Molycorp Board, Majority Holders Sued Over Stock Bubble

Molycorp Inc.’s board was sued on the company’s behalf over claims that it misled investors about the rare-earth market, creating a “price bubble” for the shares.

Molycorp’s directors and its controlling shareholders Resource Capital Funds and Pegasus Capital Advisors devised a scheme to temporarily inflate the stock’s value and then profit by dumping more than $1 billion of their personal holdings into the market in February, March and June of last year, according to the complaint. The lawsuit, which was made public today, was filed by Arizona resident Ira Gaines, a trustee of Paradise Wire & Cable Defined Benefit Plan.