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Post by mnholdem on Sept 12, 2014 18:59:32 GMT -5
Really, the rumors! I've been traveling on business, but I wanted to take a few moments after dinner to address rumors and the slide in share price.
The dumbest I've heard is that Al Mann has hedged his shares and needs to drive down PPS to cover! The second dumbest is that Al is working with Bank of America to drive down the share price. That would be dumb AND illegal. There are a half dozen other dumb rumors in circulation, and it's not worth my time to address them. Besides, I've got to run again to catch a plane.
Here's the BIG QUESTION: Why isn't Mannkind actively promoting the company in the press and passively sitting by while critics bash away?
It's simple, really.
MannKind officers are sitting on $millions of stock options and restricted shares. Some have been sold, yes... people have needs. But most are still being held. Why?
Soon, and I think VERY SOON, Mannkind officers and directors will begin converting those Option-to-Buy shares at the currently low share price. It is also possible that Sanofi has been accumulating shares on the open market. If that is the case, when they file as a 5% majority owner, Mannkind insiders will also file with the SEC to convert their Option-to-Buy stocks at the currently LOW share price.
Simple, sweet, deadly (to short interests, anyway) as the one-two punch of Sanofi buying interest and the officers and directors all exercising and buying massive amounts of MNKD shares triggers a short squeeze of historic proportions. The price shares of many skeptical MNKD long shareholders will skyrocket.
Want an even better scenario? Sanofi, after announcing its minimum 5% interest, releases sales projections. Are you beginning to see what I envision as entirely possible in the SHORT TERM?
MannKind has been quiet and has not been fighting Wall Street over the drop in share price because they are planning insider BUYING on a large scale. And how does the market typically react to massive insider buying?
It's simple, deadly... and imminent. Hang on. Even if Sanofi is not accumulating a major interest, massive insider buying at MannKind will trigger a huge reversal.
I gotta run... good fortune all!
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Post by mannmade on Sept 12, 2014 19:01:44 GMT -5
Exactly what I have been trying to say recently mnholdem, only you may have said better... Completely agree!
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Post by bigmoneytex on Sept 12, 2014 19:15:01 GMT -5
Mnholdem, I hope that you are right. I think it makes a ton of sense and lets see how it plays out!
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Post by mnholdem on Sept 12, 2014 19:20:51 GMT -5
mannmade, I've been reading your posts and have really appreciated that you have a realistic grasp of the situation. The beauty of this whole thing is that, even if no surprises hit us in the short term, we still win BIG in the long term. You, I and many other have said it time and again. You'd have to be monumentally stupid to be selling right now.
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Post by kc on Sept 12, 2014 19:24:48 GMT -5
I have to agree with you. The silence is Maddening but there is more going on and they have done an excellent job of being too low key almost to the pint of making one suspicious. This is my fantasy.
Everybody has heard of the Famous Volkswagen squeeze. I posted this as satire earlier today on the yahoo board.
A hedge funds worst nightmare is ahead ! MannKind's wild ride will begin when Sanofi quietly announces on Sunday October 5th, 2014 that it now holds nearly three quarters of Mannkind equity, having expanded its direct stake in MannKind to 55% from 5% having purchased Alfred Mann's shares, and also having exercised call options on enough shares to raise its stake to 75%. The Big Pharma s announcement that it had effectively taken control of MannKind was very bad news for hedge funds and banks that had taken short positions on MannKind shares on the assumption that their price would fall Less
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Post by bigmoneytex on Sept 12, 2014 19:39:41 GMT -5
I would love to have people referencing the epic MNKD short squeeze of 2014 in the future instead of VW. I believe the game plan is to allow the hedge funds to believe they are in control and then blind side them with what you are describing.
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Post by mannmade on Sept 12, 2014 19:48:11 GMT -5
mannmade, I've been reading your posts and have really appreciated that you have a realistic grasp of the situation. The beauty of this whole thing is that, even if no surprises hit us in the short term, we still win BIG in the long term. You, I and many other have said it time and again. You'd have to be monumentally stupid to be selling right now. Thank you... And I really could not agree with you more... Honestly with what I know and believe about the science this is the biggest bargain of a stock I have ever been around at current prices even if it goes a bit lower... Actually when I bought a very large position a few years back with the price down at $1.62pps, my risk was much BIGGER then than it is now at these prices... (Have been involved for over 5 years with first shares bought at $3.81pps) Almost no risk, short of earthquake under Danbury, etc... Now I realize almost anything can happen... "and over the years have learned to prepare for the unexpected and then prepare for what I did not prepare for..." so honestly I think you and I are in lock step on this... You presented a very good and articulate description of what I think may be a very real possibility... Either way it is now just a matter of time... And I am not predicting 100 plus a share... This stock plain and simple will just start to move up, how high I do not know... So with prices so low my strategy is to continue to accumulate and to ensure a profitable investment on a volume basis... And then if it goes higher well I will buy the whole island instead of just the house on the beach... "Best to you and all the other genuine longs...
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Post by mnkdd on Sept 12, 2014 22:52:40 GMT -5
Uh... that's not how employee stock options work. They would want the share price to be as HIGH as possible, not low as possible.
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Post by mannmade on Sept 13, 2014 1:02:14 GMT -5
Uh... that's not how employee stock options work. They would want the share price to be as HIGH as possible, not low as possible. Meant to grab quote not give you a thumbs up on above... What I am saying is that if Sanofi buys mnkd stock at low prices such as today's current pps and the stock then goes up in value as the deal between SNY and Mnkd rolls out creating value for Sanofi in new revenue it will also raise the price of the mnkd stock (creating additional value for SNY with the mnkd shares they own as an investment) that the smart SNY CEO had the company buy and he will be rewarded with stk options from SNY for making a very profitable business decision to purchase mnkd at it's low point. And since SNY has all the inside info it needs from it's own projections they are aware of the scenarios and the risks and likely to see this as a very wise business strategy for several reasons, a couple of which I have listed below: SNY potentially benefits from this senario in many ways, among them: 1.) Mannkind stock will rise in value from the marketing/sales efforts of SNY. Thus any SNY shares of mnkd owned by corp will increase in value in turn bringing more value (collateral investment return) to SNY for it's direct investment in mnkd in addition to the revenue generation from selling Afrezza 2.) As the mnkd shares owned by SNY increase in value due to the efforts in large part by SNY efforts moving forward to distribute and sell Afrezza, it will help them recoup the investment they originally made in mnkd. Could even pay for much of the milestone payments... which then becomes a wash between money out and money in, via the increased mnkd value of stk held by SNY as the likely effect is that the mnkd shares will rise in value as the sales goals are reached and milestone payments then become due, depending of course on how much SNY owns in mnkd stk. 3.) As I also mentioned before in a previous post, the collective consensus is that SNY will likely make some sort of B/O offer once a track record is established so why not hedge that bet and buy shares now so that they get the increase in value of mnkd stk and then then use when go to buy the rest of the Afrezza division or mnkd itself. And if SNY does not buy mnkd/Afrezza and someone else does they still have a profit... (I know that they have a deal for as long as Afrezza is sold but am talking about the rest of the company) The beauty of all this is of course that SNY is spending the major dollars to get Afrezza marketed and sold and they have presumably done their research and have projections in hand for market penetration and sales revenue over next several years out. With those numbers they can easily make projections as to the price of the stock over the same period of time. And they can ultimately then predict what would cost to B/O the company at any given point in time and thus know how much of an investment in mnkd would make sense to help them achieve their goals for mitigating the original investment or ultimately making an offer for B/O. So why not (I hate to use this word again) hedge or take advantage of the opportunity to receive value for your/SNY efforts by buying mnkd low knowing the pps will increase based on the numbers you (SNY) have internally based on your efforts and expenses/investments against marketing & sales. In any event, SNY profits and the CEO then gets rewarded with options from SNY not mnkd.
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Post by mnholdem on Sept 13, 2014 12:38:46 GMT -5
It's the taxes on the Option-to-Buy and Restricted Stock awards that are the issue. The strike price on option is set upon issuance, and restricted shares are awarded, not bought but, based on IRS changes in 2005, the officers' and directors' taxes are based on share value at the time they are exercised. Here's an explanation from wikipedia:
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Excess tax benefits from stock-based compensation
This item of the profit-and-loss (P&L) statement of companies' earnings reports is due to the different timing of option expense recognition between the GAAP P&L and how the IRS deals with it, and the resulting difference between estimated and actual tax deductions.
At the time the options are awarded, GAAP requires an estimate of their value to be run through the P&L as an expense. This lowers operating income and GAAP taxes. However, the IRS treats option expense differently, and only allows their tax deductibility at the time the options are exercised/expire and the true cost is known.
This means that cash taxes in the period the options are expensed are higher than GAAP taxes. The delta goes into a deferred income tax asset on the balance sheet. When the options are exercised/expire, their actual cost becomes known and the precise tax by the IRS can then be determined. There is then a balancing up event. If the original estimate of the options' cost was too low, there will be more tax than was at first estimated. This 'excess' is run through the P&L in the period when it becomes known (i.e. the quarter in which the options are exercised).
- - -
Officers have to pay the taxes on their options, which are calculated by the IRS on the stock's market value at the time they are exercised. Lower pps means officers and directors pay less taxes when they exercise their option-to-buy shares. Even though they buy at the strike price assigned when the options were awarded, the employees are taxed on the market value.
Check out those officers SEC filings last month and you will see both the strike (buy) price, which was around $4, and the market price of $7.09 on which they paid tax. I'm not sure what tax rate is, or if considered capital gains, but when insiders exercise their options-to buy, they'll be saving $millions in taxes they would have to pay if exercised at $15-$20 / share. They will buy these options at the strike price, but will want to exercise them soon, for tax reasons.
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Post by mnkdd on Sept 13, 2014 18:16:43 GMT -5
It's the taxes on the Option-to-Buy and Restricted Stock awards that are the issue. The strike price on option is set upon issuance, and restricted shares are awarded, not bought but, based on IRS changes in 2005, the officers' and directors' taxes are based on share value at the time they are exercised. Here's an explanation from wikipedia: - - - Excess tax benefits from stock-based compensation This item of the profit-and-loss (P&L) statement of companies' earnings reports is due to the different timing of option expense recognition between the GAAP P&L and how the IRS deals with it, and the resulting difference between estimated and actual tax deductions. At the time the options are awarded, GAAP requires an estimate of their value to be run through the P&L as an expense. This lowers operating income and GAAP taxes. However, the IRS treats option expense differently, and only allows their tax deductibility at the time the options are exercised/expire and the true cost is known. This means that cash taxes in the period the options are expensed are higher than GAAP taxes. The delta goes into a deferred income tax asset on the balance sheet. When the options are exercised/expire, their actual cost becomes known and the precise tax by the IRS can then be determined. There is then a balancing up event. If the original estimate of the options' cost was too low, there will be more tax than was at first estimated. This 'excess' is run through the P&L in the period when it becomes known (i.e. the quarter in which the options are exercised). - - - Officers have to pay the taxes on their options, which are calculated by the IRS on the stock's market value at the time they are exercised. Lower pps means officers and directors pay less taxes when they exercise their option-to-buy shares. Even though they buy at the strike price assigned when the options were awarded, the employees are taxed on the market value. Check out those officers SEC filings last month and you will see both the strike (buy) price, which was around $4, and the market price of $7.09 on which they paid tax. I'm not sure what tax rate is, or if considered capital gains, but when insiders exercise their options-to buy, they'll be saving $millions in taxes they would have to pay if exercised at $15-$20 / share. They will buy these options at the strike price, but will want to exercise them soon, for tax reasons. Are you suggesting that any employee would prefer that the stock price would be lower as opposed to higher? That doesn't make much sense. Of course you pay more in taxes if the share price is $20, but you still make waaay more money.
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Post by mnholdem on Sept 13, 2014 19:35:13 GMT -5
You don't make money until you sell.
Say that in 2013 you were awarded the option to buy a million shares at $4, which expires in 3 years. You are taxed based on their value when you exercise your option. So, on Monday you exercise your option and buy a million MNKD shares at $4. You're buying and you don't have to sell them... just pay the taxes. The IRS will calculate your taxes based on a share value on the day you exercise your option to buy. If the market price on Monday is $6.85 then your shares are worth $6.85M for tax purposes, even though you only paid $4M.
Next April, when your taxes are due, say MNKD market share price is $16/share. You sell some of the million shares you own to pay your tax bill but you keep the remaining shares for as long as you want. The following year you'll pay capital gains tax on the shares you sold, but you don't pay those until 2016.
Run the same scenario, except you exercise your option to buy a million shares at $4 in two years, before your expiration date. In 2017, MNKD market share price is, say $45/share. You must pay taxes on $45M value of your shares. The IRS tax is base on the market value when exercised... a LOT more in this scenario.
In 2018 Mannkind is sold and you receive $65/share in the buyout. In either scenario, you paid $4 and sold for $65. The difference is that in the second scenario where you waited to exercise, you paid a helluva lot more taxes.
In the first scenario, I believe you actually pay taxes on the difference between the $4 you paid and the $6.85 they're valued at, or $2.85/share. In the second scenario you pay taxes on the value-buy difference of $41.00/share. Perhaps there's an accountant on board that can clarify or explain loopholes that may be applied, but I hope you get the general idea.
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Post by mannmade on Sept 13, 2014 19:37:24 GMT -5
I think (but I may be wrong) the point that mnholdem is trying to make is that if you believe in the growth potential of the business and have a long term view then you want the options lower so when you exercise you pay less tax and you retain more stk as most options when vested/converted are paid for by part of the allocated options to the individual rather than come up with outside cash to pay. Once you own them you can hold and watch the appreciation and then decide when best to cash out as they begin grow in value from your basis. I am not an acct but I think this may be the general idea...
However my point is totally different... If the SNY sr mgmt team are as smart as I think they are... then they will likely be investing corp cash in purchasing shares of mnkd say like Disney did with Pixar which Disney ultimately bought out making Steve Jobs (and now his wife) the single largest shareholder of Disney stk.
Again they would do this for all the reasons previously stated which would then lead to enhanced performance compensation which would likely come in the form of SNY stk (options)
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Post by mnholdem on Sept 13, 2014 20:31:04 GMT -5
...my point is totally different... If the SNY are as smart as I think they are then they will likely be investing corp cash in purchasing shares of mnkd say like Disney did with Pixar which Disney ultimately bought out making Steve Jobs (and now his wife) the single largest shareholder of Disney stk. Again they would do this for all the reasons previously stated which would then lead to enhanced performance compensation which would likely come in the form of SNY stk (options) Yep. Totally agree with your logic about corp profits for SNY offsetting their investment. Performance compensation is certainly an incentive for the CEO and others at SNY. Also, in terms of Sanofi including their profits on MNKD shares owned in valuating cost of a B/O (#3 of your earlier post) the more shares Sanofi owns, less MNKD shareholders get compensated. MNKD shares owned by Sanofi would become worthless, and the "loss" can be written off (I think). Sooner or later, when Sanofi accumulates at least 5% of MNKD, they'll need to file and and their interest, however large, becomes public. That will be when the large insider buying begins at MannKind. I think both scenarios are likely to occur.
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Post by BD on Sept 13, 2014 22:02:49 GMT -5
Can anybody really imagine working for a self-respecting company and having it be sanctioned, or even tolerated, to actively work towards "bringing the stock down" so that insiders could buy shares cheap or somehow otherwise profit from it?
I can't. I would hope I'm not an investor in any company that has anyone in management thinking that way, and I cannot in my worst nightmares imagine MNKD people thinking that way. Sorry.
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