Molycorp was deciding to embrace the growth through becoming a vertically integrated supplier of rare earth minerals, metals, and oxides by $1 billion capital expansion. It is the only producer of rare earth minerals at the Western hemisphere. During the second quarter of 2012, the company did not meet the desired profit and earning that ultimately demanded the company to introduce a new funding strategy. Consequently, the firm decided to issue $360 million of convertible debt and $120 million of equity in August 2012. The firm contracted a “share lending agreement” with Morgan Stanley to guide the issuance of convertible debt, whereby Molycorp by a transaction “Happy Meal” would issue the shares to Morgan Stanley. The primary objective was to facilitate the convertible debt investors that “through the short sales they could protect their investment”. The case asks students to examine the potential impact of this financing strategy to the firm, its stock price, and its prospects and why Molycorp pursued this strategy.
Related Case Solutions & Analyses:
PCAOB (A)
Louis Vuitton Moet Hennessy: Expanding Brand Dominance in Asia
Note on Capital Budgeting
Technical Note on LBO Valuation and Modeling
Guiding Professional Accountants to Do The Right Thing
Marten Arts Gallery Inc.
Powershares Exchange-Traded Funds
Formosa Plastics Group: Business Continuity Forever
Investment Technology Group
Succession Planning at Samsung: The Merger Formula of Cheil Industries and Samsung C&T
