The wheels were set in motion in 2011 by a previous management. Top management has since changed at least twice. The current management must deal with a disfunctional plant and the bad decisions that were made which appears might have had more to do with pumping up the PPS as much as possible back in 2011 than a sound long term business plan.
Could a better management turn this disaster into a profitable company at this point without a significant increase in RE prices? I doubt it and besides the company does no longer have the money to pay for a top notch management team.
It almost appears that this is the first time you try to partially read through a quarterly report and are unaware that companies are obligated to list their risk factors!
What is the valuable resource that they have?
The resource would be valuable if the price of RE were multiples higher and they had a functioning plant.
I don't see why a reverse split would contributing to the shorts being forced to cover. Short would be forced to cover if there was i diminution in shares available to short by someone buying large amount of shares and not letting them be lent out to short or if the share prices was rocketing higher because of fundamentals (being cash flow positive for example and creating value for the shareholders rather than destroying value as they have been doing)
The share price increase caused by the reverse split (say the shares go from 0.60 to $6.00 in a 10:1 reverse split) should not cause the shorts to cover as the relative value of the company is unchanged.
If the reverse split occurs and MCP keeps burning cash which they have little remaining, would not they still be forced into BK?
Frankly, if they would be using Magnequench products why not talk up their magnequench division in the press release with a lot of blah blah about their technology, proven process, etc.
I can hardly believe they would pass up such an opportunity.
From shin-etsu site:
''Shin-Etsu Chemical produces a complete range of rare earth magnets from rare earth raw materials, including neodymium, samarium and cerium, and they are highly evaluated.'' (note the rare earth raw material term, MCP used ''rare earth materiel'' term in their press release)
''Using its high-level separating and refining technology, Shin-Etsu Chemical is extracting and merchandising various kinds of highly purified rare earths.''
Assuming they will be using Molycorp's magnequench products (Re-Fe-B or other metal alloys) could be incorrect.
You should try and get more specific details from Brian at IR.
It is indeed not clear as the Molycorp press release says ''rare earth materials'' and not magnetic materials, or metal or alloys..
Magnequench does not produce rare earth materials, but magnetic materials (Re-Fe-B metal alloy) and there is not a word about magnequench in the press release..
Shin-Etsu have facilities to make rare earth metals from rare earth ore.
But it seems to me that if MCP was supplying semi-finished magnetic materials rather than rare earth materials, the MCP press should have been more specific and use a different term than rare earth materials.
Per the Molycorp site:
''Siemens AG (“Siemens”) has selected Molycorp, Inc. (NYSE: MCP) (“Molycorp”) to supply rare earth materials over the next 10 years from its Mountain Pass, California facility for incorporation into Siemens’ high-efficiency, direct drive wind turbine generators. Molycorp will supply rare earth materials to Shin-Etsu Chemical Co., Ltd. (“Shin-Etsu”), which will produce the rare earth magnets Siemens intends to utilize in its wind turbines.''
MCP is not providing magnets, they are providing raw materials to a competitor (with better technology?) of which I have little doubt they would have been able to sell even without the Siemens deal.
In fact are they not selling raw materials which they could have used themselves in their down stream for making valued added products.
So in fact how does the Siemens deal even help their bottom line?
You got that right that the debt holders already own the company.
The senior debt holders know that if MCP reaches a deal with the juniors and keep burning cash there will be nothing left for them. That is why they are trying to get a few pennies on the dollar back before BK.
There is no way that MCP will reach a deal with all bond holders at once, they will most likely have to deal with the most Seniors first and move their way down to the Juniors. The Seniors are aiming for as much of the pie as they can get at the expense of the Juniors and equity holders.
In the end MCP will be bankrupt with Oaktree owning what will be left and the junior bondholders lucky to get anything and shareholders zilch.
MCP is no PAL, there is simply no comparison.
MCP is a high tech and greenest of green rare earth producer with world class facilites, able (but seemingly unwilling per Siemens deal) to send every molecule downstream for transformation into high value added products.
PAL had many issues such as:
- Poor management;
- Negative cash flow;
- High debt;
- Cost of production higher than the value of the product.;
- An hostile country (Russia) which controlled most of the world production.
- A product whose prices is down over 45% from its all time high.
It could just as well be institutional investors dumping there shares not wanting to drive down the price, so they sell small amounts with a price floor.
The end of day dumping could be that they institutional investors did not reach his selling quota, so just dumped the rest at whatever price he could get.
I'm not saying that my theory is right, there might be multiple other explanations and we could both be wrong.
''They'' are not driving down MCP, it is the lack of buyers seeing value at even the present low stock price that is driving down the PPS and those selling that have given up hope of a recovery.
Anyone investing based on conspiracy theories or blaming others for driving down the price of a stock they have absolutely no doubt is a winner is probably not a good investment strategy.
If you think the lenders are going to fall into the bagholders trap of throwing more good money after the bad and hope for the best, you might be disappointed.
They might do that, but what will they ask for in return?
They are not going to it solely out of the goodness of their hearts.
Typical pumper fantasy stupidy, recommending that you buy with no regards to financials, that if everyone buys it will create a short squeeze and all the longs will be winners and the shorts toast!
Except that in the real world financials do matter. How will ALL the longs exit their positions in this worthless stock, worhtless based on their Financial position without it crashing to an even lower PPS than currently?
With your kind of logic there is no wonder you just seat on your position looking at your wealth evaporate while blaming others for you lack of investing judgement.
Would not someone selling a large position (Instutional or a short covering) not wanting to sink the PPS cause the same effect as created by someone accumulating and not wanting to raise the price.
So in fact we do not know which is the case!
Please explain why molymet which according to you is the big insider with deep pockets with plenty of cash and able to buy some 20 - 25 million shares does not do so?
It would cost them less than 10 million $ which is peanuts compared to the hundred of millions already sunk into this sinking ship,
Are they waiting for a PPS of 10 cents to start buying?
Funny how the same was said when the PPS was many multiples higher.
Good advise for the bagholders!