Molycorp, the Western hemisphere's only manufacturer of rare earth minerals, was at the center of a $1 billion capital growth in its effort to become a vertically integrated supplier of oxides, rare earth minerals, and metals. After reporting lower than anticipated revenues and gains for the next quarter of 2012, management needed to design a new financing strategy for the business. In August 2012, Molycorp declared it would issue $120 million of equity and $360 million convertible debt.
Molycorp Issuing the ''Happy Meal'' Securities (B) Case Study Solution
To aid the issuance of convertible debt, the firm engrossed itself into a ''share lending agreement'' along with Morgan Stanley whereby Morgan Stanley will borrow shares from Molycorp in a transaction labeled as a ''Happy Meal''. The aim was to help convertible debt investors" hedge their individual investments through short sales." The challenge of the case would be to understand why this funding strategy was used by Molycorp and what impact it might probably have on its stock price, its prospects, and the firm.
PUBLICATION DATE: August 11, 2014 PRODUCT #: 215014-HCB-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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