOE agreed to alter the terms of repayment, deferring $182m of debt service in exchange for a 5 percent equity stake in the company. DOE received the equity in the form of warrants – not an unprecedented move, as DOE itself referenced its past practice in announcing the deal. Similarly, the Intel deal converted $5.7bn in awarded, unpaid grants under the CHIPS Act and $3.2bn in funding awarded as part of the Department of War’s (DOW’s) Secure Enclave programme into a 9.9 percent equity stake. The explicit legal basis for this renegotiation was not stated. Following its 2023 acquisition of Aerojet Rocketdyne, L3 Harris received $215.6m in DPA funding to expand domestic rocket manufacturing capacity. In January, L3 announced it would spin off its missile solutions business into a new company with the DOW as a $1bn equity investor. This equity funding came from the DOW’s Industrial Base Analysis and Sustainment (IBAS) programme, which administers the DOW’s industrial base fund. With the fund, the DOW may “use contracts, grants, or other transaction authorities” to improve aspects of the domestic industrial base.

The lack of a clear exposition of the powers involved in these deals is drawing scrutiny. On 2 February 2026, ranking Democrat members of the Committee on Natural Resources, Committee on Oversight and Government Reform, and the Committee on Energy and Natural Resources issued a letter to Secretaries Hegseth, Wright, Burgum and Lutnick requesting detailed information on the agreements including “[t]he legal authorities and any legal analyses relied upon in allowing the U.S. Government to become a shareholder in these companies”. The administration’s answer is likely to reference the specific powers described above, but also to rely on the government’s vast inherent capacity to contract, which is nowhere expressly stated in the constitution but is necessarily implied by the enumerated powers, the necessary and proper clause and the president’s duty to ensure the laws are “faithfully executed”. The Supreme Court clarified these powers at an early point, stating: “Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional.”

The clearest bar on this broad, inherent power as it relates to acquiring an equity stake in a private company is the Government Corporation Control Act (GCCA), which prohibits the creation or acquisition of new government-owned corporations to act as government agencies without specific congressional authorisation. Interestingly, Howard  Lutnick, commerce secretary, recently used the GCCA as a tool to void an agreement granting $11bn of CHIPS Act funding to Natcast, a nonprofit formed to operate the CHIPS-Act-created National Semiconductor Technology Center. In the subsequent Department of Justice (DOJ) opinion justifying the cancellation, the DOJ found that the government had established, but not acquired, Natcast, reiterating its prior guidance that “an agency cannot be said to acquire a corporation unless it holds an ownership interest or exercises legal control”. Under this viewpoint, the minority interests the government has recently secured would not run afoul of the GCCA. This DOJ opinion, consistent for several previous decades, remains unchallenged.

With no specific prohibition in place, it is likely the administration will continue to find innovative uses of its explicit powers, bolstered by the penumbra of its inherent powers. This represents an intensification of a preexisting trend rather than an entirely novel development. DPA powers in particular have expanded and evolved over time to fit the then-current national crises or goals. The oil embargo of the 1970s spurred the creation of the short-lived United States Synthetic Fuels Corporation, a state-owned enterprise which, backed by billions of dollars in DPA Title III funding, acted as a national investment bank to fund the research and development of alternative fuels through incentives including price guarantees for synthetic oil alternatives. More recently, President Biden used the DPA to boost domestic production of energy-efficient heat pumps in the hopes of lowering fossil fuel consumption, which the Biden administration termed a national security issue. The current focus on critical mineral and industrial supply chains is merely the latest catalyst for DPA innovation.

This time, though these deals have been justified in the name of national self-sufficiency, the innovation may not end at the US’s borders. The DPA’s definition of “domestic” has long included Canada, with funds being used to support several Canadian resource and research projects. In furtherance of the 2021 trilateral AUKUS treaty, the definition was again amended to also encompass the UK and Australia for limited purposes. The administration and Congress have also greatly empowered the US International Development Finance Corporation (DFC), expanding its funding and reach. The DFC is explicitly authorised to take equity stakes in projects, but its scope was previously limited to infrastructure projects in the developing world. Recent legislation changed that scope and included limited exemptions for projects in the ‘Five Eyes’ nations – the UK, Canada, Australia and New Zealand – and for projects in the fields of “energy”, “critical minerals and rare earths” and “information and communications technology”. The administration was already blending the DPA and the DFC by delegating DPA powers to the DFC for use in certain COVID-19 initiatives and tasking the DFC with supporting domestic mineral production. In this light, it is unclear whether deals under certain arrangements, such as the recent US-Australia critical minerals and rare earth mining framework which references equity stakes and “existing policy tools such as the United States’ industrial demand and stockpiling infrastructure”, will be “domestic”, foreign or both.

 

Jake Bolinger is counsel and Gilbert Porter is a partner at Haynes and Boone, LLP. Mr Bolinger can be contacted on +1 (703) 847 6261 or by email: jake.bolinger@haynesboone.com. Mr Porter can be contacted on +1 (212) 659 4965 or by email: gilbert.porter@haynesboone.com.

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BY

Jake Bolinger and Gilbert Porter

Haynes and Boone, LLP

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