Why Molycorp, Container Store Group, and Gigamon Tumbled Today

Wednesday brought some relief to the selling pressure in the stock market from earlier this week, as favorable comments in the minutes of the Fed's latest Federal Open Market Committee meeting restored confidence that the central bank remains poised to help support the U.S. economic recovery if it begins to falter. Major-market benchmarks were up about half a percent on the day, with bond yields falling and gold prices on the rise. But some stocks nevertheless lost substantial amounts today, with Molycorp , Container Store Group , and Gigamon among those with the worst performance in Wednesday's trading session.

Source: Molycorp.

Molycorp plunged 17%, with the producer of rare-earth metals seeing speculative activity in the private-equity arena that could result in a bankruptcy filing for the company. Reports that a major private-equity player was buying up a large amount of Molycorp's convertible debt as a method toward a backdoor takeover of the company. Essentially, by using the bankruptcy code, bondholders would potentially be able to restructure Molycorp to make current shares of stock worthless, with highest-priority debt getting repaid in full and lower-priority debt being issued new shares of stock. With prices of rare-earth metals having been low for a long time, Molycorp is running out of option to keep creditors at bay.

Container Store fell 8% after the organizational-products and home-furnishings retailer reported weak quarterly results and gave poor future guidance last night. Same-store sales at Container Store dropped 0.8%, leading to a loss that was slightly worse than investors had expected to see. Yet the comment that got the most attention was that of CEO Kip Tindell, who characterized Container Store as being captured by a "retail funk" that had affected its competitors as well. As Container Store sees its traffic fall slightly, the takeaway for investors is that just because certain portions of the consumer economy might be doing well doesn't mean that things are well throughout the entire consumer sector.

Gigamon plummeted 32% in response to its preliminary second-quarter financial results. The enterprise networking company reduced its revenue expectations for the quarter by 10% to 20%, with Gigamon's CEO saying that it has taken the company longer to close sales deals as it faces more extensive requirements for customer review and approval of contracts. Despite adding 84 new customers during the quarter, Gigamon hasn't inspired much confidence among shareholders, with several analysts issuing downgrades and slashing price targets on the stock. Given how much demand there has been for network-related services and equipment recently, Gigamon's news is particularly bad for shareholders as they assess the company's future prospects.