And you clearly have no idea how ineffective the Reg SHO list and the SEC are at doing anything.
Naked shorting is always illegal except for certain situations. The circuit breaker rule doesn't change that. I don't see MCP on the Reg SHO list. If you do, point out how to find that list, EXPLICITLY. I googled "reg sho list" and looked at the Nasdaq threshold list.
You should go find just one example of SEC punitive action based on Reg SHO. WHat I see is that when a stock os placed on the list there are a few extra rules, but they don't amount to much IMO. I love the penalty for getting caught naked shorting. That penalty? Oh, you can't short the stock anymore. And the naked short for a daytrade still looks legal by the rules ... shares would be located by the T+3 rule.
The SEC is not interested in limiting this. They are interested in giving the appearance of providing adequate policing with reasonable rules. IMO the point of the Reg SHO rules are to give the illusion that the market regulatory agency can limit naked short sales, if they put the stock on a list (and MCP is not on the list).
I don't think the circuit breaker is important. It puts an uptick rule back in place which only inconveniences shorts. I have not seen the threshold list with MCP on it. That also has next to no effect. Unfortunately.
I don't either, but obviously the "devil's advocate" would argue they depleted cash by $80 million in Q2, dropping the cash reserve from $236 to $156 million, and knowing that they would be better making an SPO before they put those Q2 numbers out.
They either think they don't/won't need cash from an SPO, or they should do it earlier rather than later. If they think that the Q2 numbers (which they will have a solid preliminary internal estimate quite soon) are an improvement from Q1, and they project improvement to a profitable number within the cash burn window they have, then they should not do an SPO. They quite possibly should use other cash raising methods to make sure they have "ongoing concern" amounts of cash.
Those would include:
Borrowing at unfavorable rates, but for short times.
Selling equipment and then leasing back that equipment.
Some other creative financing ... say buy Ucore for a stock swap ... Ucore is a $74 million market cap, so with a 50% premium buy for 45 million shares of MCP. Then use the Alaska $145 million financing in round about way (probably not possible, but who knows).
They definitely don't need the cash right now. But they can do the math and determine what the conservative cash burn plan is, what the optimistic cash burn plan is, and what the options for additional cash are. An SPO in July is one option. Hopefully they decide against that option. Hopefully the Q2 cash burn is manageable, and the progress towards operational targets is acceptable.
Smart buy. There appears to be NOTHING in the news. The volume was high in pre-market and Motley Fool piggy-backed a slam on a Seeking Alpha slam. But those are just the same OPINIONS they always give, with nothing new added. If I had to guess it was shorts trading the "news" headlines. But since there is no news, it will reverse.
We know exactly what we knew yesterday. And we still know the blog sites Motley Fool and Seeking Alpha support short arguments.
I don't need to read it. You were wrong. LOL.
"No Announcements until End of July"
And then a company announcement on July 2nd, as expected.
If they are on track to profitability and on track to production targets then the market will react favorably to the Q2 report. I still think the Q1 results were bad, but the disclosure that they were behind schedule on the production goals was the big problem for the market.
Anyone looking at the business plan understands that they have the construction completed and they have to deliver on the facility production targets: 20,000-ish mt per year production and $6-$7 per kg cost basis. And delivering on those goals will turn the company profitable. It is that simple. They have said over and over that they are going to get to those goals, and yet, here we are, 2nd half of 2014, and we don't know if or when they will get there.
I thought Q1 would be better than expected and I was wrong. I again see how they could have numbers that exceed the Q2 estimates, but really, it is the progress that once again needs to be shown (although "show me the money" is always important). We need to hear the May, June, and July production, as well as the August production, which they will know by the time of the report (they knew and reported 520 mt for April, at the Q1 report for Jan-Feb-Mar). If the production levels for those months are good, and the cost basis they are at for August is good ... then the stock should soar. Right now the expectation is clearly that they will announce lower progress and probably announce a later expectation for delivery of the goals. Instead of talking about the end of 2014, they will start talking about the first half of 2015.
I sure hope that is wrong, but the market is pretty clearly negative on the expectation of progress.
I can't do that with accuracy. Since the only real question is: Is it possible for ME to know tops and bottoms with enough accuracy to make money using that prediction? If someone else can do it, then it is possible for them. I can't. The answer to your question is that I don't know if it is possible. The answer to my question is no it is not possible.
I will entertain the squeeze question, which I consider spurious. If the price of MCP spikes beyond what might be expected, and it is clear it is a short squeeze, you can (along with everyone else) try to sell before the price collapses from astronomical to merely up. If you sell too soon, you leave money on the table. If you sell too late, the bottom might be falling out. If the price leaps and falls, then leaps and falls, then leaps and falls again, a trailing stop might take you out after just the early exiting shorts exit, but before the next group is forced out.
You get to make a decision in a rapidly rising market: what price should I sell at? I recall a day when both I and a co-worker owned some Audible stock. They announced what I thought was bad earnings and we commiserated, then the stock took off in pre-market and ran a large percent. He set a limit sell at $11.80 and that filled ... he said that was the target he thought was best. I set a trailing stop of $0.50, and sold at $11.40-ish. Neither of us could predict the top. Both of us saw the spike as a temporary thing to take a profit from. Volume was crazy high. The market gave me a gift IMO. There was nothing to cause the spike, or draw in the daytraders, or to squeeze the shorts. But the price spiked anyway. Both my co-worker and I made more than expected. And we were happy to be rid of a stock that had just badly underperformed and IMO.
That is an opportunity cost though. The reality is that a profit was locked in at the time of the short. There are lots of times that a person risks an opportunity for a "sure thing".
Yes I was kidding about the shares all being 1 share swapped. The point is that it does not take insiders releasing shares, it only takes shares selling in the market.
And yes we have had the disagreement about whether the convertible bond holders have shorted any stock. I have said (and shown math) that it made good sense for them to do so. I have no proof they did, just as I have no proof the the short interest was more than one share being moved repeatedly.
You always conclude that you know my position and always conclude I am not long. I am long. Your opinion is fine with me. You don't know me, and (hopefully) I don't know you. I'm not sure how you black and white opinion helps you, but have at it.
Unless YOU recognize that the places that shorts can get shares are the ordinary stock market, the ordinary options market, the ordinary (convertible) bond market, and possibly other places, then you will constantly mislead yourself about unavailability of shares to cover.
I can see what I posted using the search function:
You collect the $0.60 per share as soon as you sell the contract. You must maintain the $3 per share to buy the assigned shares at all times as you might have the contract exercised at anytime.
The money is not free. They very clearly spell out the risks. You could have Molycorp declare bankruptcy, and be assigned shares at $3 that are worthless. That would represent a $2.40 per share loss. For taking on that risk, you get paid $0.60 per share.
I agree that the contract is worth selling. The risk is small. But the fact is that you are the insurance for someone thru 2015, thru the next 19 months. You do have to keep the $3 per share exercise price in my account so it ties up funds there. (That is how the return is only 20%)
Go for it if you like it. But it has risks and rewards. You can earn a 12% annually on the trade of selling the contracts. Obviously Shock Exchange with his bankruptcy will happen, it is just not imminent, would never take that trade.
People love these trades until the day they get assigned shares with a huge loss.
After all, why not the $4 options. The bid is $1.01. So you get $1 for tieing up $4 for 19 months, a higher return. $5 Puts are bid a $1.52, a whopping 30% net over 19 months.
Do what you want. Those are reasonable positions. Just not for me.
If you google: Commit To Buy Molycorp At $3, Earn 20%
you will find a Forbes article advising to sell the $3 strike Puts, for $0.60 per share. That Put costs $1 per share now, representing a loss of $0.40 per share.
I searched the MCP MB, because I recall some discussion of that article ... it looked REALLLY dumb at the time. Now I see that the thread topic was started by CB-CB and has been deleted. That really gets annoying when things are deleted like that.
I thought the trade was fairly safe, and so far, you can't have had shares assigned for a total loss. But like any investment, there is always a risk.
Every share short was from a lending account. Theoretically, the same share could be sold, then borrowed from the next account and then borrowed again. There might be only one share, re-borrowed and re-sold 70 million times!. And then that same share has to be bought, returned, bought, returned, bought, returned, etc, 70 million times!
If the reverse path is over time, like the forward path was, then it is just ordinary market demand, over a long time. If the reverse path is constrained in time and price, then of course, a short squeeze is possible. And every stock that has a high short interest has people predicting a short squeeze. As you have, ad naseum. If it happens, that's great. Good times for all longs. But no one should predict it is inevitable. It is actually very unlikely.
I've also reasoned before that many of the shares are connected to the convertible bond offerings, with the bond conversion representing the method of covering. If I had a long call for 100 shares at $7, and a short position of 100 shares, I don't care if the stock price goes to $100. I can cover for $7. And one set of the convertible bonds convert at $7-ish. Now it is better to cover at $4 than $7, but if you have that backstop, you are NEVER going to be squeezed.
That is not quite my position. I maintain that when a share is borrowed and sold short, that single share represents two interested owners: the one with the lending account and the one with the buying account. Both of those parties think they are shareholders, and from a practical point of view, both are shareholders. So in that sense, every share sold short is in two places: the account that loaned the share and the account that bought it. If the share was not loaned then the account that bought a share, would have bought a non-borrowed share.
If you consider it that way (and I do), then the number of shares OWNED by the market is the full share count PLUS the shares short. The shares short were SOLD short to shareholders.
A short covers by buying shares in the market. The loaned shares are then returned to the lending account, where that shareholder never knows if the shares were loaned or not. It is true that to buy shares in the market someone must sell. But that is what a market is: it is a place where people buy and sell shares. If there is no one selling, the bid has to go up, or the ask come down.
We just disagree about short covering. Shorts cover when they want to cover, by buying in a market that sells shares. And certainly, if they ALL want to cover at the same time, then there is a problem. But since that so rarely happens, it is rational not to expect it.
You are correct that 165 million trading volume could be 165 different shares transferred, or the same share transferred 165 million times. It really doesn't matter though. The point is that if the price goes up, people sell. You can hypothesize about what if no one sells, but people ALWAYS sell.
They will buy them in the market at the market price. The price point in the market might be higher or lower. Assuming that there will be share scarcity, even with higher prices is generally not true. Higher prices lead to supply of shares into the market. Since May 14th, 165,592,900 shares have traded under $3. If the price moved to $4, there would be many people eager to sell their positions for a 20-day, 33% gain.
Short squeezes are beyond exceedingly rare. Stocks have prices. When prices soar, people sell. A short squeeze requires that prices soar AND that people don't sell.
Short covering will eventually add to the market demand. The thing that will move the stock price is business success. If that fundamental is there then the price will begin moving. Short covering will be slow as shorts give up slowly, not fast and panicky. The reversal of market sentiment and added demand will favor longs, but obviously, I consider that dependent on the business plan actually succeeding.
I think it will, but I've been wrong before. And right before also. I'm just an anonymous Yahoo MB poster who enjoys MB's. My disagreement with your short squeeze suppositions is JMO.
I side with Keynes that markets are largely irrational.
I like the conventional supply-demand curves as an explanation for how markets work, and I think that markets are efficient methods of moving the price point to avoid surplus or scarcity. But I don't buy the various flavors of rational markets otherwise.
The common assumption is that the market averages out the spectrum. So there are over-optimists and over-pessimists, and risk-takers and risk-avoiders, and the expectation is that the average is rational. I don't really think that is correct. The market averages the irrational impulses of investors but I don't see the net average of irrational people as rational.
Keynes draws an important distinction between risk and uncertainty that most people don't recognize. We tend to assign every unknown (and remember Rumsfeld's famous "unknown unknowns") as a risk, something for which we can assign odds. In fact there are many things which are uncertain and odds don't apply. The efficient market hypothesis argues these average out ... sort of like the betting line for a football game. If the line is set and moved correctly, the amount bet will be equal on both sides. Of course one side is smart and the other stupid ... but the goal of the odds-makers is to be the middleman, holding the money, on many bets between disconnected individuals, and get paid for that middleman role.
Dilution is never priced in. Fear of dilution will drop the price. But since a stock offering is inevitably at a discount to the market price, that discount CAN'T be priced in. At some price point, the benefit of buying outweighs the risk/uncertainty of dilution and price drop of an offering. But if events lead to Molycorp making a dilutive offering, they will make that offering below the market price.
Molycorp added to uncertainty with the last Q1 report and CC. And the market is irrational. But we tell good stories that seem to make sense retrospectively.
It doesn't mean anything. The market isn't supposed to trade in fractions of a penny, but if someone buys 1000 shares for $2553, the trade is registered by the market at $2.553 per share. I tend to think these are somewhat larger trade blocks, where the last bits are trivial per share buy might matter when you are about to hit lunch. So maybe someone is buying 100,000 shares for $255,300. The fractional price prevents the block from filling partially ... that price just forces a full fill. The "market maker" has the normal action above and below that block, and can fill the order and take a small profit.
I'm just guessing but I interpret it that the fractions arrive that way. You and I can't place an order for 1000 shares at $2.553, but a market insider can trade a block, with a price that divides out to fractional. I think it can also be a result of a "dutch auction" order processing. Say a broker has three market orders for 1000 shares arrive simultaneously, and before the 3rd is filled, the price drops a penny. The broker can take the orders as 3000 shares at a fractional third of a cent. At least I have had weird order fills that have multiple blocks at multiple fractions. Some stocks seem to have more of that. I don't know if those trades show in the market as fractions, even though they show in accounts as fractions.
I wonder also about intra-brokerage trades. Say I decide to sell 1000 shares as a market order (bid at $2.55) and another Scottrade account places a simultaneous market buy order ($2.56 ask). Now I pay $7 and the buyer pays $7 fees. But I think Scottrade could also process the order. 1000 shares move, but at what price? I was willing to sell at $2.55 and another was willing to buy at $2.56 ... but it has to be registered as a single 1000 share transaction. It could be that the order processes at $2.555, with both the buyer and I getting a bargain, and the market not caring.
All of these are guesses.
I've gone thru his before ... right after the Q1 report and again now. The question was necessary and obvious.
Q: When will you make money?
A: We don't know, but progress is way slow.
Q: Will you need more money? And will you sell stock?
A: We don't know, but we have options. And we expect to make money.
then repeat again.
Part of the problem is that they have been behind schedule and over-promising so long, and they probably got a big legal smackdown after the SEC investigation ... lawyers will tell you not to promise. But they need to deliver positive progress, not more news of more delays. When you deliver bad news quarter after quarter, the question of money comes up.
I don't know. They do have to consider the credit options also. And those should be better if they have a firmer business case, with actual operational progress.
In the CC they said this:
Again, I think that really depends on the ramp. We're watching it every month and looking at where we think we are and where our liquidity position is. If and when we think we need to access the market then we will do that. But it really is going to be driven by our progress with our ramping production.
So they are watching the monthly numbers and they are watching the quarterly numbers. And they should be able to make some informed guesses about cash burn.
I'm not trying to make the case for a share offering. I think they are going to do what that last CC statement says: pay attention to the progress and the cash burn, and if they are making enough progress, they won't sell stock, and if they aren't, then they will.
I was agreeing with the timing of a stock offering as being before the end of July, if they need it. The quarterly report timing influences that.
What they said in the presentation was:
... with 1100 (inaudible) metric tons at production in the first quarter, we did not achieve the production volumes we were targeting.
I expect we will see significantly increased production in the second half of this year.
And a direct question about the rate I am guessing at in this thread:
... since you mentioned you did about 520 metric tons in April, you expect to get to that cash flow break even point if you do over 1,000. I mean, what type of improvement in your operation rates on a monthly base should we be expecting? Will you be significantly higher in the second half? Should we be expecting a 30% jump per month, 50% jump per month? Can you give more specific guidance in that range?
The answer was essentially "no".
... do you think that having 2,000 production metric tons a month in the second half would not be out of the question when things are progressing at this point?
It's more of a challenge to get there in the fourth quarter than was it six months ago when we set the target because we thought we might have higher production today. That's the best that I can answer that.
Sure. Just going back to your liquidity. You talked about you have many options, including issuing equity ...
I can't blame the analysts for the question. The CC was an exercise in saying we are behind our plan, and we won't commit to meeting the production goals at any time. Or to hitting any production amount at all. We were way under what we wanted for Q1.
If you say that, the very obvious question is when does the money run out and what is your plan? I can't blame the analysts for negative questions. They are hard questions but it isn't their money they are losing, it is ours. I wanted better answers to the plan ...