MP Materials engages in the ownership and operation of integrated rare earth mining and processing facilities. The Company was previously known as Fortress Value Acquisition Corp. (FVAC) and operated as a special purpose acquisition company (SPAC). In November 2020, FVAC consummated a merger with MP Mine Operations LLC (MPMO) and Secure Natural Resources LLC (SNR and, collectively with MPMO, Legacy MP Materials), whereby, among other things, Legacy MP Materials became an indirect wholly-owned subsidiary of FVAC, and FVAC changed its name from Fortress Value Acquisition Corp. to MP Materials Corp. (the Business Combination). As a result of the Business Combination, the Company began to own and operate the Mountain Pass Rare Earth Mine and Processing Facility (Mountain Pass) in California. The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Companys business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) FVAC had overstated its due diligence efforts and expertise with respect to identifying target companies to acquire; (ii) FVAC performed inadequate due diligence into Legacy MP Materials prior to the Business Combination, or else ignored significant red flags regarding, inter alia, Legacy MP Materials management, compliance policies, and Mountain Passs profitability; (iii) as a result, the Companys future business and financial prospects post-Business Combination were overstated; (iv) MP Materials engaged in an abusive transfer price manipulation scheme with a related party in the Peoples Republic of China (China) to artificially inflate the Companys profits; (v) MP Materials ore at Mountain Pass was not economically viable to harvest for rare earth metals; and (vi) as a result, the Companys public statements were materially false and misleading at all relevant times. On February 3, 2022, Bonitas Research published a report (the Bonitas Report) accusing MP Materials of executing an abusive transfer price manipulation scheme with a related party in China, Shenghe Resources Holding Co., Ltd. (Shenghe), which owned 7.7% of the Company as of March 22, 2021. Specifically, the Bonitas Report alleged that, since the second quarter of 2021, MP Materials and Shenghe executed an abusive transfer price manipulation scheme whereby Shenghe overpaid for MP [Materials] concentrates to artificially inflate MP [Materials] profits, [which] conveniently coincided with the SPAC insider lock-up expiration so that MP [Materials] insiders could sell MP [Materials] stock at artificially inflated prices. In addition, the Bonitas Report cited a September 2019 German academic study that concluded MP [Materials] 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. On this news, MP Materials stock price fell $5.61 per share, or 14.25%, to close at $33.75 per share on February 3, 2022, on unusually heavy trading volume of 12,371,789 shares.
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