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Post by dudley on Jul 31, 2015 15:56:14 GMT -5
I think it is very likely conversions ARE happening, it is just annoying not to KNOW and stay in limbo for the next 7 days wondering. Holders have the option to convert and if they really want shares they HAVE to convert since the ability disappears 10% more each day. I still feel strongly they had already shorted the conversion shares and want to convert to obtain them for covering those shorts - still a tasty profit even if they convert at the floor price. Why would they even agree to the conversion deal just to cash out anyway in 2 weeks? Doesn't make much sense to do that, but sense is often not in the equation when it comes to good old MNKD. I guess it is possible they did a head fake with the agreement then shorted with the intention of covering their own shares at lower than the floor PLUS cashing out. That would certainly be dirty pool but it's a cruel world.
Fortunately the amount is not huge so even if it is a cash settlement at 8/15 it is not a killer scenario. They had over $100 million in cash so even if they cash out this $57 million (highly unlikely they don't get ANY conversions even at the floor price) plus the other $15 million they will not be in a truly dire predicament and Al will always be there as an ultimate backstop if they ever do get into a real cash crunch. If they get another $25 million milestone for certifying the 12U that puts them in a more stable position even if they do cash out the entire note. I still think Al may refi the whole deal anyway if push comes to shove. They don't need to worry about what the "market" may think of them - they are already being treated like dirt in that regard.
As to preserving cash for expansion, that is somewhat wishful thinking. With 3 lines operating now that will support $1 Billion in sales and we are a long, long way from maxing out that capacity. The good news is they won't need any more cash to build out capacity for the foreseeable future. If they DO that is actually great news because it means they see more than $1 Billion demand coming.
My bet is they cash out some of the notes with a reasonable percentage converting. We will know for sure in a couple of weeks then it is on to the next speculation.
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Post by dreamboatcruise on Jul 31, 2015 17:13:20 GMT -5
They don't need cash to build out new capacity since they can borrow that money from the SNY credit line (I believe). Though I agree, the need to build capacity would be an amazingly great problem to have. The cash is needed to fund the technosphere pipeline.
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Post by mannmade on Jul 31, 2015 17:40:43 GMT -5
It is my understanding that the next production facility would likely be built in Europe and Sanofi is to handle production of Afrezza at that point so they would also likely pay cost of build out.
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Post by _neil on Jul 31, 2015 17:58:21 GMT -5
At this point, I don't believe anyone in the market or even the insiders at MNKD are concerned about production. The demand is far shorter than the existing capacity even without the added two lines. In general, I believe we should prepare for success but saturating line 1's capability seems like a pipe dream for this year at the rate we are making progress.
On point, this whole note conversion deal seems more and more like something the lenders arm twisted Matt into constructing. It's complexity is one indication and the seemingly open invitation for short players to further line their pockets another. Sigh! I hope there is light at the end of this tunnel.
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Post by tbone on Jul 31, 2015 18:04:18 GMT -5
Regarding the stock for note, at this point we could have none converted, leaving 30% of the $60 M to be paid by MNKD by Aug 15?
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Post by james on Jul 31, 2015 18:46:58 GMT -5
At this point, I don't believe anyone in the market or even the insiders at MNKD are concerned about production. The demand is far shorter than the existing capacity even without the added two lines. In general, I believe we should prepare for success but saturating line 1's capability seems like a pipe dream for this year at the rate we are making progress. On point, this whole note conversion deal seems more and more like something the lenders arm twisted Matt into constructing. It's complexity is one indication and the seemingly open invitation for short players to further line their pockets another. Sigh! I hope there is light at the end of this tunnel. I think the complexity was largely due to an objective of putting restrictions on the stock after conversion and calling in the 9M loaned shares which is against the interest of many of the note holders. |
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Post by liane on Jul 31, 2015 19:24:43 GMT -5
Good point James
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Post by dreamboatcruise on Jul 31, 2015 19:34:42 GMT -5
james... could be. I'll admit that I'm biased to be looking for the flaws in the deal because I see the market share price reaction... so I figure people smarter than I are viewing it negatively and therefore "what's wrong?". Maybe this is a good deal... assuming that shares actually get converted. I still think it would have been better if the floor were absolute rather than optionally able to be lowered. Certainly looking forward to the CC and hope it is a exercise in confidence building.
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Post by dudley on Jul 31, 2015 19:41:45 GMT -5
Regarding the stock for note, at this point we could have none converted, leaving 30% of the $60 M to be paid by MNKD by Aug 15? We could quite easily have no shares at all converted. I've been thinking noteholders would have shorted earlier with the intention of using converted shares to cover but then it just kicked into my brain that all they have to do is buy back the shares on the open market at prices even lower than the conversion price - which has now been true for 3 straight days. If prices stay this low they could quite easily not convert any shares at all. That is a mixed blessing in that MNKD still has to pay cash for the notes on 8/15 but at least they get the 9 million shares back and suffer zero dilution. I am starting to think that is the end game for the noteholders - they get to snag bargain shares at LOWER than conversion price PLUS their cash back and MNKD gets stiffed with no conversions. If by some miracle the price can bounce above the floor they will convert, otherwise it's probably a safe bet they will play the buy the open market game to cover any shorted shares. Win-win for the sharks. What a world. |
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Post by liane on Jul 31, 2015 19:48:18 GMT -5
dudley,
On the flip side - no conversions means no dilution. And if the note holders do try to buy at a lower price on the open market, will they be able to buy all they need without moving the needle significantly upward?
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Post by dudley on Jul 31, 2015 19:57:43 GMT -5
dudley, On the flip side - no conversions means no dilution. And if the note holders do try to buy at a lower price on the open market, will they be able to buy all they need without moving the needle significantly upward? Hi Liane. I did point out there would be zero dilution. There are only 12-13 million shares in play which is just 1.2 million shares daily over the 10 day trading period. They could easily get what they need and if not they can still convert. I am a solid long term investor and will be here for the long term and this does not change my investment opinion at all. It just makes me angry that the sharks appear to be getting a sweet deal from both ends and MNKD gets squat. Hopefully it changes next week but I am not holding my breath. I could also be completely wrong and the noteholders are all being sweethearts and converting fully each day but I am by nature a cynic in these matters and my mind leans toward the darker scenario. |
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Post by dreamboatcruise on Jul 31, 2015 20:15:04 GMT -5
dudley... it seems rather than sweethearts they would need to be fools to pay higher than market prices for shares that have restrictions.
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Post by mnholdem on Jul 31, 2015 20:30:34 GMT -5
Are some of those borrowed shares going to stay with those holders who swapped for the 2018 notes? I think under the terms, all 9 million shares must be returned, but aren't the new note holders going to want to hedge their notes again?
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Post by liane on Jul 31, 2015 20:54:00 GMT -5
mn, Read EoD's post: So I followed up Matt's answer with the following, Would it be fair to assume that by offering this deal MNKD is trying to encourage conversion among the holders of the old notes, at the same time keeping things from spiraling out of control by setting a floor that is under MNKD’s control. Would it also be fair to say, that although MNKD would seem to prefer conversion as a way to resolve the debt notes, the company is ready to pay the debt if it needs be. I assume here that refinancing was offered as a preferred option but only a fraction of the old note holders, representing an aggregate principal amount of $27.7 million, were interested in extending terms. Minutes later I got his answer, "The first would be fair. As far as extensions of old notes, we were only willing to do this for fundamental investors, who don't short or need a borrow facility. That is the reason for the amount. We also could not approach more than a handful of note holders as doing so would trigger different legal rules around a tender offer we needed to avoid given our timeline." |
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Post by dreamboatcruise on Jul 31, 2015 20:55:58 GMT -5
Are some of those borrowed shares going to stay with those holders who swapped for the 2018 notes? I think under the terms, all 9 million shares must be returned, but aren't the new note holders going to want to hedge their notes again? No, someone (EveningOfTheDay I believe) emailed Matt about the deal and got a response that part of the reason for the small amount of rolled over debt was that they were unwilling to loan shares like they had previously. So all 9M will be returned. [Edit: liane... you are both quicker and better. Was typing this up, but you hit send first. I'm a day late and a dollar short... or make that a minute late and a proper quotation short. Feel free to delete my post entirely.] |
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