Why Molycorp, Container Store Group, and Gigamon Tumbled Today

Wednesday brought some relief to the selling pressure in the stock market from earlier this week, as favorable comments in the minutes of the Fed's latest Federal Open Market Committee meeting restored confidence that the central bank remains poised to help support the U.S. economic recovery if it begins to falter. Major-market benchmarks were up about half a percent on the day, with bond yields falling and gold prices on the rise. But some stocks nevertheless lost substantial amounts today, with Molycorp (NYSE: MCP  ) , Container Store Group (NYSE: TCS  ) , and Gigamon (NYSE: GIMO  ) among those with the worst performance in Wednesday's trading session.

Source: Molycorp.

Molycorp plunged 17%, with the producer of rare-earth metals seeing speculative activity in the private-equity arena that could result in a bankruptcy filing for the company. Reports that a major private-equity player was buying up a large amount of Molycorp's convertible debt as a method toward a backdoor takeover of the company. Essentially, by using the bankruptcy code, bondholders would potentially be able to restructure Molycorp to make current shares of stock worthless, with highest-priority debt getting repaid in full and lower-priority debt being issued new shares of stock. With prices of rare-earth metals having been low for a long time, Molycorp is running out of option to keep creditors at bay.

Container Store fell 8% after the organizational-products and home-furnishings retailer reported weak quarterly results and gave poor future guidance last night. Same-store sales at Container Store dropped 0.8%, leading to a loss that was slightly worse than investors had expected to see. Yet the comment that got the most attention was that of CEO Kip Tindell, who characterized Container Store as being captured by a "retail funk" that had affected its competitors as well. As Container Store sees its traffic fall slightly, the takeaway for investors is that just because certain portions of the consumer economy might be doing well doesn't mean that things are well throughout the entire consumer sector.

Gigamon plummeted 32% in response to its preliminary second-quarter financial results. The enterprise networking company reduced its revenue expectations for the quarter by 10% to 20%, with Gigamon's CEO saying that it has taken the company longer to close sales deals as it faces more extensive requirements for customer review and approval of contracts. Despite adding 84 new customers during the quarter, Gigamon hasn't inspired much confidence among shareholders, with several analysts issuing downgrades and slashing price targets on the stock. Given how much demand there has been for network-related services and equipment recently, Gigamon's news is particularly bad for shareholders as they assess the company's future prospects.

Leaked: Apple's next smart device (warning -- it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee that its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are even claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts that 485 million of these devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and to see Apple's newest smart gizmo, just click here!


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3023629, ~/Articles/ArticleHandler.aspx, 11/27/2014 2:39:15 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement