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Post by u1682002 on Dec 20, 2018 13:12:41 GMT -5
To answer the original question - it doesn't matter. The underwriter has agreed (for a fee) to pay Mannkind the whole amount. Finding and keeping buyers is the underwriter's problem. I would be shocked if the underwriter didn't already have their buyers locked up, and those buyers had not already shorted the stock. This is my original understanding also. The relative light volume given a day like this makes me just wonder whether or not my understanding is correct.
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Deleted
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Post by Deleted on Dec 20, 2018 13:14:36 GMT -5
To answer the original question - it doesn't matter. The underwriter has agreed (for a fee) to pay Mannkind the whole amount. Finding and keeping buyers is the underwriter's problem. I would be shocked if the underwriter didn't already have their buyers locked up, and those buyers had not already shorted the stock. From this level we should see SP rise, how much and over what time is the big question. The buyers make a lot of money given the amount of capital and the amount of time they hold. The annualized return on this one deal alone is beyond obscene. Would like to know at what point the buyers are locked in and then how long after they are locked in can they start the short, what are the rules for them surrounding this and can the market makers participate as buyers of the offering? Quick ride down and then likely a nice ride up in pure percentages.
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Post by tomtabb on Dec 20, 2018 13:14:57 GMT -5
The following is a response from MNKD management that I got today. Not sure I got what I want to hear but I guess this is the best they can do. I do understand they have to take some actions right now to secure the necessary fund for next year giving the market conditions. Dear Mr. xxx, To effectively promote Afrezza and to invest in our pipeline, ultimately resulting in collaborations such as United Therapeutics, we need capital resources which we all agree should have come from Afrezza sales or prior deals. As you may be familiar with, over the years, we’ve done equity offerings, some of which came easy when Mr. Mann was still with us and some of which came during what others perceived as desperation. So for our CEO and CFO, there is a thoughtful process to timing. They are also painfully thoughtful of dilutive financings. They have exhaustively looked at non-dilutive alternatives resulting in terms that we wouldn’t necessarily want to be held hostage to, especially in the ensuing year(s) when we expect success in both Afrezza and our pipeline technology. Ancillary to the ultimate goal of raising capital, but important for the long-term, are increasing our institutional ownership (our CEO and CFO have been on non-stop targeted non-deal roadshows with institutionals leading up to this offering), and elevating our banking relationships to get effective analyst coverage. There are a lot of considerations and at the right time, we will provide transparency. Announcements and the disclosure process are strictly regulated by securities laws which legal counsel dictates to the Company. --------------------------------------- Rose Alinaya SVP Investor Relations & Treasury That really doesn't explain why they apparently need to do the offering now, 5 days before Christmas. They have money from UTHR that should last at least another quarter or two. Are they anticipating something bad?
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ssaq
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Post by ssaq on Dec 20, 2018 13:16:36 GMT -5
Dec 20, 2018 13:05:41 GMT -5 agedhippie said: To answer the original question - it doesn't matter. The underwriter has agreed (for a fee) to pay Mannkind the whole amount. Finding and keeping buyers is the underwriter's problem. I would be shocked if the underwriter didn't already have their buyers locked up, and those buyers had not already shorted the stock.
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I don't think that is necessarily true. They may have indications of interest, but the deal didn't close yet. I believe they could change terms if they forced to, or maybe close without being fully subscribed. Hopefully they had interest from strong hands.
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Post by mnkdfann on Dec 20, 2018 13:22:00 GMT -5
The following is a response from MNKD management that I got today. Not sure I got what I want to hear but I guess this is the best they can do. I do understand they have to take some actions right now to secure the necessary fund for next year giving the market conditions. Dear Mr. xxx, To effectively promote Afrezza and to invest in our pipeline, ultimately resulting in collaborations such as United Therapeutics, we need capital resources which we all agree should have come from Afrezza sales or prior deals. As you may be familiar with, over the years, we’ve done equity offerings, some of which came easy when Mr. Mann was still with us and some of which came during what others perceived as desperation. So for our CEO and CFO, there is a thoughtful process to timing. They are also painfully thoughtful of dilutive financings. They have exhaustively looked at non-dilutive alternatives resulting in terms that we wouldn’t necessarily want to be held hostage to, especially in the ensuing year(s) when we expect success in both Afrezza and our pipeline technology. Ancillary to the ultimate goal of raising capital, but important for the long-term, are increasing our institutional ownership (our CEO and CFO have been on non-stop targeted non-deal roadshows with institutionals leading up to this offering), and elevating our banking relationships to get effective analyst coverage. There are a lot of considerations and at the right time, we will provide transparency. Announcements and the disclosure process are strictly regulated by securities laws which legal counsel dictates to the Company. --------------------------------------- Rose Alinaya SVP Investor Relations & Treasury I have no doubt that the 'Cult of Mike' will survive this. Cognitive dissonance theory suggests it will bounce back even stronger than ever before. My statement above in no way blames Mike. I think he's doing about as good a job as he can. But I do think many people have long over-stated his (and other Mannkind executives) abilities and the opportunities he has (they have) to get things done.
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Post by agedhippie on Dec 20, 2018 13:33:30 GMT -5
To answer the original question - it doesn't matter. The underwriter has agreed (for a fee) to pay Mannkind the whole amount. Finding and keeping buyers is the underwriter's problem. I would be shocked if the underwriter didn't already have their buyers locked up, and those buyers had not already shorted the stock. From this level we should see SP rise, how much and over what time is the big question. The buyers make a lot of money given the amount of capital and the amount of time they hold. The annualized return on this one deal alone is beyond obscene. Would like to know at what point the buyers are locked in and then how long after they are locked in can they start the short, what are the rules for them surrounding this and can the market makers participate as buyers of the offering? Quick ride down and then likely a nice ride up in pure percentages. The buyers are locked in as soon as the underwriter gets the green light. Nobody is going to bail out because they are contractually obliged, and more importantly if they did they would never get to participate again. They can short as soon as they sign the contract, they don't have to wait for the whole thing to close or receive the stock. MArket makers don't take part because it's not what they do. They are getting their percentage from the shorts and trades around the issue.
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Post by ktim on Dec 20, 2018 13:41:46 GMT -5
To answer the original question - it doesn't matter. The underwriter has agreed (for a fee) to pay Mannkind the whole amount. Finding and keeping buyers is the underwriter's problem. I would be shocked if the underwriter didn't already have their buyers locked up, and those buyers had not already shorted the stock. Are you certain this is true? The press release states "Leerink Partners is acting as sole book-running manager for the offering. BTIG, LLC and Oppenheimer & Co. Inc. are acting as co-lead managers for the offering. H.C. Wainwright & Co., LLC acted as a financial advisor to MannKind in connection with the offering. " Note they are not said to be an underwriter. Don't know if that is meaningful distinction or not. Would appreciate anyone that can shed light. Hoping you are correct aged.
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Post by awesomo on Dec 20, 2018 13:45:30 GMT -5
The following is a response from MNKD management that I got today. Not sure I got what I want to hear but I guess this is the best they can do. I do understand they have to take some actions right now to secure the necessary fund for next year giving the market conditions. Dear Mr. xxx, ... They are also painfully thoughtful of dilutive financings. They have exhaustively looked at non-dilutive alternatives resulting in terms that we wouldn’t necessarily want to be held hostage to, especially in the ensuing year(s) when we expect success in both Afrezza and our pipeline technology. ... I think this part highlights how bad the relationship with Deerfield has been.
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Post by mannmade on Dec 20, 2018 14:20:39 GMT -5
Would be hard for Mike to go after another loan for this amount as would negate his progress over last year on cleaning up the balance sheet. No more loans unless good terms and they secure a 3 year runway. Hate dilution but for now lesser of two evils...
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Post by agedhippie on Dec 20, 2018 14:29:19 GMT -5
Are you certain this is true? The press release states "Leerink Partners is acting as sole book-running manager for the offering. BTIG, LLC and Oppenheimer & Co. Inc. are acting as co-lead managers for the offering. H.C. Wainwright & Co., LLC acted as a financial advisor to MannKind in connection with the offering. " Note they are not said to be an underwriter. Don't know if that is meaningful distinction or not. Would appreciate anyone that can shed light. Hoping you are correct aged. Ignore the PR, it's in the filing: " Leerink Partners LLC is acting as representative of each of the underwriters named below and as sole book-running manager for this offering. Subject to the terms and conditions set forth in the underwriting agreement among us and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the number of shares of common stock and warrants set forth opposite its name below." The only underwriter listed is Leerink Partners LLC. That's not surprising since they are running the book and they don't want to share the fees since this is a zero risk proposition. The buyers short the stock at $1.70 knowing they are paying $1.50 for stock and warrant. This means the buyers are out of the market before the sale is even announced so where the share price goes is irrelevant to them. A buyer in this deal just made a risk-free 13% for a weeks work which is an IRR of 700%. The hardest part is not getting buyers, it's being asked to participate!
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Post by u1682002 on Dec 20, 2018 14:38:37 GMT -5
This is the case in a normal case. I was wondering if MNKD would have passed this stage by requiring the underwriter to sign an agreement not to short any of the offered stocks.
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Post by jred on Dec 20, 2018 14:40:11 GMT -5
Condolences to the longs for the brutal price action today - believe me I feel your pain.
The bad:
- I feel this offering is an unfortunate consequence of the slower than expected growth in sales. Sales are increasing on a % basis, but as a number of members have already pointed out, in terms of real dollars and scripts, we haven't seen the exponential (ie hockey stick) growth we were hoping for and need.
- After barely making their projections last year and totally botching them this year, management's credibility has taken a significant hit - with the Street, potential partners and the stable institutional investors management is looking for. I think Mike's handling of missing the projections - or basically non-handling of them - was a mistake in judgement. - IMO because of these and past misses, the stock market is not going to give MNKD any benefit of the doubt when it comes to future potential for Afrezza or TS. Therefore until there is a real jump in sales or game changing TS deal, the suppressed stock price is going to make capital raises painful. - Mike's recent remarks of "up from here" and comments on attempting to avoid stockholder dilution in future cash raises makes this price move that much harder to take for the longs.
The better: (need some healing before I can say good)
- It was painful, but they did raise $40 million. If I was in CFO's Steven Binder's shoes, I would have been pushing for this. They are in a better place to execute their plan - now let's hope we get an update on their progress. It will be interesting to hear if this cash is going to be used for normal operations of if management sees an opportunity to significantly accelerate sales or lucrative TS deals and needed this capital to move on it. - There was not a significant drop in share price or a spike in short interest or the borrow rate prior to the offering, like we have seen in past deals. Seems like management was better at handling this offering and limiting the shorting of the stock ahead of time, thereby driving down the price offering even further. It will also be interesting to hear who the investors were, to find out if management was able to attract any that will be longer term. - This capital raise and stock price drop doesn't negate whatever potential Afrezza or TS has. The delay in realizing that potential came with the cost of dilution at these prices, but it didn't change Afrezza or TS. If you feel the potential upside is only as a niche drug then the dilution is significant to your profit margin, but if you feel MNKD can be significantly more (without taking too long to get there) - then there is still a lot of upside. Doesn't feel like it after today's gut punch, but the story hasn't really changed. - Shareholders may be upset with Mike based on a lack of predicted sales growth and his recent comments in light of today's action, but with a new and inexperienced CEO there are bound to be a few bumps along the way. But we also got a leader with tremendous passion and energy at a time when there weren't many people looking for the job. It has gone slower than planned, but he has transformed the company and managed to push it forward against some strong headwinds. Without his vision there is no UTHR deal. Imagine the damage of the financing that would have been necessary if MNKD didn't have the cash from that deal.
Good luck to the longs - maybe I'm just a gluten for punishment, but bought more today.
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Post by mnkdfann on Dec 20, 2018 14:40:12 GMT -5
This is the case in a normal case. I was wondering if MNKD would have passed this stage by requiring the underwriter to sign an agreement not to short any of the offered stocks. Why is this not a 'normal' case?
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Post by agedhippie on Dec 20, 2018 15:01:03 GMT -5
This is the case in a normal case. I was wondering if MNKD would have passed this stage by requiring the underwriter to sign an agreement not to short any of the offered stocks. The underwriter doesn't short the stock, the buyers do. The problem is that MNKD is not seen as a great investment by Wall St so MNKD gets forced into this murky world where you take what you can get. Once things get better there will be investors rather than vultures and this problem goes away.
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Post by matt on Dec 20, 2018 15:23:00 GMT -5
I don't think that is necessarily true. They may have indications of interest, but the deal didn't close yet. I believe they could change terms if they forced to, or maybe close without being fully subscribed. Hopefully they had interest from strong hands. Yes, that is necessarily true. There are two kinds of placements, fully underwritten and what is normally called "best efforts". In an underwritten offering MNKD sells the shares to the underwriter and it is the underwriter's problem to find investors to take the shares. The price is fixed and the underwriter has all the risk of subsequent price movements. As is typical in underwritten offerings, there is more than one bank involved and the other banks will take a chunk of the deal and find buyers among their clients. Contrast this with best efforts offerings where all the bank promises to do is to try and find buyers. Of course the bank only gets paid on a best efforts offering if they actually find buyers, so banks only sign up for those if they think they have a very good chance of getting the deal done. In both cases, the banks will have a list of likely investors. The could be family offices, deep pocket individuals, or most likely, hedge funds. Since the price terms are locked and loaded, the bankers were out peddling the securities today and will continue to do so until their allocations are gone. When MNKD closes with the underwriter, the shares will trickle down to the new buyers within hours if not minutes. As for what the securities are worth, the market has already voted on that. As I write this message the stock is trading at $1.10 which gives an implied value to the warrant of $0.40. Since the securities will trade separately, you can go back at any point and see if the new buyers got a good deal or not as the market value of the unit is always the stock price plus the warrant.
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