From 24/7 Wall Street:
Molycorp Rare Earths Quality Confession Worse Than Secondary Offering
Molycorp Inc. (NYSE: MCP) is showing its new shareholders buying into the rare earths trade late in the game that it still has a tendency to shaft the value of their investment in the company. This stock already was trading low at $7.10 on Monday, but news of a secondary stock offering is another reminder that it will punish shareholders if need be. What is worse is the disclosure from the filings about the quality and expectations of the rare earth materials and the quality as well....MORE
This is extremely high risk stuff and not suitable for widowed orphans but if this isn't a "everything including the kitchen sink" bad news day I don't know what would be--cancer clusters maybe....What the filing really shows is that Molycorp’s rare earths might not be the great source that investors thought the company had. Molycorp projected that approximately 48.8% of the rare earth material contained in the Mountain Pass facility bastnasite ore is cerium, which is considered a lower demand product....
We are jaded, as reflected in some of our 2012 posts:
I hate it when they talk like that, it triggers alarm bells and Sister Sledge tunes....
The thing to remember about bubbles is they don't immediately re-inflate. It seems to take anywhere from a year to a generation....
Back in August Molycorp did a notes and common follow-on offering and MS dropped their coverage in anticipation of bookrunning the stock part of the offering. The stock was at $16.62 on Aug. 1.
It is trading at $6.91 today....
"It began as a twisted dream..."
Nah, it was a Goldman deal.*
In late pre-market action the stock is trading at $7.38 which eclipses Friday's new all-time low of $7.42 which...
The stock was down 13.5% on Friday and I think it might be time to revisit the capital structure to see if there are any instruments that attract. Probably not the shares quite yet or the notes that were floated in August:
...MS is, along with Credit Suisse, joint bookrunner for the notes offering and MS is sole bookrunner for the stock.Got that?
From the book:
...The Borrowed Shares Offering is contingent upon the successful completion of the Notes Offering, and the Notes Offering is contingent upon the successful completion of the Borrowed Shares Offering. However, the Primary Shares Offering is not contingent upon the successful completion of either the Notes Offering or the Borrowed Shares Offering, and the Notes Offering and the Borrowed Shares Offering are not contingent upon the successful completion of the Primary Shares Offering....
And even earlier:
Jan. 2011
After being halted at down $1.14 for the dissemination the stock has reversed course and is up $2.46.April 2011
The thinking is the stock will have much less influence on the supply demand picture as an offering than if it had been dribbled into the market by the early investors.
Too funny.
It seems like just 20 days ago we were posting "With the Stock Up Four-fold Look For Molycorp to Sell More Shares (MCP)":
Following up on this morning's Bloomberg story "Pre-Market: Molycorp up 7.5% on Wild Ass Speculation (MCP)"
At current prices it makes more sense to dilute the stock a bit than to jv the deal but hey, that's just me....
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?June 2011
[it's not just you, the stock is only up two bucks -ed]
...To paraphrase one of my all-time favorite Barron's headlines:
(the original miscreants were 'Stockbrokers')Better Get The Leg Irons Boys.
These Ain't Regular Criminals,
These is Private Equity.
So what the hell, let's see how this shakes out and lean long.
