v3.26.1
Merger Transaction and Acquisition
 12 Months Ended
Dec. 31, 2025
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Merger Transaction and Acquisition Merger Transaction and Acquisition
IPXX Business Combination Agreement

On August 21, 2024, IPXX entered into the Business Combination Agreement, by and among IPXX, USARE LLC, and Merger Sub. Pursuant to the Business Combination Agreement, Merger Sub merged with and into USARE LLC, with USARE LLC continuing as the surviving company.

On March 12, 2025, as contemplated by the Business Combination Agreement, IPXX filed a notice of deregistration with the Cayman Islands Registrar of Companies and filed a certificate of incorporation and certificate of corporate domestication with the Delaware Secretary of State, pursuant to which IPXX was domesticated and continues as a Delaware corporation, changing its name to USA Rare Earth, Inc. (the “Domestication”). As a result of the Domestication, each issued and outstanding Class A ordinary share of IPXX automatically converted, on a one-for-one basis, into a share of the Company’s common stock and each of the issued and outstanding warrants to purchase Class A ordinary shares of IPXX automatically became a warrant exercisable for one share of Company’s common stock on the same terms as the pre-Domestication warrants. Additionally, each unit of IPXX issued and outstanding as of immediately prior to the Domestication was automatically canceled and each unit holder received one share of Company’s common stock and one-half of one warrant exercisable for one share of Company’s common stock on the same terms as the pre-Domestication warrants.
On March 13, 2025, the Company consummated the Merger Transactions contemplated by the Business Combination Agreement and USARE LLC became a direct wholly owned subsidiary of the Company. As a result of the Merger Transactions, all issued and outstanding Class A and Class B common units, Class C and Class C-1 preferred units, equity-based incentive units and warrants to acquire Class B common units and Class C preferred units of USARE LLC were converted into shares of the Company’s common stock using an exchange ratio of approximately 0.204. On the closing of the Merger, all incentive units were considered fully vested. The number of shares of the Company’s common stock issuable for USARE LLC warrants and incentive units was calculated using the treasury method of accounting on a cashless exercise basis. Additionally, all issued and outstanding Class A-1 and Class A-2 preferred units of USARE LLC taking into account certain anti-dilution provisions and payment-in-kind dividends on such units from the date of issuance through the Closing Date were converted on a one-for-one basis into shares of the Company’s 12% Series A Cumulative Convertible Preferred Stock. Warrants to acquire USARE LLC Class A common units issued to the holders of Class A-1 and Class A-2 Preferred units were converted into a right to acquire the Company’s common stock on a one-for-one basis.

As a result of the Merger, the Company is a holding company, in which substantially all of the assets and business are held by USARE LLC and its subsidiaries and continues to operate through USARE LLC and its subsidiaries. The Merger is accounted for as a reverse recapitalization in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) and not as a business combination. Under U.S. GAAP, IPXX is treated as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the Merger was treated as the equivalent of USARE LLC issuing stock for the net assets of IPXX, accompanied by a recapitalization. USARE LLC has been determined to be the accounting predecessor to the combined entity.
In connection with the transactions contemplated by the Merger, the following funding events occurred prior to the Closing Date:

•On August 21, 2024, USARE LLC and certain accredited investors, including certain funds related to IPXX entered into Securities Purchase Agreements (“SPA”) for such investors to purchase (i) USARE LLC Class A Convertible Preferred Units and (ii) USARE LLC Class A Preferred Investor Warrants for gross cash proceeds of $25.5 million and a subscription receivable of $1.25 million for shares issued in exchange for forgiveness of 50% of Mr. Michael Blitzer’s, IPXX’s Chairman and Chief Executive Officer, promissory note at the Closing Date.
•On January 31, 2025, the Company and certain accredited investors, including USARE LLC Class A-2 Convertible Preferred Unit investors, Mr. Blitzer, and Collective Capital Management LLC entered into SPAs for such investors to purchase (i) USARE LLC Class A-2 Convertible Preferred Units and (ii) USARE LLC Class A Preferred Investor Warrants for an aggregate purchase price of approximately $15.3 million which closed on February 3, 2025.
Additionally, immediately prior to the effective time of the Merger, the following occurred:

•USARE LLC’s unvested incentive units became immediately vested and all vested incentive units were converted to the Company’s common stock, see Note 8, “Equity-Based Compensation;”
•USARE LLC’s warrants to purchase Class B Common Units and Class C Convertible Preferred Units were exercised on a cashless basis and converted to the Company’s common stock, see Note 7, “Mezzanine and Stockholders' Equity;”
•The Hatch Note (as defined below) converted into approximately 0.68 million of USARE LLC’s Class A Common Units, see Note 4, “Other Financial Information - Notes Payable;”
•The Company issued approximately 0.78 million 12% Series A Cumulative Convertible Preferred Stock and Series A warrants exercisable for an aggregate of approximately 0.78 million shares of the Company’s common stock at $12.00 per share pursuant to SPAs with two accredited investors, including an affiliate of IPXX, for an aggregate consideration of $8.0 million;
•The Company issued approximately 0.13 million shares of 12% Series A Cumulative Convertible Preferred Stock in exchange for Mr. Blitzer’s forgiveness of the remaining 50% of the convertible promissory note; and
•The Company issued approximately 0.88 million shares of the Company’s common stock pursuant to USARE LLC’s arrangements with Cohen & Company Securities, LLC (fka J.V.B. Financial Group, LLC) (“CCS”).
The following table presents a summary of the number of equity instruments outstanding immediately following the closing of the Merger and the PIPE investment.
Shares
(In thousands)
Common Stock
Pre-merger shares60,273 
Shares issued in reverse merger recapitalization21,679 
Total Common Stock81,952 
12% Series A Cumulative Convertible Preferred Stock
Pre-merger shares4,318 
Shares issued in reverse merger recapitalization915 
Total 12% Series A Cumulative Convertible Preferred Stock
5,233 
Total shares87,185 

In connection with the Merger, approximately $22.8 million of cash held in trust, net of redemptions by IPXX’s public shareholders, became available for use by the Company as well as $8.0 million in proceeds received from the closing of the PIPE investment. In addition, the Company incurred certain earnout shares obligations and entered into forward purchase agreements discussed further below.

The following table presents the net proceeds from the Merger.
Amount
(In thousands)
Sources
Cash - PIPE investment$8,000 
Cash - IPXX Trust Account22,843 
Cash - IPXX Op Account (Blitzer note)24 
Total Cash in IPXX going into the Merger$30,867 
Uses
Transaction costs allocated to equity$(8,331)
FPA Prepayments(20,789)
Other Expenses and Prepayments(1,658)
Total cash used immediately after the merger
$(30,778)
Net cash to USARE LLC
$89 
Transaction costs allocated to equity$350 
Net cash used by USARE LLC(350)
$— 
Earnout Liabilities

In connection with the closing of the Merger, USARE is required to issue to certain USARE LLC shareholders as of the effective date of the Merger and CCS, up to 10.1 million additional shares of Common Stock in two (2) tranches (the “Earnout Shares”) upon certain triggering events (the “Triggering Events”):

•The first tranche of 5.05 million Earnout Shares would be distributed if, during the time period beginning on the date of the first anniversary of the Closing Date and ending on the date of the sixth anniversary of the Closing Date (the “Earnout Period”), the market price of the Common Stock is greater than or equal to $15.00 per share for a period of at least twenty out of thirty consecutive trading days.
•The second tranche of 5.05 million Earnout Shares would be distributed if, during the Earnout Period, the market price of the Common Stock is greater than or equal to $20.00 per share for a period of at least twenty out of thirty consecutive trading days.

The aggregate Earnout Shares may also vest upon a change of control as defined in the Business Combination Agreement pursuant to which USARE or its shareholders have the right to receive consideration if the implied value per share of Common Stock is equal to or above such price targets, with the amount of such consideration dependent upon the implied per share value reaching the thresholds discussed above.

Management considered the guidance within Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, and determined that the contractual requirement to issue the Earnout Shares meets the definition of a derivative. Management next considered whether or not the Earnout Shares meet the requirements for the scope exception under the “Own Equity” scope exception in ASC 815 for contracts indexed to an entity’s own equity. The change of control clause in the Business Combination Agreement represents an exercise contingency related to an event outside of the Company’s control, which is not based on an observable market or an observable index. The obligation to issue the Earnout Shares that includes exercise contingencies that are outside the control of the Company are classified as liabilities and excluded from equity classification. Instruments not classified in equity do not meet the “Own Equity” scope exception.

The Earnout Shares are classified as liabilities and no additional analysis under ASC 815 is required. The Merger is accounted for as a reverse recapitalization and the Earnout Shares represent consideration of IPXX securities that are being transferred to the holders of the Company. As such, the Earnout Shares are recorded through the recapitalization of equity within additional paid-in capital upon recognition and are remeasured on a recurring basis. See Note 3, “Fair Value Measurements,” for further information.

The Earnout Period has not commenced as of December 31, 2025, and therefore, none of the Triggering Events have occurred.
Forward Purchase Agreements

On March 11, 2025, IPXX entered into forward purchase agreements (“FPAs”) with three separate investors (“Sellers”) pursuant to which the Sellers agreed to hold up to a total of approximately 1.89 million publicly held IPXX Class A ordinary shares (“Public Shares”) in connection with the closing of the Merger. Each FPA amended, restated and superseded in its entirety a separate FPA with each of the Sellers, dated March 10, 2025, which had identical terms to those described herein, except that the Reset Price (as defined in the FPAs) was not subject to a floor price of $4.00. For purposes of the FPAs, the Public Shares held by each of the Sellers are referred to as such Seller’s “Maximum Shares.” Each Seller, acting separately and solely for its own account, was permitted, if necessary, to (i) reverse its previous election to redeem its Public Shares in connection with the Merger Transactions pursuant to the redemption rights set forth in IPXX’s amended and restated memorandum and articles of association or (ii) purchase Public Shares through a broker in the open market from holders of Public Shares (other than IPXX), including from holders who previously elected to redeem their Public Shares in connection with the Merger Transactions pursuant to the redemption rights set forth in IPXX’s amended and restated memorandum and articles of association. The aggregate number of Public Shares subject to each FPA investor (the “FPA Shares”) was the aggregate number of Public Shares as notified to the Company by the applicable Seller, but in no event more than such Seller’s Maximum Shares set forth above. Each Seller notified the Company that it would subject the Maximum Shares to their respective FPAs. Prior to the date that was 90 days after the Closing Date (the “Maturity Date”), each Seller was permitted to sell any, or all, of their FPA Shares.
On various dates between the Closing Date of the Merger and December 31, 2025, the Sellers exercised their early termination rights under the FPAs with respect to approximately 1.89 million FPA Shares. As of December 31, 2025, all FPAs have been terminated. Upon the early termination of the FPAs, the Sellers remitted cash to the Company at the initial price of $11.00 per each FPA share, resulting in cash proceeds received in the amount of $20.8 million from the Sellers, which was recorded as a reduction of the subscription receivable at the fair value of the terminated shares on the date of termination with an offset to additional paid-in capital.
Acquisition of Indian Ocean Rare Earth Metals Pte. Ltd.

On November 18, 2025 (“Acquisition Date”), Laconia Acquisition Sub Limited, a wholly owned subsidiary of the Company, acquired Indian Ocean Rare Metals Pte. Ltd. (“IORM”). The acquisition of IORM is expected to enhance the Company’s industry relationships, secure reliable sources of critical rare earth metals and alloys used in magnet production, improve control over the supply chain and associated costs, support sustainable recycling initiatives for rare earth materials, and provide access to alternative low-cost feedstock. IORM’s operating subsidiary, Less Common Metals Ltd. (“Less Common Metals”), primarily manufactures and sells strip cast metals to customers in the U.S. and Europe.
Purchase Price

The aggregate purchase price of the IORM acquisition was $197.7 million, consisting of $103.1 million in cash funded with existing cash and 6.54 million newly issued shares of the Company’s common stock with a fair value of $94.6 million. The fair value of the newly issued shares of the Company’s common stock was determined based on the closing market price of the Company’s shares of common stock on the date of the acquisition.
November 18,
2025
(In thousands)
Cash consideration$103,114 
Equity consideration94,557 
Total purchase price$197,671 
Assets Acquired and Liabilities Assumed at Fair Value

The IORM acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations, using the acquisition method of accounting which requires that assets acquired and liabilities assumed be recognized at their fair values as of the Acquisition Date.
The following table sets forth the components and the allocation of the purchase price for the business combination and summarizes the fair values of the assets acquired and liabilities assumed at the Acquisition Date.
November 18,
2025
(In thousands)
Cash and cash equivalents$905 
Accounts receivable3,165 
Inventory15,329 
Other current assets1,110 
Property and equipment10,593 
Intangible assets69,290 
Total assets acquired100,392 
Accounts payable and accrued liabilities(7,597)
Contract liabilities(10,976)
Loans(1,515)
Deferred tax liability(16,876)
Asset retirement obligation(605)
Total liabilities assumed(37,569)
Net assets acquired62,823 
Goodwill134,848 
Total purchase price$197,671 
Valuation Methodologies

The fair values of assets acquired and liabilities assumed were determined in accordance with the fair value measurement principles of ASC 820, Fair Value Measurement, using market‑participant assumptions. The Company applied a combination of income, market, and cost approaches, depending on the nature of each asset or liability, as described below.

•Cash and cash equivalents. Measured at carrying value, which approximates fair value due to short-term maturities.
•Accounts receivable. Measured at fair value using an expected cash flow approach. Based on credit quality, historical loss experience, customer aging, and subsequent collections through the valuation cut‑off, expected credit losses were assessed as immaterial; therefore, gross receivables approximated fair value and no allowance was recorded at the acquisition date.
•Inventory. Finished goods were valued at estimated selling prices less costs of disposal and a reasonable profit allowance for the selling effort. Work-in-process inventory was valued at estimated selling prices less costs to complete, costs of disposal and a reasonable profit allowance for the completion and selling effort, or at estimated replacement costs for certain components. Raw materials were valued at the lower of the at purchased cost or replacement costs.
•Property and equipment. The property, plant and equipment acquired were valued using either the replacement cost or market value approach, as appropriate, as of the date of acquisition.
•Intangible assets.
◦Customer relationships. The fair value of the intangible asset acquired was estimated using an income approach.
◦Supplier relationship. The fair value of the intangible asset acquired was estimated using the with and without method, which is a type of incremental income method approach. This method assumes that the value of the intangible asset is equal to the difference between the present value of the prospective cash flows with the intangible asset in place and the present value of the prospective cash flows without the intangible asset.
◦Trade name. The fair value of the intangible asset acquired was estimated using the relief from royalty method. This method is a specific application of the discounted cash flow method, which is a form of the income approach to valuation. It is based on the principle that ownership of the intangible asset relieves the owner of the need to pay a royalty to another party in exchange for rights to use the asset.
◦Know-how. The fair value of the intangible asset acquired was estimated using the relief from royalty method. This method is a specific application of the discounted cash flow method, which is a form of the income approach to valuation. It is based on the principle that ownership of the intangible asset relieves the owner of the need to pay a royalty to another party in exchange for rights to use the asset.
•Accounts payable and accrued liabilities. Recorded at carrying value given short-term settlement periods.
•Contract liabilities. Contract liabilities are customer deposits that are measured at fair value and represent advance payments for undelivered goods or services, the fair value does not include any historical contract margin earned by the acquiree.
•Loans. Recorded at the amount owed as the contractual interest rate equals a current market-participant rate.
•Deferred tax liability. Measured using enacted statutory tax rates applicable to the periods in which the temporary differences are expected to reverse. No separate valuation allowance is recorded for deferred tax liabilities.
•Asset retirement obligation. Valued at an appraisal‑based rate adjusted for inflation.
•Goodwill. Attributable primarily to the revenue synergies expected from combining the operations of both entities, and intangible assets that do not qualify for separate recognition, including the existing workforce acquired through the acquisition.The Company does not expect goodwill to be tax deductible.
Intangible Assets Acquired

The following table presents the components of the fair value of intangible assets acquired as of the date of acquisition, along with their estimated useful lives:
Intangible assetsFair ValueWeighted Average Useful Life
(In thousands)(Years)
Trade name$7,245 15.0
Customer relationship11,856 20.0
Supplier relationship33,986 10.0
Know-how16,203 17.0
Total identifiable intangible assets$69,290 13.8
Acquisition-related Costs

Acquisition-related costs consist of legal and professional service fees and expenses for acquisition-related activities. The Company incurred acquisition-related costs of $8.1 million during the year ended December 31, 2025, which are shown in Selling, general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss.
Pro Forma

The following table presents the unaudited, pro forma consolidated results of operations for the years ended December 31, 2025 and 2024, as if the business combination had occurred at the beginning of fiscal year 2024. The pro forma information provided below is compiled from the pre-acquisition financial information of IORM. The pro forma results are not necessarily indicative of (i) the results of operations that would have occurred had the operations of this acquisition actually been acquired at the beginning of fiscal year 2024 or (ii) future results of operations.
Year Ended December 31,
20252024
(Unaudited, in thousands)
Revenue (1)
$13,752 $10,080 
Net loss(304,517)(23,213)
(1)Since the acquisition of IORM on November 18, 2025, the Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2025 includes revenue of $1.6 million and losses of $6.0 million related to IORM.