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Post by peppy on Jan 4, 2024 19:56:49 GMT -5
This more of a rhetorical question really. Why would ANY company executive sink money into a stock that they may believe is being manipulated to the point where the executives believe that the share price is being suppressed? Wouldn't a smart executive wait until they were sure that any manipulation had ceased? Or the cost of living in CA is the highest in the USA. Home, vehicle, lawyers, divorce, homeowner insurance increase, Christmas and the water heater just went out. Rhetorical answer really.  Out of Lunch money. |
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Post by prcgorman2 on Jan 4, 2024 20:09:40 GMT -5
timhanewich.medium.com/examining-the-correlation-between-insider-buying-and-subsequent-stock-performance-c7e9163455feTo answer these questions, we will assess the performance of S&P 500 components following insider purchases made between 2010 through 2019. Results
The evidence clearly shows that, on average, stocks will outperform following an insider purchase in both the short and long term. In the short term, this outperformance is sometimes as much as double the typical capital return. In the long term, this edge hovers around 415 basis points above the typical capital returns you would see in a non-insider purchase period. I am not disputing whether insider buying can be used as an indicator of possible future positive returns. (Note that the S&P reference is “on average”, not “every time”.). The part that nobody seems to want to talk about is, what are the amounts that should be spent, how is that determined, how long should those shares be held or put another way what is the exit plan? Who randomly drops big chunks of their money on their own company stock? Nobody. It has to be based on more than just confidence. It is planned. Fine. Many seem to think now is the time. What should be the plan? What amounts should MNKD execs spend of their own money to satisfy the parameters that yeild the desired result? And whatever numbers get suggested, let’s see the formula or algorithm used to determine the number. Without that, it’s just a pointless discussion. |
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Post by awesomo on Jan 4, 2024 20:09:48 GMT -5
I am not disputing whether insider buying can be used as an indicator of possible future positive returns. (Note that the S&P reference is “on average”, not “every time”.). The part that nobody seems to want to talk about is, what are the amounts that should be spent, how is that determinied, how long should those shares be held or put another way what is the exit plan? Who randomly drops big chunks of their money on their own company stock? Nobody. It has to be based on more than just confidence. It is planned. Fine. Many seem to think now is the time. What should be the plan? What amounts should MNKD execs spend of their own money to satisfy the parameters that yeild the desired result? And whatever numnbers get suggested, let’s see the formula or algorithm used to determine the number. Without that, it’s just a pointless discussion. OMG, of course it is "on average" and not every time. That's the nice thing about having a large sample size rather than just one-off testimonials. The point is, insider buying leads to better returns. Thus, insider buying is a bullish indicator. All these other details you're talking about don't matter. |
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Post by prcgorman2 on Jan 4, 2024 20:17:49 GMT -5
I am not disputing whether insider buying can be used as an indicator of possible future positive returns. (Note that the S&P reference is “on average”, not “every time”.). The part that nobody seems to want to talk about is, what are the amounts that should be spent, how is that determinied, how long should those shares be held or put another way what is the exit plan? Who randomly drops big chunks of their money on their own company stock? Nobody. It has to be based on more than just confidence. It is planned. Fine. Many seem to think now is the time. What should be the plan? What amounts should MNKD execs spend of their own money to satisfy the parameters that yeild the desired result? And whatever numnbers get suggested, let’s see the formula or algorithm used to determine the number. Without that, it’s just a pointless discussion. OMG, of course it is "on average" and not every time. That's the nice thing about having a large sample size rather than just one-off testimonials. The point is, insider buying leads to better returns. Thus, insider buying is a bullish indicator. All these other details you're talking about don't matter. Hmm, other authors thought those details mattered. The Putnam blogger used $400,000 as a floor before it was a useful indication. If it doesn’t matter, than a single share purchased satisfies the condition of insider buying. Obviously not true. If you and cretin11 don’t want to be serious about what “insider buying” is needed, fine. Duly noted. |
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Post by agedhippie on Jan 4, 2024 20:56:08 GMT -5
I don't know about anyone else, but I consider a buy to be more bullish than a sale to be bearish. The sales may be the only way an insider can raise cash because life happens (divorce or otherwise. I had an unexpected need for cash recently and I just had to dump stuff. I tried to take a little from every possible source, but someone focused on, say, some particular sale of mine because it happens to be of shares of the company I work for, would not be aware of the context). OTOH, if I see an insider choose to buy shares, that's a pretty unambiguous endorsement of that equity. So now tell me how I'm oversimplifying it, because I assume I probably am. I heartily agree with this with the exception that buy and hold is bullish, buy and immediately sell is not. I don't really care about insiders selling because sometimes you have to. As an example Amazon used to make you take around half your salary as RSUs so unless could live on half pay you were going to be selling the stock as it was granted! |
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Post by agedhippie on Jan 4, 2024 21:26:54 GMT -5
What was said on the conference call was “under-valued”, not “suppressed”. I agree that insider buying would underscore that assertion much better than it just hanging out there unsupported. On the other hand, my gut says MNKD has been heavily manipulated from time to time so “supressed” might be how the execs feel versus “under-valued”. If you thought the price has been manipulated and suppressed, seemingly at will (ah, but whose will?), would you have the guts to throw a lot of your salary at insider buying? Now, if there was an ESPP and it permitted generous buying, at a discount, then the buy can be hedged, but even then, is there any guarantee the action will yield the desired result? Obviously, no. It’s easy to bravely talk about how other people ought to spend THEIR money, but if it was your money, how would you behave? ... If I knew the price was being suppressed then I absolutely would buy, but if I only suspected then I wouldn't because the risk of confirmation bias is far to high. Undervalued is a different story. There is the old saying, the market can remain irrational longer than you can remain solvent. I avoid stocks that are "undervalued" unless I can see a binary event with a high probability of removing the reason the market is undervaluing them with a solid timeline, and then I would probably buy calls. |
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Post by BD on Jan 4, 2024 22:06:14 GMT -5
I don't know about anyone else, but I consider a buy to be more bullish than a sale to be bearish. The sales may be the only way an insider can raise cash because life happens (divorce or otherwise. I had an unexpected need for cash recently and I just had to dump stuff. I tried to take a little from every possible source, but someone focused on, say, some particular sale of mine because it happens to be of shares of the company I work for, would not be aware of the context). OTOH, if I see an insider choose to buy shares, that's a pretty unambiguous endorsement of that equity. So now tell me how I'm oversimplifying it, because I assume I probably am. I heartily agree with this with the exception that buy and hold is bullish, buy and immediately sell is not. I don't really care about insiders selling because sometimes you have to. As an example Amazon used to make you take around half your salary as RSUs so unless could live on half pay you were going to be selling the stock as it was granted! I don't count that, it's not really a "buy", it's an option exercise and a sell. That's a sell. |
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Post by castlerockchris on Jan 5, 2024 0:26:41 GMT -5
Insider buying and selling is a very interesting topic. My belief is it would be very hard to prove the impact of insider selling on share price, since many insiders never really "sell," rather they use their shares as collateral for loans. This is especially the case with larger companies with proven track records. Unfortunately, MC and other MNKD insiders have to sell as no banker, public or private, is likely to take MNKD shares as collateral on a person loan, without charging an arm and a leg. I have known senior executives who have borrowed millions of dollars from private bankers, securing the loan using their stock and even sometimes RSUs as collateral, and it never gets reported in an SEC filing as it is simply considered a person loan. The loan is generally an interest only loan and the banker gets their principal back at the end of the term. Until the loan is paid off, the shares generally sit frozen in an escrow account under the shareholders name. It is a very interesting and completely legal way to get around reporting insider sales. The insider avoids capital gains or income tax which they would pay were they to have sold the shares. The big bonus is they still benefit from future appreciation in the stock. It also allows senior executives to avoid scrutiny and the appearance of "not supporting or having faith in" their company due to stock sales.
If you are looking for examples of insider buying not predicting the future, simply go back to 2008/2009 time frame when LodgeNet senior executives gobbled up shares on the public market during the great recession, only to see the company file bankruptcy a couple of years later. Same could be said for Charter Communications and many of the DSL provider's insiders in the late 1990s and early 2000s. Heck I won't even point out the hopium of the .com era. Often times insiders, senior executives included, are to close to the story to see the reality. This is especially true at the VP and sometime the SVP level in larger organizations. They see the numbers, they see the market, they think they see the economic trends, and then something they didn't know, didn't have complete access to, comes up and bites them. Think of all the insiders at Merrill Lynch or Lehman Brothers who thought they knew, and bought, who thought "no way can we go out of business."
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Post by prcgorman2 on Jan 5, 2024 0:42:09 GMT -5
I wasn’t going to post anymore tonight and then castlerockchris comes and posts this excellent post about how shares are used for collateral in bank loans. How many times have I seen personal bank loans in a news article about some BS associated with executives and politicians? I lost count. castlerockchris provided excellent insight. I didn’t delve into it much, but yeah, it turns out risk is involved in investing even if you’re an executive. I’m OK with people advocating for insider buying but it can’t be some pointless banging of a gong. It has to be based in some amount of sophisticated thinking around the complexities. Personal loans based on collateral of personally-purchased stock on the open market is a perfect example of having a plan for how to potentially maximize personal benefit if you’re the executive making the on-the-market purchases. What is also great about this post is providing some insight into whether MNKD executives fit this profile of buyer/debt holder. Based on this, my assumption is MNKD executives are not yet good candidates for overt, sizeable, material insider buying. There’s a baseline. Let’s see if there is a believale rejoinder. |
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Post by sandstorm on Jan 5, 2024 5:22:22 GMT -5
Thank you Agedhippie. Let's check if I understand this correctly now. As per "The initial conversion rate is 191.8281 shares of common stock per $1,000 principal amount of notes, which represents an initial conversion price of approximately $5.21 per share of common stock. The initial conversion price represents a premium of approximately 30% over the last reported sale of $4.01 per share of MannKind’s common stock on March 1, 2021. The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events.", assume I am a holder of $1,000 of the senior notes, it is Jan 2026, MNKD stock price is $8,00 and I elect to convert. For my $1,000 of pricipal I am entitled to 191.8281 of stock (using the $5.21 per share conversion price). If MNKD decides to satisfy me in their stock, they simply give me 191.8281 shares and the debt is cancelled. Alternatively, if they want to satisfy me using cash, they would send me 191.8281*$8 = $1,534.62. Correct? Final thing -- is MNKD giving away stock like a warrant, i.e. MNKD could simply print it out and increase the total number of outstanding shares, OR they would have to buy their stock first on the open market/give stock they keep in tresury? prcgorman2 - some excellent points, thank you.
Your guess of MNKD's motivations makes a good sense to me. Also thank you for an excellent summary of key catalysts as well as not so likely ones.
I would be very interested if anyone has some insight also into the bit in green, namely
"... holders will have the right to convert all or any portion of their notes at their election. Upon conversion, MannKind will pay or deliver, as the case may be, cash, shares of MannKind’s common stock or a combination of cash and shares of MannKind’s common stock, at its election.". My reading is the holders have the option to initiate this conversion process but when they elect to do so, it is then MNKD who controls what gets delivered to the debt holders -- stock (at equivalent of $5.21 per share), cash (is it the pricipal+ interest only, i.e. equivalent $4.01/share + interest OR is it the equivalent of $5.21/share + interest?) or the combination of two.
MNKD can either supply the shares, or can give the lender cash to the value of the shares at that moment in time. Almost invariably companies supply shares because it preserves cash. |
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Post by sandstorm on Jan 5, 2024 5:25:11 GMT -5
This little tidbit is important as well regarding the Senior convertible notes: If the Company elects to redeem less than all of the outstanding Senior convertible notes, at least $75.0 million aggregate principal amount of Senior convertible notes must be outstanding and not subject to redemption as of the relevant redemption notice date. No sinking fund is provided for the Senior convertible notes. Thank you standup.
Interesting provision. What is the commercial motivation for provision like this? Is it to make sure that holders are not left with too small holding whose management (accounting, custody etc) would be too pricey relative to the economical benefit?
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Post by stella on Jan 5, 2024 7:59:02 GMT -5
Maybe insiders are prohibited from buying right now. If they have anything material to announce at the JPM conference, then they can't legally front-run the news.
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Post by prcgorman2 on Jan 5, 2024 8:35:37 GMT -5
Maybe insiders are prohibited from buying right now. If they have anything material to announce at the JPM conference, then they can't legally front-run the news. Good point. Historically, MannKind has not made announcements at quarterly earnings reports or in financial conferences (or ADA Scientific Sessions). You’re correct of course, but just saying historically, announcements haven’t been made at these events and the prohibition wouldn’t have applied. |
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Post by cretin11 on Jan 5, 2024 8:47:00 GMT -5
MNKD insiders haven’t been prohibited from buying for the past few years, they simply have chose not to buy.
And it’s easy to find isolated examples of when insider buying preceded share price drops. That’s why awesomo pointed out the importance of using averages, as in the article he found.
However, it’s important to note that insider buying isn’t a miracle cure for any stock. Insider buying alone won’t save a bad stock. Insider buying is a bullish indicator (yes we have now established that, thanks prc for putting it to the test) not because the insider buying itself makes a stock become a “winner.” No, insider buying is a bullish indicator because it shows management’s confidence in the stock, i.e. because those most in the know believe the stock is undervalued and likely to rise as the market figures that out.
So insider buying only makes sense when those in the know sincerely believe the stock is undervalued and thus likely to rise. It just so happens that MNKD recently had an insider claim they believe our stock is “severely undervalued” and therefore it’s reasonable to expect some insider buying to occur. Stay tuned, maybe we’ll get that announcement soon.
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Post by hellodolly on Jan 5, 2024 8:47:53 GMT -5
Maybe insiders are prohibited from buying right now. If they have anything material to announce at the JPM conference, then they can't legally front-run the news. I think many here are not focused on management making any purchases during the blackout periods. But, when they could...they should based on what we've been told during this most recent update to shareholders. |
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Out of Lunch money.
