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Post by BD on Aug 9, 2014 7:46:21 GMT -5
I read a post which mentioned that if MNKD declared a special dividend, say $10, the people who are short MNKD would be on the hook to pay it. Does anyone know if this is in fact true? If so, MNKD should announce that at the CC with a "shareholders as of" date of COB Tuesday! (This of course assumes that MNKD gets $$$ upfront from the partner) Yes, shorts are responsible for paying out dividends on the shares they've borrowed. Think about it--it wouldn't make any sense for the actual original owner of the shares to not get their divi. So if a short borrows my shares, I'm not even aware of it. The shares still show up as being in my account. Yet the person who bought the shares sold short also sees shares in his/her account. So there are two dividend payments happening. The company only pays one of them. The short has to pay the other. I assume the brokerage handles this automatically, so shorts can't weasel out of their liability. Having said that, and having theorized a whole bunch about this scenario while in other stocks, I've never actually seen a company declare a divi just for the purpose of sticking it to shorts. Not that I wouldn't enjoy seeing that in this case...
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Post by cybergym66 on Aug 9, 2014 8:22:57 GMT -5
Thanks for the clarification! I know...wishful thinking!
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Post by mnholdem on Aug 9, 2014 9:19:13 GMT -5
I read a post which mentioned that if MNKD declared a special dividend, say $10, the people who are short MNKD would be on the hook to pay it. Does anyone know if this is in fact true? If so, MNKD should announce that at the CC with a "shareholders as of" date of COB Tuesday! (This of course assumes that MNKD gets $$$ upfront from the partner) Yes, shorts are responsible for paying out dividends on the shares they've borrowed. Think about it--it wouldn't make any sense for the actual original owner of the shares to not get their divi. So if a short borrows my shares, I'm not even aware of it. The shares still show up as being in my account. Yet the person who bought the shares sold short also sees shares in his/her account. So there are two dividend payments happening. The company only pays one of them. The short has to pay the other. I assume the brokerage handles this automatically, so shorts can't weasel out of their liability. Having said that, and having theorized a whole bunch about this scenario while in other stocks, I've never actually seen a company declare a divi just for the purpose of sticking it to shorts. Not that I wouldn't enjoy seeing that in this case... I'm half-tempted to (but won't) re-print this over in Bashersville, just to throw a scare at them (chuckle). Bombs away!
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Post by dreamboatcruise on Aug 9, 2014 14:45:30 GMT -5
I read a post which mentioned that if MNKD declared a special dividend, say $10, the people who are short MNKD would be on the hook to pay it. Does anyone know if this is in fact true? If so, MNKD should announce that at the CC with a "shareholders as of" date of COB Tuesday! (This of course assumes that MNKD gets $$$ upfront from the partner) The loss for the shorts would come with the announcement of a big payment... it wouldn't really matter whether a payout then occurs. To a first order, if $X upfront payment increased the share price by Y%, having shorts suffer a Y% loss, then if the company paid special dividend of $X one would expect the share price to drop by Y% again. The shorts would then recover Y% which would offset the dividend they'd have to pay for the shares they borrowed. Any 2nd order effects would likely be short term; and short term manipulation of share price really isn't what normally falls within the fiduciary duty of a company. The correct thing to do would be to put that money to work and/or pay off debt. Plus if they get upfront money it isn't going to be anywhere close to $10 per share.
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Post by savzak on Aug 11, 2014 13:05:00 GMT -5
Dreamboatcruise and mannmade,
I think your $15ish price targets are very reasonable. I don't disagree but would reserve judgment until I see the terms of the deal. However the confidence of the shorts at $8 does make me wonder. I imagine that they know as well as we do that there will be a deal announced. All of the "MannKind is going it alone" stuff on the other board is just bashing blather. Everyone knows there will be a deal. And everyone knows it will be soon. That's why Monday is ultimately not that important in my opinion. Oh sure, it might provide a take down opportunity for the short side, given the apparent high level of concern over the issue. But since we all know a deal will be announced within the next several days or very few weeks, what difference does it make to even a medium term investor?
So back to the point...are the shorts so confident at $8 just because they believe there will be no announcement by Monday and that they'll therefor be able to take the stock down next week? Or are they comfortable at $8 because they don't think the deal will be good enough to motivate the stock price much higher or for very long after it is announced. I hope it is the first, but if it's the second, I sure hope they're wrong.
Following up on this post from last week, it appears as though there was a third reason for the short's confidence at $8...they were comfortable they'd be in control no matter what happened. Granted, the deal isn't the best possible deal we might have hoped for. But it is a very good deal. 35% split, cost free production, world wide coverage, with THE Alpha Pharma in the diabetic space. It looks like the market is simply not ready to value MNKD at more than $4B on the mere promise and hope of future revenues and the short side realized that fact.
Although it seems like we longs are always waiting for something to happen, at least this time we are at the end game. If sales are to start in Q1 of 2015, we're only 3 to 5 months away. In that time frame, institutions will become more and more curious/interested as the world's best diabetic therapy sales force begins educating docs across the country about the benefits of Afrezza. Magazine and newspaper print advertisements, banner advertisements on appropriate websites and hopefully television advertisements will all fuel public interest as well.
Our best days are obviously yet to come. And this time, once our good news is actually revenue based, the short side will finally have no answer.
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