MP Materials plunges on short call from Bonitas Research

Feb. 03, 2022 9:52 AM ETMP Materials Corp. (MP)By: Carl Surran, SA News Editor107 Comments

Wheel loader unloading sand into mining truck at the open pit — Maksim Safaniuk/iStock via Getty Images

MP Materials (MP -6.6%) tumbles to a three-month low at the open after short seller Bonitas Research accuses the company of executing an "abusive transfer price manipulation scheme" with a Chinese partner.

Chinese state-owned rare earths metals producer Shenghe owns 8% of MP shares and has rights to production from MP's Mountain Pass mine in California.

Bonitas believes since Q2 2021, MP and Shenghe "executed an abusive transfer price manipulation scheme whereby Shenghe overpaid for MP concentrates to artificially inflate MP's profits, [which] conveniently coincided with the SPAC insider lock-up expiration so that MP insiders could sell MP stock at artificially inflated prices."

Bonitas also cites a German academic study that concluded MP's ore at Mountain Pass is "not economically viable to harvest for rare earth metals while 12 of the other 13 well known rare earth mines outside of China are economically feasible" at current market prices.

MP Materials "remains an underrated EV investment," Sandis Weil writes in a bullish analysis published on Seeking Alpha.