Tuesday, September 20, 2011

After Thrashing by JPM, Morgan Stanley Says Nice Things About Molycorp (MCP)

The stock closed down 21.81% ($11.56) at $41.45. After hours it is up 15 cents.
So sweet to get both sides of the family together on the same deal.
And just like a real fam, JP Morgan disses the MCP while Morgan Stanley gives it some love.* See important note after the jump.
From Clusterstock:
Morgan Stanley Says to Buy Molycorp

...The stock is off 21.11% today and down 16.19% year-to-date. Now Morgan Stanley has said the sell-off is hasty and recommends buying the stock:
"MCP shares are down 20% today on concerns about weakening rare earth oxide spot prices in China (down 40% from peak). The stock is pricing REOs at ~$28 per kg (vs. $111 spot) and no credit for downstream. A key concern is cerium and lanthanum prices, which are down ~50% to $80 per kg each. An unsubstantiated report in Metal Pages suggested cerium and lanthanum may be exempted from the next export quotas, increasing supply, given rising customer concerns.
Our price deck already factors in LT supply growth for cerium and lanthanum. Regardless of the next Chinese quota, cerium and lanthanum supply will meaningfully increase when Mountain Pass and Mount Weld start production in 2012, as both are very rich in the two metals. Our base case REO price deck of $47/kg is based on $16/kg cerium and $15/kg lanthanum and already reflects weaker LT fundamentals than for neodymium and praseodymium. Also, management has been working to develop new applications for cerium (XSORBX) to absorb excess supply and improve market balance."
Prices are expected to stabilize in the fourth quarter as China continues to come down hard on illegal mining. However risks to the stock include, a drop in spot prices when MCP supplies increase, execution risks at Mountain Pass and Mount Weld since the project is still in pre-production, and risks to its refining and marketing strategy.
Note: REO refers to rare earth oxides....
Morgan Stanley was an underwriter of MCP's IPO. They have a street-high price target on the stock and do tend to eat their own cooking, here are some of our MCP/MS posts:
Aug. 9, 2011
Rare Earths: Molycorp Registers Some Stock (and why did Morgan Stanley pick up 8,439,008 shares?) MCP
On the other side of the ledger we have a 13G filing from Morgan Stanley Investment Management
Here's the August 8 initial filing for the July 29, 2011 event.
And here we have the complete text file.

Thank you
Feb. 22, 2011 
Molycorp: Morgan Stanley sees $140/share valuation; J.P. Morgan upgrade to Overweight (MCP)
Ha! Both halves of the old J.P. Morgan & Co.giving a stock some love on the same day! I don't recall ever seeing that.
(After Glass-Steagall MS took the investment banking business of the House of Morgan while JPM took the commercial banking biz)

With the S&P and DJIA both down over 1% Molycorp is swimming against the current, up $.91 at $45.56 just 19 cents abovc the day's low (the stock traded as high as $47.88 earlier)....
April 27, 2011 
Hype'n Tout: Morgan Stanley's $240 Molycorp Call (MCP)
Is it just me or does this research note read like a 1999 internet chat room pump and dump?
[it's not just you, the stock is only up two bucks -ed]...
Now let's just sit still and take the picture:
If you don't remember the offering here's part of the prospectus cover:

Morgan Stanley_____________________________ J.P. Morgan

CIBC     Credit Suisse
     Stifel Nicolaus Weisel                Dahlman Rose & Company                Piper Jaffray
     Knight/Houlihan Lokey
Griffiths McBurney Corp.
Prospectus dated July 29, 2010.