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Post by obamayoumama on Jul 29, 2015 14:44:07 GMT -5
Here is what I gleaned from the official 8-K on the exchange notes. It is not clear how the VWAP is calculated so I am using just the closing price as examples. Furthermore it is not clear what happens if the holders do NOT complete the exchange since they "have the option but not the obligation to exchange" if the daily VWAP is lower than the floor price on that date. I assume they would WANT to exchange since the lower the price the greater number of shares they receive but again it is not clear. "Pursuant to the Stock-for-Note Exchange Agreements, the exchange transactions will generally be priced over a 10 trading day period spanning from July 29, 2015 to and including August 11, 2015 (each, an "Exchange Date"). The number of Exchange Shares related to each Exchange Date will equal approximately 1/10th of the total principal amount of the 2015 notes to be exchanged, divided by the exchange price for such date. The exchange price for each such date will be the greater of 95.75% of the daily volume-weighted average price ("VWAP") of the Company's common stock for such date and 95.75% of a floor price, which floor price will initially be 94.5% of the daily VWAP on July 28, 2015, but may be adjusted by the Company for any trading day by providing notice to the holders prior to 9:00 a.m. Eastern Time on such day. On any Exchange Date on which the daily VWAP is lower than the floor price in effect on such date, each holder will have the option, but not the obligation, to complete the portion of the exchange associated with such date. In the event the Company modifies the initial floor price for any trading day during the exchange period, the Company will promptly publish the modified floor price on the Investor Relations page of its corporate website (http://investors.mannkindcorp.com/index.cfm). Information contained in the Company's website does not constitute a part of this report." Today's floor price as well as all subsequent days unless the company changes it ( which floor price will initially be 94.5% of the daily VWAP on July 28, 2015) is therefore 94.5% of yesterday's price of $4.82 or $ 4.555Exchange price today will be the greater of 95.75%, of that floor price, or $4.36. OR 95.75% of today's VWAP. Assuming the stock closes at $4.45 that would be $4.26 so the exchange price would be $4.36 since it is the greater of the two. Since today's VWAP is less than the floor it is not clear if they will convert or not since they have the option but not the obligation to convert. My guess is they WILL convert since I still think they have already shorted with the expectation of using conversion shares to cover. This would be the same scenario for all the next 9 trading days as well, unless they change the floor price. So unless some other event occurs (like a horrible conference call - we will certainly hope the opposite is true - GREAT conference calls) to massacre the price further it appears the exchange will hover somewhere in the $4.36 range. 56.9 million in principal will be just over 13 million shares issued. Still somewhat murky overall but hopefully all of it actually gets converted and we get this behind us. The way I read it is that the daily price and calculation is in there if MNKD is above the $4.60 floor using the VWAP from yesterday. Yes today will be included in the Average ten days, but will only have an impact if the 10 day calculation comes out higher than the floor. |
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Post by obamayoumama on Jul 29, 2015 14:56:07 GMT -5
Where or how did you get the number of 4.85? The floor is about $4.60 based on the 95% of the VWAP from yesterday. All in it looks like about less than 2 million shares more than the original convert, plus we get back the 9 million shares from Merrill, and we don't have 14.7 million shares hitting the market on August 15 minus 9 million loaned to Merrill or 5.7 million shares to deal with. Net net Merrill owes us 9 million shares, without the 14.7 million hitting the market. |
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Post by babaoriley on Jul 29, 2015 15:02:30 GMT -5
It's hard to envision any sort of true "death spiral" battle materializing. The price here has to be very tempting to real investors with longer term horizons and there are only 12-13 million shares in play from the convert. That's barely 2 days of average volume. My guess is smart money grabs bargain shares to offset shorting efforts trying to eke out a few more shares. Any knowledgeable investor can see this deal is much more favorable than unfavorable, resolving a large part of the puzzle quite satisfactorily and the remainder is basically the same as it always was at a much smaller level. If there are positive indicators from SNY and MNKD quarterly results/calls this will all be forgotten in a heartbeat. Long term it will be just another footnote in the story - which as many others have pointed out is all about the results and market penetration over time. I personally bought another few K shares this morning, just adding some sprinkles to the top of my sundae. I like this post, too, dudley , I just don't agree with it being hard to envision that the share price could go lower. For example, I had to sell some shares this morning in order to address some of a margin call, I'm going to transfer some cash into my account to satisfy the rest, assuming the need is still there for it by Friday. By the way, I've often thought we should have a "like, but don't necessarily agree with" button, as some posts are well written and are very possibly correct, even if one does not agree with them at the moment.  |
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Post by petech on Jul 29, 2015 15:14:04 GMT -5
All in it looks like about less than 2 million shares more than the original convert, plus we get back the 9 million shares from Merrill, and we don't have 14.7 million shares hitting the market on August 15 minus 9 million loaned to Merrill or 5.7 million shares to deal with. Net net Merrill owes us 9 million shares, without the 14.7 million hitting the market. EXACTLY! That's the bottom line! Shares issued can't be sold; 9M shares have to be returned. Plus there is a floor on the conversion price....which they can adjust by giving notice. If they had fantastic news coming out in the next 10 days (hypothetically), they could announce they are adjusting the floor as of that day. But as of right now, a quick conversion brings 4.36 or so as a floor. |
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Post by greg on Jul 29, 2015 15:24:25 GMT -5
There is a floor of around $4.85 on the conversion price. Please read the press release more carefully. Where or how did you get the number of 4.85? the floor was initially set based on yesterday's trading but management is allowed to adjust the floor price any day, while the debt holders have the option not to convert any day they're not happy with the floor price. Given all this, I don't understand the need to quibble about a nickel, dime, quarter, or whatever. i'm sorry to say this as a newbie on this board, but the quibbling is characteristic of MNKD shareholders who endlessly discuss and argue trivia. |
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Post by compound26 on Jul 29, 2015 15:39:18 GMT -5
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Post by dudley on Jul 29, 2015 15:42:01 GMT -5
It's hard to envision any sort of true "death spiral" battle materializing. The price here has to be very tempting to real investors with longer term horizons and there are only 12-13 million shares in play from the convert. That's barely 2 days of average volume. My guess is smart money grabs bargain shares to offset shorting efforts trying to eke out a few more shares. Any knowledgeable investor can see this deal is much more favorable than unfavorable, resolving a large part of the puzzle quite satisfactorily and the remainder is basically the same as it always was at a much smaller level. If there are positive indicators from SNY and MNKD quarterly results/calls this will all be forgotten in a heartbeat. Long term it will be just another footnote in the story - which as many others have pointed out is all about the results and market penetration over time. I personally bought another few K shares this morning, just adding some sprinkles to the top of my sundae. I like this post, too, dudley , I just don't agree with it being hard to envision that the share price could go lower. For example, I had to sell some shares this morning in order to address some of a margin call, I'm going to transfer some cash into my account to satisfy the rest, assuming the need is still there for it by Friday. By the way, I've often thought we should have a "like, but don't necessarily agree with" button, as some posts are well written and are very possibly correct, even if one does not agree with them at the moment. Hi baba - with respect I did not say not envisioning the stock price going lower - that is always possible with any stock, any time. I said it is hard to envision a "death spiral" scenario where the shorts can attack at will and the company has literally no defense. MNKD is priced very cheap at these levels and anyone following the stock closely knows things are not at all desperate. Buying interest will be present at these levels and there are not that many shares in play - shorts jockeying for lower prices for their conversion shares have much less exploitative power here. That was the point. Margin is crazy risky with this stock so we all have to take the consequences for that. Being in this for the long term is the only way to think - this short term stuff will drive you crazy. |
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Post by obamayoumama on Jul 29, 2015 15:43:52 GMT -5
All in it looks like about less than 2 million shares more than the original convert, plus we get back the 9 million shares from Merrill, and we don't have 14.7 million shares hitting the market on August 15 minus 9 million loaned to Merrill or 5.7 million shares to deal with. Net net Merrill owes us 9 million shares, without the 14.7 million hitting the market. EXACTLY! That's the bottom line! Shares issued can't be sold; 9M shares have to be returned. Plus there is a floor on the conversion price....which they can adjust by giving notice. If they had fantastic news coming out in the next 10 days (hypothetically), they could announce they are adjusting the floor as of that day. But as of right now, a quick conversion brings 4.36 or so as a floor. I believe it is the higher of the two, the 10 day times the 95% VWAP or the 4.60 based on yesterday's VWAP times the 95% whichever is higher. There isn't going to be any number less than 4.60 only higher if the 10 day calculation is higher. |
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Post by BD on Jul 29, 2015 15:46:57 GMT -5
That's a really nice write-up by Nate. He's excellent at explaining this stuff (and spot-on in his characterization of AF!)
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Post by me on Jul 29, 2015 15:53:30 GMT -5
Some very good posts on this subject; dudley's above is especially good, thanks dudley! Yes, there was always going to be dilution, but Matt and others were hopeful that the exchange price for the debt would have been at least around $6, instead of where it is. Also, there's that provision in the news release that allows MNKD to change the floor price on a day to day basis over the ten day period. So, if conversion isn't happening because the price is too low, it seems MNKD can either pay off the debt with cash or allow for a lower floor price. I think I have a bit less of a problem with Matt's recent claims. To me, the interesting thing will be whether this stock can be (will be) manipulated above or below $4.39, which was my estimate of the floor price in my earlier, still sleepy-headed post. I believe the next ten trading days will be trench warfare - keep low and keep that helmet fastened tightly. Baba, I've done a quick calc elsewhere and arrived at an exchange price floor of $4.41. This price is critical, because the way I read the PR, the note holders are obligated to convert one-tenth of their shares each day so long as the VWAP that day is not below the exchange price floor. Give today's pricing/volume, it would appear that 10% of those shares are now converted, probably at a price of $4.41 +/- (which is greater than 95.75% of the assumed VWAP today of approx $4.46). |
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Post by compound26 on Jul 29, 2015 16:07:56 GMT -5
Some very good posts on this subject; dudley's above is especially good, thanks dudley! Yes, there was always going to be dilution, but Matt and others were hopeful that the exchange price for the debt would have been at least around $6, instead of where it is. Also, there's that provision in the news release that allows MNKD to change the floor price on a day to day basis over the ten day period. So, if conversion isn't happening because the price is too low, it seems MNKD can either pay off the debt with cash or allow for a lower floor price. I think I have a bit less of a problem with Matt's recent claims. To me, the interesting thing will be whether this stock can be (will be) manipulated above or below $4.39, which was my estimate of the floor price in my earlier, still sleepy-headed post. I believe the next ten trading days will be trench warfare - keep low and keep that helmet fastened tightly. Baba, I've done a quick calc elsewhere and arrived at an exchange price floor of $4.41. This price is critical, because the way I read the PR, the note holders are obligated to convert one-tenth of their shares each day so long as the VWAP that day is not below the exchange price floor. Give today's pricing/volume, it would appear that 10% of those shares are now converted, probably at a price of $4.27 +/- (assumed VWAP today of $4.46 x 95.75%). The floor is around $4.55 to 4.6. The $4.41 number you referred to above (or the $4.36-4.39 number other people have talked about) is 95.75% of the floor. So for today, the daily VWAP is below the floor price currently in effect. Thus, it appears the note-holders have no obligation to convert for today. If they do choose to covert, they will convert at 95.75% of the floor (i.e.., at $4.36-4.41 range). |
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Post by pktrump on Jul 29, 2015 16:08:14 GMT -5
Which one is better going forward?
1. Owing 27 million with same terms as before with 15 million paid down on the debt vs 100 million.
2. Listening to the shorts scream MNKD wont meet its obligation regarding the notes, which now has been resolved, or listening to the shorts next argument(s)?
3. Debt holders choosing to convert to shares with a floor price (based on VWAP with the statement shares "may not be offered or sold absent registration" ) vs not converting
Some things will stay the same going forward however, the PK profile of AFZ being the most important, some not so important, such as AF's character.
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Post by me on Jul 29, 2015 16:21:07 GMT -5
Baba, I've done a quick calc elsewhere and arrived at an exchange price floor of $4.41. This price is critical, because the way I read the PR, the note holders are obligated to convert one-tenth of their shares each day so long as the VWAP that day is not below the exchange price floor. Give today's pricing/volume, it would appear that 10% of those shares are now converted, probably at a price of $4.27 +/- (assumed VWAP today of $4.46 x 95.75%). The floor is around $4.55 to 4.6. The $4.41 number you referred to above (or the $4.36-4.39 number other people have talked about) is 95.75% of the floor. So for today, the daily VWAP is below the floor price currently in effect. Thus, it appears the note-holders have no obligation to convert for today. If they do choose to covert, they will convert at 95.75% of the floor (i.e.., at $4.36-4.41 range). I didn't say the "floor price" was $4.41, I said the "exchange price floor" was $4.41. The "floor price" is indeed about $4.60. The LOWEST EXCHANGE PRICE for the conversion is 95.75% of the floor price ($4.60). The agreement (with my assumptions): Conversion of 10% of outstanding debt ($56.9 million) on 7/29 at the greater of (i) 95.75% of 7/29 VWAP (assume $4.46 VWAP x 95.75% = $4.27) or (ii) 95.75% of FLOOR PRICE (which is 94.5% of 7/28 VWAP, which I assume to be $4.87). Hence, (i) = $4.27 and (ii) = $4.87 x 94.5% x 95.75% = $4.41. Since $4.41 is higher than $4.27, the note holders are obligated to converted 10% of the outstanding debt and interest today at $4.41 per share. |
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Post by dudley on Jul 29, 2015 16:50:22 GMT -5
The floor is around $4.55 to 4.6. The $4.41 number you referred to above (or the $4.36-4.39 number other people have talked about) is 95.75% of the floor. So for today, the daily VWAP is below the floor price currently in effect. Thus, it appears the note-holders have no obligation to convert for today. If they do choose to covert, they will convert at 95.75% of the floor (i.e.., at $4.36-4.41 range). I didn't say the "floor price" was $4.41, I said the "exchange price floor" was $4.41. The "floor price" is indeed about $4.60. The LOWEST EXCHANGE PRICE for the conversion is 95.75% of the floor price ($4.60). The agreement (with my assumptions): Conversion of 10% of outstanding debt ($56.9 million) on 7/29 at the greater of (i) 95.75% of 7/29 VWAP (assume $4.46 VWAP x 95.75% = $4.27) or (ii) 95.75% of FLOOR PRICE (which is 94.5% of 7/28 VWAP, which I assume to be $4.87). Hence, (i) = $4.27 and (ii) = $4.87 x 94.5% x 95.75% = $4.41. Since $4.41 is higher than $4.27, the note holders are obligated to converted 10% of the outstanding debt and interest today at $4.41 per share. Sorry, you can't just make assumptions. How is the VWAP calculated? If 7/28 closing price was $4.82 how do you derive $4.87? Today's close was $4.44 - how do you derive $4.46 for the 7/29 VWAP? Agreement clearly states "The exchange price for each such date will be the greater of 95.75% of the daily volume-weighted average price ("VWAP") of the Company's common stock for such date and 95.75% of a floor price, which floor price will initially be 94.5% of the daily VWAP on July 28, 2015" and "On any Exchange Date on which the daily VWAP is lower than the floor price in effect on such date, each holder will have the option, but not the obligation, to complete the portion of the exchange associated with such date." Any accurate analysis is dependent on first knowing the actual VWAP for 7/28. You then take that number x .9450 to get the working floor price. The actual exchange price on any given day for the conversion shares is then the GREATER of .9575 of the working floor price OR .9575 of the VWAP for each day. Unless someone can verify the calculations used for VWAP nobody knows the actual prices involved. Furthermore, using your own numbers and assuming today's VWAP is actually $4.46 then .9575 of that number is $4.27, which is LOWER than your floor price of $4.60 x .9575 or $4.40. The holders were NOT obligated to exchange today since the VWAP today was lower than the floor price. Not trying to be a jerk, just saying it is important to get this straight before we are making assumptions that are wrong and/or unverifiable. It's certainly not helpful that Matt did not provide the actual beginning VWAP and how that is calculated. If the holders do NOT convert - and today they were NOT obligated to do that - we have to watch this wretched thing drag on for the next 10 days waiting to see the final resolution - they may still have to refi the $57 million in some other way if the conversions don't happen. |
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Post by dudley on Jul 29, 2015 17:23:58 GMT -5
I didn't say the "floor price" was $4.41, I said the "exchange price floor" was $4.41. The "floor price" is indeed about $4.60. The LOWEST EXCHANGE PRICE for the conversion is 95.75% of the floor price ($4.60). The agreement (with my assumptions): Conversion of 10% of outstanding debt ($56.9 million) on 7/29 at the greater of (i) 95.75% of 7/29 VWAP (assume $4.46 VWAP x 95.75% = $4.27) or (ii) 95.75% of FLOOR PRICE (which is 94.5% of 7/28 VWAP, which I assume to be $4.87). Hence, (i) = $4.27 and (ii) = $4.87 x 94.5% x 95.75% = $4.41. Since $4.41 is higher than $4.27, the note holders are obligated to converted 10% of the outstanding debt and interest today at $4.41 per share. Sorry, you can't just make assumptions. How is the VWAP calculated? If 7/28 closing price was $4.82 how do you derive $4.87? Today's close was $4.44 - how do you derive $4.46 for the 7/29 VWAP? Agreement clearly states "The exchange price for each such date will be the greater of 95.75% of the daily volume-weighted average price ("VWAP") of the Company's common stock for such date and 95.75% of a floor price, which floor price will initially be 94.5% of the daily VWAP on July 28, 2015" and "On any Exchange Date on which the daily VWAP is lower than the floor price in effect on such date, each holder will have the option, but not the obligation, to complete the portion of the exchange associated with such date." Any accurate analysis is dependent on first knowing the actual VWAP for 7/28. You then take that number x .9450 to get the working floor price. The actual exchange price on any given day for the conversion shares is then the GREATER of .9575 of the working floor price OR .9575 of the VWAP for each day. Unless someone can verify the calculations used for VWAP nobody knows the actual prices involved. Furthermore, using your own numbers and assuming today's VWAP is actually $4.46 then .9575 of that number is $4.27, which is LOWER than your floor price of $4.60 x .9575 or $4.40. The holders were NOT obligated to exchange today since the VWAP today was lower than the floor price. Not trying to be a jerk, just saying it is important to get this straight before we are making assumptions that are wrong and/or unverifiable. It's certainly not helpful that Matt did not provide the actual beginning VWAP and how that is calculated. If the holders do NOT convert - and today they were NOT obligated to do that - we have to watch this wretched thing drag on for the next 10 days waiting to see the final resolution - they may still have to refi the $57 million in some other way if the conversions don't happen. Since " VWAP equals the dollar value of all trading periods divided by the total trading volume for the current day. Calculation starts when trading opens and ends when trading closes" it is obvious this will have to be derived from some sort of market database - there is no way an individual can possibly track the dollar amounts of millions of shares traded. Hopefully Matt or someone will provide VWAP and actual conversion results for each day (not holding my breath for that) or else it will be nothing but guesswork to know where things stand. Further clouding the issue is that the holders CAN convert but don't HAVE to convert on days the VWAP for that day is lower than the floor. Not much for it now but to wait and see how it shakes out. Fortunately it does not impact the long term thesis, just frustrating to have to wait for another 2 weeks to get it all wrapped up nicely and move on. |
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