Molycorp Inc. (NYSE: MCP) may soon join the endless number of public companies that have filed for bankruptcy protection. There have been countless warnings about this U.S.-based leader in rare earths. After the company decided to miss its latest interest payments, a report from the Wall Street Journal warning that Molycorp is preparing to file for bankruptcy protection has sent an already bad stock down even further.

While this potential bankruptcy news has been fairly well telegraphed, the initial take of 24/7 Wall St. is that Molycorp decided to make its shareholders play the game of Russian roulette once it decided to miss an interest payment.

The big question is what it means for the common shareholders if a bankruptcy filing is made. It is impossible to say anything up front without a crystal ball, but the reality is that most bankruptcy filings in public companies that went awry end up netting out a total loss for the common shareholder.

Molycorp may have had about $140 million in cash and investments at the end of March, but the total long-term debt and other long-term liabilities was more than $1.6 billion at the same time.

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By electing for a “30-day grace period” of an interest payment, Molycorp has shielded itself from immediately paying $32.5 million of its cash out the door to satisfy the debt payment on those 10% senior notes that mature in 2020. At the time of the interest payment announcement, Molycorp said:

This election by the Company will not trigger any cross-default provisions in other outstanding Company debt prior to the end of the grace period and should not affect current operations. As previously disclosed, the Company has retained financial and legal advisors to assist the Company to restructure its debt. The Company will use the grace period to continue to evaluate different options related to such debt restructuring.

Unfortunately, this company’s public stock value after the drop on Thursday is down to $88 million or so. Here are the annual losses from continuing operations at Molycorp for each of the past three years:

• 2014: -$622.9 million
• 2013: -$370.5 million
• 2012: -$473.6 million

What investors have to consider is the independent auditor’s note from mid-March of this year. KMPG issued the deadly “going concern” warning. It turns out that the so-called rare earths may have just been one of the many burst bubbles. Another concern is that much of Molycorp’s rare earths just were not the same rare earths that were in such high demand.

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With shares down 24% at $0.31 on over 15 million shares right as of the noon-hour on Thursday, Molycorp has a 52-week trading range of $0.28 to $2.98. It may be too painful to say how high this stock reached over the past five years or so.

Now investors must decide if they roll the dice here and hold on with hope or if they bite the bullet and exit. At this point, it is one of those decisions with no good choices left. Molycorp’s Mountain Pass mine may continue ahead, but if the bankruptcy filing does come, it may be with the debt holders as the new shareholders.

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