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Post by bosephe on Mar 2, 2021 19:44:01 GMT -5
Don't they already own the notes? Isn't that what the 200M was for.
Thanks for taking the time to explain this.
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Post by bosephe on Mar 2, 2021 20:18:24 GMT -5
a. Parking $200M for 5 years at 2.5% and then wanting to buy a stock that is currently $4 at $5.21 or b. Using $200M starting now to invest into any equity you want or into S&P ETF Those guys must be insane  And most importantly, this deal is so bad for MNKD isn't it Took me a minute but I think I understand now. When you explain it like that it does seem strange to tie up that much money for such a long time? |
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Post by bones1026 on Mar 2, 2021 21:57:08 GMT -5
Terms are better than expected. Still don't know why the hell they bothered with yesterday's cryptic press release which just provided all the downward momentum on the share price other than for purely self-interest reasons (management). They certainly didn't do shareholders any favors. I don't like it, but I bought back some shares today... Yesterday's cryptic message did what those buying the notes would demand the company do prior to investing. There is no way on God's green earth I am giving you free cash (2% interest is nothing - won't even cover inflation), for nothing in return, especially unsecured. Nobody in their right mind would do that. MNKD is not a blue chip stock with assets to cover the debt. What management just pulled off was akin to Wimpy buying his hamburger today with the promise to pay next Tuesday (sorry for the reference that may be too old for some - go watch Popeye). How do you think this benefits management? Yes they keep the company running and collecting their salaries, but that was already in the bag with UTHR revenue about to start, Mid-Cap and the sale of the building. On paper, management lost as much money yesterday as I did. What this move tells me is that management and the board now have the capability to play the long game at favorable rates. The proof will come in how they spend the money. Not taking Mid-Cap's money to the full $70 to 75mm and replacing it with the notes saves roughly $4.65mm in annual interest or nearly half the leaseback on the building. Seems like a good deal to me. I get that now is different than the past and last week everyone was seeing a future $10 stock price, but less than one year ago, if I would have told you I found a group of people willing to give MNKD an unsecured loan worth more than the entirety of the enterprise value of the company, you would have laughed me right off this board. Three years ago I would have gladly taken a dilution of 30% just for the opportunity to stay in business (and we did). Today, someone is offering a strong path to the future, a very promising future, in exchange for the potential of roughly 17% dilution on a much, much bigger enterprise value. Yup, I am taking it. I have not always agreed with how the board and management have run this company, but I think the sale of the building and this raise is a bold, beautiful and excellent move. Added comment - One more thing to consider, the note holders interests are now alined with the shareholders interests. They don't make money unless the stock appreciates. This has not always been the case. What a tremendous way to sum it up. I needed that after these last two days |
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Post by uvula on Mar 2, 2021 22:03:20 GMT -5
a. Parking $200M for 5 years at 2.5% and then wanting to buy a stock that is currently $4 at $5.21 or b. Using $200M starting now to invest into any equity you want or into S&P ETF Those guys must be insane And most importantly, this deal is so bad for MNKD isn't it Took me a minute but I think I understand now. When you explain it like that it does seem strange to tie up that much money for such a long time? I don't think this is a done deal. What if people don't buy the convertible notes? |
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Post by avi8torslc on Mar 2, 2021 22:30:51 GMT -5
Ohh it’s done alright. And the entity more than likely buying up the stock with the fear and pps weakness. Beautifully played with the announcement of terms a day later. Buy time to do the deed.....
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Post by bones1026 on Mar 2, 2021 22:31:07 GMT -5
Somebody is willing to pay $200M+ for an option to buy MNKD stock at $5.21 per share, starting in December 2025, while collecting only %2.5 interest until then... Let that sink in... Those investors are most likely buying up the stock since yesterday, to take advantage of shorting and panic. Today everyone had a chance to buy the same stock under $4 without any premium or waiting. I did. Keep complaining about the management while you watch the stock price rise in the coming days and weeks Opportunities in the markets do not last long, most people only recognize them after the fact. It's awesome, totally awesome! Let’s just pretend it is United, is it not essentially them taking a 17% stake in MNKD for 200M? I would have been happy to wake up to that PR |
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Post by prcgorman2 on Mar 2, 2021 22:51:12 GMT -5
So very glad other see it the way I do. This is unbelievably awesome, assuming the money does most of the good it’s intended to. I’m impressed. Thank you Kent and Dr. Kendall. I assume you knew all of this before moving on, and helped it be able to happen. Appreciate you.
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Post by buyitonsale on Mar 2, 2021 22:58:29 GMT -5
a. Parking $200M for 5 years at 2.5% and then wanting to buy a stock that is currently $4 at $5.21 or b. Using $200M starting now to invest into any equity you want or into S&P ETF Those guys must be insane And most importantly, this deal is so bad for MNKD isn't it Took me a minute but I think I understand now. When you explain it like that it does seem strange to tie up that much money for such a long time? Rather than to think "it's strange", try to think of a reason why they are doing it... and it is certainly not the 2.5% interest  I can think of 2 reasons: 1. They were hoping for the share price to drop and planned to either short or buy shares. I hope the latter. At least that is what I would do... By the way, these folks may have used additional $200M for that little maneuver (a lot of shares have traded in the last 2 days already). 2. In December 2025 MNKD will be an established and profitable biotech with multiple drugs being marketed. It's share price could very well be $50. The pricing does not tell us what the conversion price will be in effect in 2024 when Mannkind may choose to redeem for cash, but I assume that the investor protected themselves with the 130% of conversion price to be high enough so that mankind will not be able to redeem in cash... Therefore, the main reason they are doing it is to get a huge discount upon redemption and their $200M investment may end up becoming $2B. Get the idea ? Again, the language of the agreement says that the conversion price at that point can also be adjusted but we do not know the details. I think MNKD protected themselves there for something more reasonable and higher than $5.21 per share... |
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Post by geomean on Mar 3, 2021 3:56:51 GMT -5
Not the raise, jesus. The way they announced it. Awesome, you need to read some of the other posts about conversion hedging and how other companies have made similar disclosures for convertible notes recently. I felt the same as you yesterday, thinking management was throwing current shareholders under the bus, until I learned today that this is how the game is played. Yesterday (and maybe today) those short positions were put on to increase the investors returns. Hopefully it will just be a temporary set back for us long haulers. Good point on Conversion Hedging See www.investopedia.com/terms/c/convertible-hedge.asp In this case roughly $200,000,000 / $5.21 per share or 200'000'000 ÷ 5.21 = 38'387'715 extra shares worth of downward pressure was placed on the price over a few days this week (closing set for March 4). But on the other hand, shares sold short ultimately become demand and in this case long term price support. If one were to undertake an “operation” to drive price up a la Jesse Livermore’s descriptions in Edward Lefevre’s classic “ Reminiscences of a Stock Operator” then utilizing a hedged Senior Convertible Note position to trade around sounds like an excellent means to accomplish that end. I’m curious about whether there are any studies published about the long term price action of companies who have done similar deals and their impact on price |
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Post by cedafuntennis on Mar 3, 2021 13:14:46 GMT -5
It's awesome, totally awesome! Let’s just pretend it is United, is it not essentially them taking a 17% stake in MNKD for 200M? I would have been happy to wake up to that PR But then why would they play it this way instead of a partnership with a cash infusion? |
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Post by Clement on Mar 3, 2021 15:17:06 GMT -5
"The sale of the notes is expected to close on March 4, 2021"
Do we get more info tomorrow or the next day?
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bkdmd
Researcher
Posts: 79
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Post by bkdmd on Mar 3, 2021 15:38:26 GMT -5
So we had the manipulation ruuing up to $6 to right before they diluted.
Pfeffer hitting us with dilution immediately after a conference call. We are taling seconds after the call ended.
We had MC hitting us with dilution after he was on the record stating time and time again no dilution.
Now have have this.
Does anyone see a pattern?
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Post by mymann on Mar 3, 2021 17:39:20 GMT -5
$6 is the curse. I say it again, smells fishy. Every time.
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Post by castlerockchris on Mar 3, 2021 19:30:33 GMT -5
Some one with more of an accounting/finance background than I needs to help me with this. I keep hearing dilution thrown around. I am not a finance guy, but I play one at home and did manage to make it through Accounting 202. But it seems to me this is not dilutive, at least not the same way as flat out tapping the ATM. Here is what I am thinking and need a better explanation from an accounting person:
The transaction is not dilutive from what I can tell. Just like taking Mid-Cap money at crazy high interest rates was not dilutive. Yes the price of the stock fell, but today I own the same percentage of the company as I owned last week. I have not been diluted at this point (note I did not say delusional). Yes the balance sheet took on debt, which decreases owner's equity (one liability goes up and another goes down). Of course the balance sheet will see an increase in assets in the form of cash - so owner's equity will not drop by the full 200mm immediately. As the cash is spent, it will be offset on the liability side by a decrease in owner's equity. But I still own the same percent of the company - still no dilution.
Down the road, if the note holder is allowed to convert to common shares, my ownership percentage of the company will drop (dilution), but owner's equity should rise (liability removed in the form of debt adds to owner's equity liability) by close to the same proportion as my ownership was diluted by.
I think I have my logic straight, but then again I have been buying the stock for over a decade, so it is possible that logic escaped me the day Afrezza received FDA approved and I didn't sell.
Somebody pease help.
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Post by castlerockchris on Mar 3, 2021 19:46:59 GMT -5
I realize that most people are not unhappy with the notes/capital raise, they were unhappy with how the communication surrounding the offering was handled. Could it have been done in a manner that had less of a negative impact on share price, I don't know, maybe marginally.
Correct me if I am wrong, but... didn't this offering give us more than 2.3 times as much working capital as we had under the Mid-Cap agreement (200mm under notes vs. 60mm under Mid-Cap after retained escrow)?
And didn't it at the same time reduce our interest expense from roughly $6mm to $4mm annually?
That in-and-of itself seems to me to be the proverbial rabbit being pulled from a hat and is testament to how much better shape we are in as share holders than we were just a few months ago.
Now somebody pass me the Kool-aid...
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