Shares of rare earth miner MP Materials (NYSE: MP) fell just shy of 15% in morning trading on Dec. 29. Although the shares were able to claw back some of the decline, they still ended the day off by around 11% or so. The backstory here is complex, but it all ties back to the company’s creation.
The year 2020 will be best remembered for the coronavirus pandemic. But the year also saw an increase in special purpose acquisition companies (SPACs or “blank check” companies). These are companies that start life with no business. They effectively sell shares to the public with the promise to use the cash raised to buy another company. This is the way in which MP Materials came into being. A blank check company bought a privately held business, and it became public.