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Molycorp, Inc Common Stock Message Board

  • trendtn trendtn Aug 17, 2012 1:53 PM Flag

    why i started a position

    first of all a caveat
    MCP will never anytime soon regain even half its old highs
    and it will NEVER ever make new all time highs
    the sooner you get that straight the sooner you can see things as they really are

    the company missed a couple weeks ago and explained, at least in part, their funding shortfall and the range of options left to it---many longtime traders understood they would have to issue shares in an offering and began shorting the stock into the announcement. Many others were adding toshort positions. the general idea was that they could issue as much as 25-40m shares at between 7-8 pricing the offering at a discount to the market.

    the snp downgrade made a notes offering hard to see at under 10% what they paid for the loan to complete the neo purchase.

    the terms described today were much better than many expected. $10 with a maximum of 13.8m shares and the notes at 6%

    the deals still have to be consumated but that is far fewer shares and at a higher price than many expected and the notes rate if done at 6% means they are only paying a 1% premium to repay the legacy neo notes.

    also worth noting morgan stanley mcp's banker effectively capitulated a couple days ago by cutting their price target from 81 to 20---i know you thought it was a positive call---it wasnt they capitulated and tried to put the best face on it

    and today the final bull dahlman rose capitulated by cutting the stock to hold from

    both bullish signs--the last sellers are in or said another way
    the last holdouts have faced reality

    as a result of the offerings IF consumated mcp will be able to fund and finish phoenix on time and be able to ramp up volume on their largely light ree mining operation.

    Much of the equity offering will likely be used to cover at least most of the large short interest in the stock in one move. say your desk is short 1m mcp you simply buy 1m at the offering and youre done covered in one move

    and i expect following the close of the offering next wed that snp will lift the creditwatch due to funding at better than exp terms

    cumulatively these things taken together argue for a bottom

    though the company itself still faces a daunting slow global economy which is a drag on any commodity company

    further demand and prices are likely to continue lower--though at a dimisnished pace.

    MCP's management has been a pollyanna ---the cfo has already been replaced--the ceo may be next---one possiiblity is the neo ceo stepping in. if it happens this will confirm a bottom

    taken together mcp will never recover to its old highs and they still face serious issues but as of today --note the high volume covering---at least they are facing the issues in the open head on
    which is a good start

    and why after a year of being short i started a position

    finally i'd like to say that though i have been a bear so long on mcp that i was developing paws that i have tried to make reasoned arguments as i saw the issues

    it turned out i was right---i hope at least some listened to me and saved some money

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