A feel terrible for those who have invested in Molycorp over the past year. I once had thousands of shares in the company. At this point, the company's balance sheet is under water with a market cap of $877 Million and outstanding debts of over 1 billion. A very sad day indeed. If this continues, which it looks to do so, Molycorp with be forced into bankruptcy.
I'm not short on Molycorp. I have lost money on this company however. During the rare earth bubble, they did engage in a lot of debt. Don't take my word for it, scour the internet, you'll find plenty or reports and articles. I am hoping Moly pulls through. I would like to invest in them again, one day. At the moment, senior management is not doing a good job of leading the company.
We all knew it was going to make new 52 week lows. America needs a strong rare earth company, unfortunately the leadership of Molycorp is questionable and symptoms of fiscal and legal negligence has become obvious. Molycorp's debts are too burdensome for a buyout. With a Market Capitalization under 1 billion, their debt ratio is .999. They are in debt one dollar for every dollar of equity, including "good will" which does not bode well. In fact , they have no more cushion left in the event of a bad situation. Example: if you're maxed out on your credit cards and have a car accident, it could unfortunately mean bankruptcy. I sure hope not, I'm just trying to be sober and realistic about their fiscal well-being.
I will continue to monitor Molycorp's progress however it seems to be moving toward new lows due to market sector head-winds, pending SEC resolution, competition, lower rare earth values in the current quarter and not enough inflationary pressures for the raw materials. In the long-term Moly could become a stronger company providing they make it through this very tenuous period. It could also go the other way and that would truly be unfortunate for America. My fingers crossed.