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Cleveland-Cliffs Drops 11% After $1 Billion Share Sale — and a Surprise Deal With POSCO
Cleveland-Cliffs (NYSE: CLF) just gave investors a double dose of shock: a $1 billion equity offering to pay down debt — and a mysterious new deal with South Korean steel giant POSCO that management insists will be “highly accretive.”
Shares tumbled more than 11% in morning trading, erasing months of gradual recovery and reigniting the debate over CEO Lourenco Goncalves’ capital strategy, timing, and long-standing nationalist rhetoric about foreign ownership in U.S. steel.
The Move: 75 Million New Shares, $964 Million in Cash
Cleveland-Cliffs announced it will issue 75 million new shares, with UBS underwriting the offering and holding a 30-day option to purchase an additional 11 million shares.
The expected $964 million in proceeds will go toward debt reduction, trimming total liabilities to roughly $7 billion, according to analyst estimates.
On paper, that’s prudent. In practice, it’s painful — because it dilutes shareholders at a time when steel prices remain stagnant, demand is soft, and margins are already thin.
The result: investors fled the stock, seeing the move less as opportunistic deleveraging and more as a signal that free cash flow isn’t enough to handle the balance sheet organically.
The Market Reaction: Dilution Over Discipline
Wall Street’s verdict was swift — a double-digit selloff that took shares down to $12.48, their lowest level since July.
The logic is simple:
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More shares = less EPS.
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Flat steel prices = limited offset.
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Opaque strategic deal = more questions than confidence.
Even with Goncalves’ reputation as one of the most vocal, forceful CEOs in American manufacturing, the announcement came across as defensive.
Investors didn’t want capital discipline — they wanted clarity.
Enter POSCO: A Strategic Twist With Global Implications
In the same release, Cliffs revealed a memorandum of understanding (MOU) with POSCO, South Korea’s largest steelmaker, calling it a “transformative partnership.”
Few details were provided, but the announcement’s timing — dropped alongside a dilutive share sale — suggests the company is trying to reframe dilution as strategic reinvention.
If the deal includes joint ventures in advanced steel, EV battery materials, or low-carbon manufacturing, it could indeed become “accretive.”
But for now, investors only have adjectives, not details.
It’s also a striking irony: Goncalves — who spent much of 2024 railing against Nippon Steel’s acquisition of U.S. Steel on nationalist grounds — is now partnering with a foreign steel conglomerate himself.
Strategically, it may be brilliant. Optically, it’s awkward.
The Industry Backdrop: Steel Prices Flat, Patience Thin
The timing is tough. Steel prices have been flat for most of 2025, weighed down by sluggish automotive production, weak construction demand, and a cooling energy sector.
Cleveland-Cliffs has already closed several plants this year to reduce costs, signaling internal pressure long before today’s announcement.
The dilution news effectively confirms that operational cuts weren’t enough — and that management sees external capital as the only lever left to reduce leverage before a potential industry downturn.
What This Means for Investors
This is a short-term credibility hit but potentially a long-term strategic reset.
Here’s the math investors are running:
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Debt reduction from ~$8B → ~$7B improves credit flexibility.
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But dilution reduces earnings power by ~15% in the near term.
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POSCO’s “transformative” deal could offset this — if it delivers material synergies.
In other words: Cliffs is betting that near-term pain will buy long-term stability.
The market, however, is unconvinced until numbers — not promises — back it up.
Valuation Snapshot
After Thursday’s selloff, Cleveland-Cliffs trades near 4.5× forward EBITDA, one of the steepest discounts among U.S. steelmakers.
If the POSCO partnership unlocks new technology, global distribution, or green-steel access, that multiple could quickly re-rate closer to 6×.
If not, the market will treat this week’s events as what they look like today: a leveraged balance sheet, diluted earnings, and another delay in the turnaround story.
The Bottom Line
Cleveland-Cliffs’ share sale is either a smart move at the wrong time or a desperate move at the only time possible.
Issuing stock at depressed prices rarely wins applause. But if the POSCO deal proves real — and not just rhetorical — it could mark the beginning of Cliffs’ pivot from U.S.-centric producer to global value-chain player.
Until then, investors are voting with their feet.
The next move belongs to Goncalves — and the market’s patience is running out.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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