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If there's one thing Molycorp (NYSE: MCP ) and its investors know, it's an opportune moment to raise capital. The rare-earth element miner is heading back to the market for cash from the debt market and stockholders are cashing in with a big stock sale.
The proposed debt offering by Molycorp is for $230 million, including overallotment, and will be the company's first big debt offering as a public company. But the stock deal is a little bigger news today.
Certain shareholders are putting up to 11.5 million shares of the company up for sale. At a price of $55 per share -- near today's price -- proceeds would be $632.5 million before fees. But what should be more concerning is that nearly 14% of the company's shares are being put up for sale by major stockholders. Talk about insiders running for the exits!
What's going on out there?
Molycorp is in great financial position with $492.5 million in cash on its balance sheet to end the first quarter and rare-earth element prices still through the roof. This may be a perfect time to head to the bond market for more cheap cash to continue acquisitions, so I'm not worried about the debt sale.
But the insider stock sale has to have even the most die-hard Molycorp investors worried. According to Yahoo! Finance, insiders have already sold 18 million shares in the last six months -- and this only adds to the mass exodus. This may be a sign that insiders see competition coming.
Avalon Rare Metals (AMEX: AVL ) and Rare Element Resources (AMEX: REE ) may be years away from production, but Lynas is months away -- and who knows what China will do with exports. The explosion of rare-earth mineral prices has been based on supply and demand being wildly out of whack, but by the time Molycorp opens its facility, 40,000 more metric tons will be on the market annually.
Management and other insiders know this, and reading between the lines I have to say that's why they're selling out now. I thought we would hit a stock peak in October, as I predicted here, but maybe I was a few months early. Now may be the time to jump ship. What do you think of the share offering?