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Post by cjm18 on Jan 19, 2024 0:30:00 GMT -5
Maybe I'm missing something in your logic but the holders have the right to convert to shares given certain circumstances. The decision is not all MNKD's to make.
The holders are able to manage the risk inherent to naked short selling. MNKD can pay the 200+ million loan beginning March 6th. Long before the date it is possible to convert to shares. MNKD decides the fate of the loan, pay now, later or convert to shares later. can they? may not redeem the notes prior to March 6, 2024. MannKind may redeem for cash all or any portion of the notes (subject to certain limitations), at its option, on or after March 6, 2024 and prior to the 36th scheduled trading day immediately preceding the maturity date, if the last reported sale price of MannKind’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which MannKind provides notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date |
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Post by agedhippie on Jan 19, 2024 9:55:54 GMT -5
^ This
The problem with the toxic debt theory is that the price at which the holders would convert their stock is far over where the price is now (the market price is $3.35 so why would they pay far more to get shares?) Suppose they decide to short; they are selling at $3.35 and they can buy Jan 2025 $4.00 Calls at $0.47 to hedge. The ability to convert at $5.21 becomes completely irrelevant, that $4.00 Call is far cheaper and delivers the same result - shares to cover the short.
MNKD statement that they will repays the debt with cash means there is no incentive for the note holders to short the stock unless the price rises above $5.21 because their convertible notes are more valuable as cash. And if they want to short the stock there are cheaper ways to do it anyway. Calling this toxic debt as it stands now is just trying to shift blame for the current share price.
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Post by Thundersnow on Jan 19, 2024 11:22:26 GMT -5
As long as the convertible holders are free to short with relative impunity I will consider it "toxic". That's simply wrong. MNKD have said they will settle the loan with cash at the end of the term and have the cash on hand so there will be no shares to close a short position. The holders can and may short the stock, but they are doing it at exactly the same risk as any other short. There is definitely not any impunity, relative or otherwise. There is no way MNKD is waiting until March 2026 to payoff the convertible debt. They cannot wait another 2 years with no stock price improvement. Yes the Bondholders are keeping a ceiling on the stock price by using their allotment to short. Mike will not last 2 years if the stock does not appreciate. A window opens March 6, 2024. I believe MNKD will use most of the $150M to pay down the $230M Debt. They might use Cash and Stock. Will they pay it totally off?? Maybe but I doubt they will since they will have strong revenues over the next 2 years. Yes Mike and Steve said they will bank the money and earn 5%. Of Course they are going to say that. They are not going to tip their hand and tell the bondholders their plan. Mike was aware of the consequences of doing the Conv. Debt Deal. He talked about it after they entered into it. It's common practice which artificially DEFLATES the stock price. Is it TOXIC?? It's a lesser degree of toxic. This was the only way for MNKD to clean up their very toxic old debt. If they were in a stronger position then a Conv. Deal would not have been done. It would have been a straight debt deal. Unfortunately this is what the market was giving them at that time. Another possibility during the window - MNKD will approach the bondholders and renegotiate the terms like lowering the strike price. I believe they did that years ago to get a deal done. It's not ideal but it's a negotiation. Another possibility during the window - MNKD could go to the credit markets and see what kind of new deal they can get and REFINANCE the $230M. This could have been the reason why they SOLD off 1% (i.e. Borrowed) of their Royalty. They gave the markets a BASELINE as to what to expect from UTHR's royalty stream which I thought was a BRILLIANT MOVE. Now the street knows MKD will get between $1.5B - $2B in Royalty Revenue for DPI. MNKD could have easily sold 2% or 3% of their royalty and totally payoff the CV Debt. That would have shaken the market so 1% was perfect. The WINDOW is the key! IMO Mike wants to build momentum throughout the year with the READOUTS, CIPLA Filing, PAH-ILD, Clofazimine, PEDS Approval and possible NEW PARTNER for PEDS and have a tailwind going into 20205. Taking care of the $230M now rather than later is an important opportunity. |
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Post by cretin11 on Jan 19, 2024 11:29:26 GMT -5
That's simply wrong. MNKD have said they will settle the loan with cash at the end of the term and have the cash on hand so there will be no shares to close a short position. The holders can and may short the stock, but they are doing it at exactly the same risk as any other short. There is definitely not any impunity, relative or otherwise. Mike will not last 2 years if the stock does not appreciate. I don't agree with that sentence. However, I wish it were accurate but (more importantly) hope it to be a moot point. |
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Post by prcgorman2 on Jan 19, 2024 12:18:42 GMT -5
Going from memory, I think the debt maturity is December 2026, not March. The March date I remember is this year as a possible earliest payoff date, but it comes with share price constraints over some period of time. The interest on the debt is way less than current debt instruments. It begs the question, why would debt holders not want it paid off early?
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Post by cjc04 on Jan 19, 2024 12:33:51 GMT -5
^ This The problem with the toxic debt theory is that the price at which the holders would convert their stock is far over where the price is now (the market price is $3.35 so why would they pay far more to get shares?) Suppose they decide to short; they are selling at $3.35 and they can buy Jan 2025 $4.00 Calls at $0.47 to hedge. The ability to convert at $5.21 becomes completely irrelevant, that $4.00 Call is far cheaper and delivers the same result - shares to cover the short. MNKD statement that they will repays the debt with cash means there is no incentive for the note holders to short the stock unless the price rises above $5.21 because their convertible notes are more valuable as cash. And if they want to short the stock there are cheaper ways to do it anyway. Calling this toxic debt as it stands now is just trying to shift blame for the current share price. I kinda feel like you just proved yourself wrong Aged. You just said, in your own statement… “there is no incentive for the note holders to short the stock unless the price rises above $5.21“ Have you looked at the 3 year chart lately? Any coincidence that every time the sp gets above the mid $5’s it comes screaming back down? And with everything this company finally has going for it (I’ll save you the list) $907m is a proper valuation? I mean, it can’t possibly be because of some toxic debt holders having incentive to keep the sp under $5.21… as YOU said. |
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Post by sayhey24 on Jan 19, 2024 12:39:25 GMT -5
Mike will not last 2 years if the stock does not appreciate. I don't agree with that sentence. However, I wish it were accurate but (more importantly) hope it to be a moot point. For Mike to survive the next 2 years he needs to figure out a plan for afrezza. Its too expensive and is not getting insurance coverage. I think he has already figured out V-Go is a no go. I love the line from his JP Morgan slide - "Discipline selling of V-Go in secondary position to maintain core prescribing base" . Last year afrezza was for T1 market and V-Go was for T2. Now V-Go is in a secondary position. I would say thats progress. If things stay steady state and afrezza is still too expensive and still has no insurance coverage when the great results come in from Cipla and the kids, afrezza will still have little sales. I would think it will be hard for Mike to survive at that point. He will have trial data saying he has the greatest advance in diabetes care since Banting and Best but he has not figured out a way to get BP's boot off MNKDs throat. He is also sitting on a potential block buster in the GLP1 market but was not willing to poke the bear. |
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Post by ryster505 on Jan 19, 2024 13:17:56 GMT -5
I don't agree with that sentence. However, I wish it were accurate but (more importantly) hope it to be a moot point. For Mike to survive the next 2 years he needs to figure out a plan for afrezza. Its too expensive and is not getting insurance coverage. I think he has already figured out V-Go is a no go. I love the line from his JP Morgan slide - "Discipline selling of V-Go in secondary position to maintain core prescribing base" . Last year afrezza was for T1 market and V-Go was for T2. Now V-Go is in a secondary position. I would say thats progress. If things stay steady state and afrezza is still too expensive and still has no insurance coverage when the great results come in from Cipla and the kids, afrezza will still have little sales. I would think it will be hard for Mike to survive at that point. He will have trial data saying he has the greatest advance in diabetes care since Banting and Best but he has not figured out a way to get BP's boot off MNKDs throat. He is also sitting on a potential block buster in the GLP1 market but was not willing to poke the bear. If the data is as good as we all hope, and BP won’t let up, he can just offload it to one of them for a much higher premium than before data. Win/Win for patients and shareholders. I’d have no problem selling it off for a few billion and move on to other things. |
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Post by agedhippie on Jan 19, 2024 13:43:16 GMT -5
... MNKD statement that they will repays the debt with cash means there is no incentive for the note holders to short the stock unless the price rises above $5.21 because their convertible notes are more valuable as cash. And if they want to short the stock there are cheaper ways to do it anyway. Calling this toxic debt as it stands now is just trying to shift blame for the current share price. ... I mean, it can’t possibly be because of some toxic debt holders having incentive to keep the sp under $5.21… as YOU said. That may be a concern if the price had spent more of it's life near that point, but it hasn't so there is no action for the note holders. Any time a price spikes above around $4.70 the channel traders pile in and short the stock back down, it's nothing personal but rather how they trade - betting on fluctuations reverting to the mean. If the stock has a solid reason for repricing buyers will emerge who will soak up the selling and a new higher channel becomes established. Almost every time though it was just a spike and stock remains in the channel, this is the whole basis of this trading strategy - absent increases in tangible profitability the assumption is that the stock is fairly priced and will revert to that price. To date that has been the MNKD story, it repriced when the UTHR deal was done and that's where it has been sitting ever since. Come up with a new and profitable revenue stream and it may well reprice again, but until then don't blame the note holders if this is what the market think the stock is worth. |
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Post by agedhippie on Jan 19, 2024 13:49:14 GMT -5
Going from memory, I think the debt maturity is December 2026, not March. The March date I remember is this year as a possible earliest payoff date, but it comes with share price constraints over some period of time. The interest on the debt is way less than current debt instruments. It begs the question, why would debt holders not want it paid off early? They probably would, a better question is why MNKD would want to pay it early. As they pointed out in the call they can put the $150M in the bank and collect on the difference between the 2.5% they are paying, and the higher amount they are being paid - it's free money. |
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Post by agedhippie on Jan 19, 2024 13:57:36 GMT -5
There is no way MNKD is waiting until March 2026 to payoff the convertible debt. They cannot wait another 2 years with no stock price improvement. Yes the Bondholders are keeping a ceiling on the stock price by using their allotment to short. Mike will not last 2 years if the stock does not appreciate. ... Mike was aware of the consequences of doing the Conv. Debt Deal. He talked about it after they entered into it. It's common practice which artificially DEFLATES the stock price. Is it TOXIC?? It's a lesser degree of toxic. This was the only way for MNKD to clean up their very toxic old debt. If they were in a stronger position then a Conv. Deal would not have been done. It would have been a straight debt deal. Unfortunately this is what the market was giving them at that time. Another possibility during the window - MNKD will approach the bondholders and renegotiate the terms like lowering the strike price. I believe they did that years ago to get a deal done. It's not ideal but it's a negotiation. ... The note holders are not going to try and depress the stock as long as MNKD has the money to settle the note when it falls due because it's unnecessary risk. Having the cash kills the incentive to depress the stock stone dead because they are not going to be paid in stock therefore the stock price is irrelevant. If they were going to be paid in stock because there was insufficient cash then there absolutely would be an incentive to drive down the price since they would get more stock. At this time this is not depressing the share price. |
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Post by sayhey24 on Jan 19, 2024 14:03:17 GMT -5
For Mike to survive the next 2 years he needs to figure out a plan for afrezza. Its too expensive and is not getting insurance coverage. I think he has already figured out V-Go is a no go. I love the line from his JP Morgan slide - "Discipline selling of V-Go in secondary position to maintain core prescribing base" . Last year afrezza was for T1 market and V-Go was for T2. Now V-Go is in a secondary position. I would say thats progress. If things stay steady state and afrezza is still too expensive and still has no insurance coverage when the great results come in from Cipla and the kids, afrezza will still have little sales. I would think it will be hard for Mike to survive at that point. He will have trial data saying he has the greatest advance in diabetes care since Banting and Best but he has not figured out a way to get BP's boot off MNKDs throat. He is also sitting on a potential block buster in the GLP1 market but was not willing to poke the bear. If the data is as good as we all hope, and BP won’t let up, he can just offload it to one of them for a much higher premium than before data. Win/Win for patients and shareholders. I’d have no problem selling it off for a few billion and move on to other things. Right now BP has afrezza exactly were they want them at 1k scripts a week. In other words, afrezza is not impacting the $100B market. Why would any of them break the cartel and disrupt the $100B market? They are all making $Bs from the GLP1s and SGLTs and the pumps. Not one of them will break something which is working really well. Not one will give Mike a reasonable offer for afrezza. The only reason to buy afrezza would be to shelf it. Mike has 2 years to make his move. Until then the share price will bounce as it has between $5.50 and $3.50. How long has this been going on - 4 or 5 years? Buy at $3.50 and sell at $5.50. I would guess some have made a lot of money and as long as BP has Mike spooked I don't see anything changing soon with this pattern. Whats it at now $3.35 in other words a buy. Next stop $5.50. |
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Post by cjc04 on Jan 19, 2024 14:19:26 GMT -5
... I mean, it can’t possibly be because of some toxic debt holders having incentive to keep the sp under $5.21… as YOU said. That may be a concern if the price had spent more of it's life near that point, but it hasn't so there is no action for the note holders. Any time a price spikes above around $4.70 the channel traders pile in and short the stock back down, it's nothing personal but rather how they trade - betting on fluctuations reverting to the mean. If the stock has a solid reason for repricing buyers will emerge who will soak up the selling and a new higher channel becomes established. Almost every time though it was just a spike and stock remains in the channel, this is the whole basis of this trading strategy - absent increases in tangible profitability the assumption is that the stock is fairly priced and will revert to that price. To date that has been the MNKD story, it repriced when the UTHR deal was done and that's where it has been sitting ever since. Come up with a new and profitable revenue stream and it may well reprice again, but until then don't blame the note holders if this is what the market think the stock is worth. you just shifted the conversation to everything that goes into the market valuation of MNKD. As much as I would love to hear your very complex explanation as to why this company deserves be valued where it is, this particular conversation was about whether or not the debt should be considered toxic based on whether or not the debt holders have incentive keep the sp below $5.21. And they do, you said it! |
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Post by cjc04 on Jan 19, 2024 14:26:48 GMT -5
Going from memory, I think the debt maturity is December 2026, not March. The March date I remember is this year as a possible earliest payoff date, but it comes with share price constraints over some period of time. The interest on the debt is way less than current debt instruments. It begs the question, why would debt holders not want it paid off early? They probably would, a better question is why MNKD would want to pay it early. As they pointed out in the call they can put the $150M in the bank and collect on the difference between the 2.5% they are paying, and the higher amount they are being paid - it's free money. the debt holders may not want it paid off early because as Aged said, they have incentive to keep the stock price under $5.21. AND, as Aged said, the stock has stayed in this price channel for a very long time. Which I would take as the toxic debt holders have made a lot more money with their roll in keeping it in this channel than they would’ve with their money somewhere else. The better question, “why would MNKD want to pay it off early” Because it’s toxic ! |
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Post by cjc04 on Jan 19, 2024 14:29:40 GMT -5
There is no way MNKD is waiting until March 2026 to payoff the convertible debt. They cannot wait another 2 years with no stock price improvement. Yes the Bondholders are keeping a ceiling on the stock price by using their allotment to short. Mike will not last 2 years if the stock does not appreciate. ... Mike was aware of the consequences of doing the Conv. Debt Deal. He talked about it after they entered into it. It's common practice which artificially DEFLATES the stock price. Is it TOXIC?? It's a lesser degree of toxic. This was the only way for MNKD to clean up their very toxic old debt. If they were in a stronger position then a Conv. Deal would not have been done. It would have been a straight debt deal. Unfortunately this is what the market was giving them at that time. Another possibility during the window - MNKD will approach the bondholders and renegotiate the terms like lowering the strike price. I believe they did that years ago to get a deal done. It's not ideal but it's a negotiation. ... The note holders are not going to try and depress the stock as long as MNKD has the money to settle the note when it falls due because it's unnecessary risk. Having the cash kills the incentive to depress the stock stone dead because they are not going to be paid in stock therefore the stock price is irrelevant. If they were going to be paid in stock because there was insufficient cash then there absolutely would be an incentive to drive down the price since they would get more stock. At this time this is not depressing the share price. I can’t argue with this point. HOWEVER, you are conveniently leaving out one very important detail…. March 6th. Your logic only applies to after that date, I guess we will see. |
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