X stock’s disastrous year continues as US Steel Corp acquisition hangs in the balance
US Steel Corp (X) remains under pressure this week as federal regulators deliberate whether the commodity producer should be sold to a Japanese conglomerate.
X stock has fallen by more than 8.5% over the last five trading sessions. On Dec. 17, X stock declined by another 2.4% to $31.94, closing at its lowest level in more than three months.
US Steel Corp has plunged by more than 34% this year due to the company’s pending acquisition by Japan’s Nippon Steel for $14.9 billion.
The Treasury Department’s Committee on Foreign Investment in the U.S. (CFIUS) is deliberating whether Nippon’s takeover could negatively harm America’s security interests.
Regulators are expected to reach a final decision by Dec. 22.
However, even if CFIUS green lights the deal, it’s expected to be blocked by President Joe Biden. President-elect Donald Trump has also criticized the proposed acquisition.
It's not surprising US Steel accepted the deal: Nippon’s acquisition would help the company shore up its finances while boosting its production capabilities. Plus, Nippon offered an attractive premium for X shares.
In need of a lifeline
US Steel used to be one of the world’s largest steel producers. Fast forward to 2024 and its production has plummeted because of degraded facilities, poor investment decisions, slumping sales, and growing competition.
In its most recent quarter, US Steel reported a year-over-year decline in net earnings and revenue.
But these problems go back many years. Even before the pandemic, US Steel was considered one of the country’s least profitable steel manufacturers, according to The Wall Street Journal.
Clearly, US Steel needs help. Some industry experts, such as Dan Ikenson of Ikenomics Consulting, believe regulators shouldn’t fear a Nippon takeover of the once iconic steelmaker.
In Ikenson’s view, US Steel’s acquisition by a Japanese company doesn’t carry the same national security threat of, say, a Chinese takeover. In fact, Nippon’s backing could help US Steel innovate, boost production capacity, and create more jobs in the United States.
Nippon has expressed regret over the regulatory backlash, saying it’s inappropriate for politics to “outweigh true national security interests.”
“Nippon Steel still has confidence in the justice and fairness of America and its legal system, and—if necessary—will work with US Steel to consider and take all available measures to reach a fair conclusion,” the company said.