There's been a lot of debate over President Trump's penchant for having the U.S. government take equity stakes in private companies, which continued this week with two new deals.
- But one thing is indisputable: These investments boost company value, at least in the short term.
Why it matters: Positive stock performance helps explain why so many free-market capitalists have signed onto something that seems more socialist than not. And why others will do so when given the opportunity.
By the numbers: The White House appears to have agreed to equity deals with nine companies, most which are publicly traded.
- The public cohort saw their share prices climb an average of 85% between the time of announcement (or press leak, if earlier) and yesterday, per an Axios analysis.
- Intel shares, for example, have more than doubled since the chipmaker agreed to sell a 9.9% equity stake to the U.S. government last August.
- Trilogy Metals shares are up 171%, while MEP Materials stock has seen a 122% jump.
Carveouts: The average increase doesn't include the "golden share" in U.S. Steel, which now is owned by Japan's Nippon Steel.
- Also not included are deals with private companies (e.g., Vulcan Elements, xLight) or bespoke revenue-share deals (e.g., AMD, Nvidia).
- We also excluded L3Harris, which on Tuesday agreed to a $1 billion investment from the Pentagon that could be converted into equity if the company's missile business goes public. L3Harris shares spiked briefly on the news, but since reverted to pre-announcement levels.
The bottom line: So long as the values keep rising, the deals will keep coming.
