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Post by babaoriley on Dec 20, 2018 18:21:17 GMT -5
Matt, doesn't it depend on the type of market out clause the underwriting agreement contains?
I doubt it will come into play here, though, cuz I think many of us know that the shorting has been done and the gain booked!! And if they tried to get greedy and cancel, and just buy back the short at a huge profit, inquiring eyes may cast a look their way.
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Post by spudspud on Dec 20, 2018 20:04:33 GMT -5
Are you certain thThe 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! The only thing is that we may have only done 26 million in total volume in close to a month before today.. So I don’t think that’s a “rule” and I don’t know how many did that and how legal it is. I know in other share offerings i’ve been involved in the underwriters definitely shorted the stock before the offering and stated so plainly in the prospectus that they would be doing so and acting as market makers.
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Post by agedhippie on Dec 21, 2018 5:33:37 GMT -5
Are you certain thThe 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! The only thing is that we may have only done 26 million in total volume in close to a month before today.. So I don’t think that’s a “rule” and I don’t know how many did that and how legal it is. I know in other share offerings i’ve been involved in the underwriters definitely shorted the stock before the offering and stated so plainly in the prospectus that they would be doing so and acting as market makers. You are quite right. I reread the underwriting section in the prospectus and they can short to fix a price. I was thinking of shorting to exploit a coming drop and they cannot do that. Of course it's a grey area when you get to what is stabilizing and what is exploiting.
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Post by boytroy88 on Dec 22, 2018 19:02:19 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! So that's where I'm confused as to why the SEC allows this. If I'm not mistaken the original intent of this type is financing is so that the company gets investors to lock in at a good price to minimize the potential loss. If everyone knows that the new investors will short the stock, which in a sense is insider trading since only those involved know that the price will go down, this should not be allowed.
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Post by brotherm1 on Dec 22, 2018 19:45:18 GMT -5
good point.
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Post by uvula on Dec 22, 2018 19:57:33 GMT -5
If this was illegal it would be harder for desperate companies to raise cash. Maybe it is good that it is legal.
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Post by agedhippie on Dec 23, 2018 12:01:29 GMT -5
So that's where I'm confused as to why the SEC allows this. If I'm not mistaken the original intent of this type is financing is so that the company gets investors to lock in at a good price to minimize the potential loss. If everyone knows that the new investors will short the stock, which in a sense is insider trading since only those involved know that the price will go down, this should not be allowed. These are not investors, it's closer to the mark to think of them as financiers. They have no interest in the company, they just want to protect their capital and make a profit. Without that short their capital and profit would be at risk and they simply wouldn't fund micro-caps like Mannkind. The SEC role is not there to protect investors from their decisions. You are expected to be informed, do the research, and ask questions. The SEC will step in if the data you need to make those decisions is fraudulently distorted but that isn't the case here. Look back at Mannkind's history and see what sort of funding deals they have struck in the past, the data is all there in the filings. Personally - this caught me unprepared. I had some Calls I needed to roll forwards and while I was expecting dilution I wasn't expecting it for another couple of months. Traditionally Mannkind cut this much finer but I suspect in this case the board told Mike that the stock market was falling apart so play safe and do it now.
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