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Lithium Americas Corp (NYSE:LAC) and General Motors Co (NYSE:GM) are facing delays in closing their $330 million Tranche 2 investment.
Both parties are looking for “mutually beneficial” solutions as they reassess the deal.
The investment was initially structured as an equity deal, but with Lithium Americas’ share price far below expectations, both companies have agreed to extend the decision-making process until year-end.
The original plan was for General Motors to invest in Lithium Americas at a conversion price based on the lower of either Lithium Americas stock's five-day volume-weighted average price (VWAP) or $17.36 per share. With Lithium Americas' VWAP hovering around $2.50, the equity investment would result in “highly dilutive” outcomes, potentially pushing General Motors’ ownership above the 50% threshold.
This significant equity stake could alter the dynamics between the companies.
“Both parties have agreed not to close or cancel the Tranche 2 investment during the extension period as they evaluate ‘mutually beneficial’ solutions,” JPMorgan analyst Bill Peterson said on the deal situation.
The delay also affects the timeline for the U.S. Department of Energy (DOE) loan, which is critical for the full funding of the Thacker Pass project.
Peterson pointed out that closing both the Tranche 2 investment and the DOE loan are “contingent upon each other.”
Peterson outlined multiple risks surrounding the delays, including “election risk affecting timing and probability of DOE Loan closure” and the potential slowdown of General Motors’ EV battery production ramp.
The company's Ultium Cells venture, which has already seen its third battery plant face delays, adds uncertainty to its future lithium demand.
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In addition, Peterson flagged risks such as dilution to equity shareholders and even the “termination of the agreement after the extension period” if both parties cannot find common ground.
General Motors’ right to purchase up to 100% of Phase 2 lithium offtake further complicates the scenario, especially in a market facing weak lithium prices and slower-than-expected EV growth.
Peterson believes the DOE loan could serve as a positive catalyst for Lithium Americas, but the outlook for General Motors’ Tranche 2 investment is less certain.
As both sides look for a way forward, the clock is ticking on what could be a game-changing deal for Lithium Americas and General Motors’ EV future.
Investors will have to wait and see if the companies can find a solution before the year’s end.
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