Reddit Loved USAR for a Week. Short Sellers Never Stopped Betting Against It

Operating the Round Top Heavy Rare Earth project in Texas, among other domestic projects, USA Rare Earth (NASDAQ:USAR) has become one of the more polarizing stories in retail investing this year. Shares of the company are up 67% year-to-date, fueled by a single catalyst: a non-binding letter of intent for $1.6 billion in federal financing announced on January 26, 2026. The deal pairs a $277 million federal grant with a $1.3 billion senior secured loan, with the government taking a 10% equity stake in the company. A concurrent $1.5 billion private placement closed on January 29, bringing total capital raised to roughly $3.1 billion. For a company with zero revenue and a stockholders’ deficit of $58.6 million, that is a significant bet on a mine that won’t begin commercial production until late 2028.

Reddit Spiked, Then Went Quiet

Around the government announcement, posts across r/wallstreetbets, r/stocks, and r/stockmarket generated over 6,800 upvotes and 1,239 comments with a sentiment score of 68.98 out of 100. By this week, activity collapsed to 65 upvotes and 15 comments, though sentiment held at 71 (bullish). The loudest thread wasn’t even a USAR post. A r/stocks discussion titled “Do you feel that considerable insider trading is currently happening in the USA?” drove the most engagement, peaking at 3,719 upvotes and 511 comments. USAR’s biggest Reddit moment being wrapped inside an insider trading debate captures the tension around this stock perfectly.

On r/wallstreetbets, the post titled “USAR – USA Rare Earth” drew attention shortly after the government funding announcement. One commenter noted the significance of the LOI, writing that the federal backing was the kind of catalyst that could re-rate the entire rare earth sector.

On r/stocks, a post with reddit_id 1iu7aqb captured early retail reaction to the news, with one commenter writing that USAR was worth watching given the government’s push to onshore critical mineral supply chains, though others cautioned that the LOI remained non-binding.

Do you feel that considerable insider trading is currently happening in the USA?
by u/[OP] in stocks

The bear case is concrete:

• USAR carries going concern doubt across every quarter it has reported, with liabilities exceeding assets and no revenue path until 2028
• Short interest sits at 21.85% of float, more than double the peer average of 8.58%, signaling active skepticism from professional traders
• Commerce Secretary Howard Lutnick faces an ethics investigation tied to Cantor Fitzgerald’s role as lead placement agent, introducing real uncertainty around whether the federal commitment holds

The Valuation Depends Entirely on Execution

Among the notable voices discussing USAR, analyst Derek Soderberg at Cantor Fitzgerald projected that magnet production could generate $1.2 billion in EBITDA by 2030 if key milestones are met. The consensus analyst target is $38, while the current price is near $19.85. The closest peer, MP Materials (NYSE:MP), is up 15% year-to-date with actual production already running. The LOI is non-binding, the mine is years out, and existing shareholders face roughly 75% dilution from the capital raises. The key thing to watch is whether the federal funding converts from a letter of intent into a signed agreement.

Data Sources

• A Look At USA Rare Earth (USAR) Valuation After Recent Share Price Moves: Used for analyst fair value estimate, EBITDA projection, and production milestone context
• Alpha Vantage News Sentiment: Used for federal funding deal structure, short interest data, ethics investigation details, and dilution estimates
• Fuse API Stock Data: Used for Reddit sentiment scores, activity levels, financial metrics, and going concern disclosures
• Fuse API Price Performance: Used for USAR and MP Materials year-to-date price performance figures