Why Molycorp's Shares Got Crushed


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What: Today started off on a positive note for Molycorp (NYS: MCP) after it released earnings. The stock was once up 6.6%, after reporting a slightly better loss than expected, but shares quickly fell 14.5% after investors found out about an SEC investigation.

So what: Hidden in the company's 10-Q filing is notice of a formal investigation by the SEC into the company's public disclosures. What's curious is that the investigation began in August, but this is the first disclosure, and there was no mention of it in the company's earnings press release or its conference call.

Now what: At the very least, this sounds a little fishy. It's always best to be upfront about these kinds of challenges, and we know that investors hate it when the SEC comes a-knockin'. We have very little detail about the investigation except that Molycorp is cooperating.

It looks to me like management wanted to sweep this under the rug, if possible, and it certainly needs to answer investor concerns quickly. I didn't like Molycorp before this, but I definitely would be a seller after the investigation disclosure.

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The article Why Molycorp's Shares Got Crushed originally appeared on Fool.com.

Fool contributor Travis Hoium has no positions in the stocks mentioned above. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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