According to the law firm press release, Molycorp produces and sells rare earth and metal materials in the United States and internationally. The Company's Resources segment extracts rare earth minerals, including rare earth concentrates; rare earth oxides (REO), such as lanthanum, cerium, neodymium, praseodymium, and yttrium; heavy rare earth concentrates, which include samarium, europium, gadolinium, terbium, dysprosium, and others; and SorbX, a line of proprietary rare earth-based water treatment products. This segment's products are used in oil refinery catalyst, glass polishing, automotive, water purification, and energy efficiency lighting applications.
The Complaint alleges that throughout the Class Period, Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company's business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (1) the Company's reported inventory was materially understated; (2) the Company overstated its income tax benefit in the first quarter of 2013 by approximately $6.5 million; (3) the Company lacked adequate internal and financial controls; and (4) as a result of the foregoing, the Company's statements were materially false and misleading at all relevant times.
On August 8, 2013, the Company disclosed that, on August 6, 2013, the Audit and Ethics Committee of the Company's Board of Directors, based upon a recommendation from management, determined that its unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2013 should no longer be relied upon because they contained an error with respect to the reconciliation of its physical inventory to the general ledger, which resulted in a cumulative overstatement of costs of sales and understatement of current inventory of approximately $16.0 million. This error also caused the income tax benefit in the first quarter of 2013 to be overstated by approximately $6.5 million, the disclosure of the consolidated assessment of normal production levels to be understated by approximately $17.4 million, and the consolidated total write-down of inventory to be overstated by $18.0 million.
On this news, shares fell $0.71, approximately 9.72%, to close of $6.69 per share on August 9, 2013.
On April 2, 2014, the Court issued an Order appointing lead plaintiff and approving lead counsel. Lead Plaintiff filed a consolidated and amended complaint on May 19.
On March 12, 2015, the Court issued an Order granting Defendants' motion to dismiss. The Clerk was directed to close this case. A Notice of Appeal of this decision was filed on August 17, 2015. The Appeal was withdrawn pursuant to a Settlement between the parties as of October 5, 2016.
A Stipulation of Settlement was entered into by the parties on October 21, 2016. On January 18, 2017, the Court issued an Order preliminarily approving the Settlement. On May 15, the Court granted final approval of the Settlement and entered Final Judgment. The Court issued an Order authorizing distribution of the net Settlement Fund on April 10, 2018.