Nate Pile's Latest Thoughts
Oct 31, 2016 19:41:19 GMT -5
sportsrancho, prosper, and 3 more like this
Post by nylefty on Oct 31, 2016 19:41:19 GMT -5
Nate Pile has made his latest Inter-Issue Commentary available to non-subscribers.
Some excerpts:
What are some of the possible sources of capital to keep the lights on? At the “easy”
end of the spectrum (and I put it in quotes because the only time it is ever easy for
investment bankers to raise money for a company is when the stock is in great demand
already on Wall Street – which usually means it is either hitting new all-time highs and/or
there is a bull market going on for the sector that it belongs to – and, clearly, this is not
the situation MannKind finds itself in at the moment), the company could simply figure
out how much it really thinks it will cost to turn the corner, and then sell as many shares
(via stock and/or some sort of convertible debt) as needed at whatever price the market
would bear to get the deal done, and, in doing so, take “fear of bankruptcy” off the table
for good (knock on wood).
Yes, the dilution would almost certainly be “significant” if the deal was done at current
prices but, at the end of the day, if it gets us across the finish line, it won’t matter whether
there are 500M, 600M, or 700M shares outstanding since the size of the prize is quite
large, indeed… the trick, of course, would be in making sure that “enough” was raised to
ensure that the exercise would never need to be repeated again.
Along with a straight up offering to the public, the company could instead raise capital
by selling a sizable stake (i.e. 10% or more) to a single investor in a private placement.
And, while there may be a single, very large institutional investor out there willing to
participate in such an offering, a more likely buyer of stock in this manner would be
another drug company that might be interested in eventually owning MannKind and/or
one that, as part of the transaction, would also end up partnering with MannKind to sell
one (or more) of its products.
Besides raising money via one of the two paths mentioned above, one of the more
intriguing ideas that has been making the rounds of social media following the leak last
month of what is supposedly a Receptor Life Sciences “About Us”-type document is that
MannKind and Receptor Life Sciences might do a “reverse merger” (a reverse merger is
a transaction in which a private company acquires/merges with an already public
company in order to become a publicly traded company itself without going through the
very lengthy and complex process usually associated with “going public”).
No, we still do not officially know anything about RLS other than that it is, in fact,
working on “cannabis products,” it has signed an agreement with MannKind to develop
products using the Technosphere platform, and RLS’ chief scientist happens to be the
same woman that was MannKind’s chief scientist until sometime late last year… and, at
least in my book, those are three points that provide a nice framework around which to
start wondering “what if ___?”
Again, without knowing for sure who is behind RLS and what their intentions may be,
anecdotal evidence suggests that the group behind it probably does have “deep pockets”
that may or may not end up providing upfront cash as part of a transaction… but even if
they don’t put money in right out of the gate, a much more intriguing piece of the puzzle
is the fact that while MannKind’s stock has been the dumps lately (along with rest of the
biotech sector, I might add, even if not to the same degree as MannKind), cannabis
stocks have been on a tear lately - and, as mentioned above, when is the best and easiest
time for companies to ask investment banks to raise money for them? Why, during bull
markets, of course!
Please note that I am in NO WAY predicting that a reverse merger is in the works (nor
should you invest based solely on this hope, mind you!), but given the relationships that
already exists between the two companies… along with where each company finds itself
sitting at this point in the market cycle for its respective industry… I think it is certainly a
scenario worth pondering for at least a minute or two.
Along with the above possibilities when it comes to putting cash in the coffers, I want
to also remind of you that there are some smaller dollar amounts that will come in from
the sale of Afrezza (as well as via “the insulin put” that requires Sanofi to buy insulin
from MannKind), along with a potential milestone payment from RLS in the fourth
quarter, and though these almost certainly won’t be “enough” to keep the lights on, I want
to reiterate yet again that while I cannot guarantee it will happen, I find it hard to believe
that Sanofi won’t also end up making a settlement payment of some sort to the company
before all is said and done, even if it is as “small” as simply forgiving the 2024 debt
(which would, in turn, give MannKind the ability to raise money via the sale of the real
estate complex that is currently pledged to Sanofi as collateral for the loan).
And finally, only because it may catch a lot of people by surprise if it happens, I want
to remind you that a lot of the dollar amounts that were associated with the Sanofi
relationship showed up in the books in an “odd” manner, and, now that the relationship
has officially been terminated, there is a chance that we will see those odd placements on
the balance sheets and income statements move to different (and perhaps equally odd)
spots in the books. I do not claim to be an expert when it comes to accounting, but I do
believe Matt Pfeffer knows how things look better than anyone else from an accounting
standpoint (and I’m guessing that is a big part of the reason he wound up in the CEO
spot)… and so this is another area where I am looking forward to hearing what he has to
say about the current situation (as well as what he sees going forward).
Having said all that, I want to thank you once again for your patience through what has
become one of the most grueling and unpleasant situations I have been forced to endure
since I started Nate’s Notes way back in 1995. No, we are not out of the woods by any
stretch, but given the circumstances, I do think we will know by the end of the next
earnings call whether it is time to lick our (very deep, in some cases) wounds and move
on… or if our patience and discipline will finally be vindicated.
-
Some excerpts:
What are some of the possible sources of capital to keep the lights on? At the “easy”
end of the spectrum (and I put it in quotes because the only time it is ever easy for
investment bankers to raise money for a company is when the stock is in great demand
already on Wall Street – which usually means it is either hitting new all-time highs and/or
there is a bull market going on for the sector that it belongs to – and, clearly, this is not
the situation MannKind finds itself in at the moment), the company could simply figure
out how much it really thinks it will cost to turn the corner, and then sell as many shares
(via stock and/or some sort of convertible debt) as needed at whatever price the market
would bear to get the deal done, and, in doing so, take “fear of bankruptcy” off the table
for good (knock on wood).
Yes, the dilution would almost certainly be “significant” if the deal was done at current
prices but, at the end of the day, if it gets us across the finish line, it won’t matter whether
there are 500M, 600M, or 700M shares outstanding since the size of the prize is quite
large, indeed… the trick, of course, would be in making sure that “enough” was raised to
ensure that the exercise would never need to be repeated again.
Along with a straight up offering to the public, the company could instead raise capital
by selling a sizable stake (i.e. 10% or more) to a single investor in a private placement.
And, while there may be a single, very large institutional investor out there willing to
participate in such an offering, a more likely buyer of stock in this manner would be
another drug company that might be interested in eventually owning MannKind and/or
one that, as part of the transaction, would also end up partnering with MannKind to sell
one (or more) of its products.
Besides raising money via one of the two paths mentioned above, one of the more
intriguing ideas that has been making the rounds of social media following the leak last
month of what is supposedly a Receptor Life Sciences “About Us”-type document is that
MannKind and Receptor Life Sciences might do a “reverse merger” (a reverse merger is
a transaction in which a private company acquires/merges with an already public
company in order to become a publicly traded company itself without going through the
very lengthy and complex process usually associated with “going public”).
No, we still do not officially know anything about RLS other than that it is, in fact,
working on “cannabis products,” it has signed an agreement with MannKind to develop
products using the Technosphere platform, and RLS’ chief scientist happens to be the
same woman that was MannKind’s chief scientist until sometime late last year… and, at
least in my book, those are three points that provide a nice framework around which to
start wondering “what if ___?”
Again, without knowing for sure who is behind RLS and what their intentions may be,
anecdotal evidence suggests that the group behind it probably does have “deep pockets”
that may or may not end up providing upfront cash as part of a transaction… but even if
they don’t put money in right out of the gate, a much more intriguing piece of the puzzle
is the fact that while MannKind’s stock has been the dumps lately (along with rest of the
biotech sector, I might add, even if not to the same degree as MannKind), cannabis
stocks have been on a tear lately - and, as mentioned above, when is the best and easiest
time for companies to ask investment banks to raise money for them? Why, during bull
markets, of course!
Please note that I am in NO WAY predicting that a reverse merger is in the works (nor
should you invest based solely on this hope, mind you!), but given the relationships that
already exists between the two companies… along with where each company finds itself
sitting at this point in the market cycle for its respective industry… I think it is certainly a
scenario worth pondering for at least a minute or two.
Along with the above possibilities when it comes to putting cash in the coffers, I want
to also remind of you that there are some smaller dollar amounts that will come in from
the sale of Afrezza (as well as via “the insulin put” that requires Sanofi to buy insulin
from MannKind), along with a potential milestone payment from RLS in the fourth
quarter, and though these almost certainly won’t be “enough” to keep the lights on, I want
to reiterate yet again that while I cannot guarantee it will happen, I find it hard to believe
that Sanofi won’t also end up making a settlement payment of some sort to the company
before all is said and done, even if it is as “small” as simply forgiving the 2024 debt
(which would, in turn, give MannKind the ability to raise money via the sale of the real
estate complex that is currently pledged to Sanofi as collateral for the loan).
And finally, only because it may catch a lot of people by surprise if it happens, I want
to remind you that a lot of the dollar amounts that were associated with the Sanofi
relationship showed up in the books in an “odd” manner, and, now that the relationship
has officially been terminated, there is a chance that we will see those odd placements on
the balance sheets and income statements move to different (and perhaps equally odd)
spots in the books. I do not claim to be an expert when it comes to accounting, but I do
believe Matt Pfeffer knows how things look better than anyone else from an accounting
standpoint (and I’m guessing that is a big part of the reason he wound up in the CEO
spot)… and so this is another area where I am looking forward to hearing what he has to
say about the current situation (as well as what he sees going forward).
Having said all that, I want to thank you once again for your patience through what has
become one of the most grueling and unpleasant situations I have been forced to endure
since I started Nate’s Notes way back in 1995. No, we are not out of the woods by any
stretch, but given the circumstances, I do think we will know by the end of the next
earnings call whether it is time to lick our (very deep, in some cases) wounds and move
on… or if our patience and discipline will finally be vindicated.
-
