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Post by yossarian on May 9, 2016 22:41:29 GMT -5
So they're going to offer the combined stock and A and B warrants for a combined price of 1.03. Current stock price is 1.32. The A warrant gets you the right to buy .75 (three quarters) share at 1.50 for 2 years.beginning upon issuance or approximately May 2018. The B warrant gets you the right to buy .25 (quarter) share at 1.50 for 18 months.starting in May 2017 thus expiring Nov. 2018.
The offering is for a share of stock at 1.03 plus one A and B warrant entitling you taken together to 1 share of stock at 1.50 at least between May 2017 and May 2018. (this is when the two warrants overlap in terms of being exercisable). The closest you can come now is to purchase a share of stock at 1.32 plus a Jan. 2018 1.50 call at .55 for a total cost of 1.87. If you believe in Mannkind you are clearly better off taking the offering than buying the stock and call. Of course if Mannkind goes belly up, it's all academic.
You could take the offering and short the stock and Jan 2018 1.50 call. You'd have no risk and make a quick .84 profit less commissions.
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Post by Deleted on May 9, 2016 23:02:42 GMT -5
So they're going to offer the combined stock and A and B warrants for a combined price of 1.03. Current stock price is 1.32. The A warrant gets you the right to buy .75 (three quarters) share at 1.50 for 2 years.beginning upon issuance or approximately May 2018. The B warrant gets you the right to buy .25 (quarter) share at 1.50 for 18 months.starting in May 2017 thus expiring Nov. 2018. The offering is for a share of stock at 1.03 plus one A and B warrant entitling you taken together to 1 share of stock at 1.50 at least between May 2017 and May 2018. (this is when the two warrants overlap in terms of being exercisable). The closest you can come now is to purchase a share of stock at 1.32 plus a Jan. 2018 1.50 call at .55 for a total cost of 1.87. If you believe in Mannkind you are clearly better off taking the offering than buying the stock and call. Of course if Mannkind goes belly up, it's all academic. You could take the offering and short the stock and Jan 2018 1.50 call. You'd have no risk and make a quick .84 profit less commissions. Fail. The A Warrants will be exercisable at a price of $1.50 per share beginning upon issuance and will expire two years thereafter. The B Warrants will be exercisable at a price of $1.50 per share beginning in May 2017 and expire 18 months thereafter. |
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Post by yossarian on May 9, 2016 23:16:16 GMT -5
Note the A and B warrants are BOTH exercisable between May 2017 and May 2018. So during that time period you can get a share of MNKD for 1.50. If you get the offering, when you short MNKD at 1.32 and the Jan 2018 .55 call you are completely hedged. The Jan 2018 1.50 call expires in January 2018 but the warrants you are exercising are good until May 2018 and in fact the B warrant is exercisable until Nov. 2018.
What am I missing here. Of course the B warrant is not exercisable until May 2017. So if MNKD skyrockets before May 2017 you will have to wait until May 2017 to cover .25 a share.
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Post by lakon on May 10, 2016 11:31:38 GMT -5
Note the A and B warrants are BOTH exercisable between May 2017 and May 2018. So during that time period you can get a share of MNKD for 1.50. If you get the offering, when you short MNKD at 1.32 and the Jan 2018 .55 call you are completely hedged. The Jan 2018 1.50 call expires in January 2018 but the warrants you are exercising are good until May 2018 and in fact the B warrant is exercisable until Nov. 2018. What am I missing here. Of course the B warrant is not exercisable until May 2017. So if MNKD skyrockets before May 2017 you will have to wait until May 2017 to cover .25 a share. You must have a really nice broker.  As soon as you cannot cover your margin requirements, you will be forced out of your position. That means you have to cover the .25 shares so there is your risk. It is not a bad idea, but it does have risk unlike what you suggested. There is no free lunch. Also, you would not be selling short MNKD. You would close out your stock position from the issue that you cannot buy into by the way. You would write the calls for .75 shares until May 2017. At that time, you would write the .25 shares. That would reduce your risk. The numbers that you quoted would be weighted accordingly, except good luck with the $1.32 for MNKD and same for call price from before the deal. The market is FAST. LOL. What you suggest is not going to work for anyone, but an institutional purchaser of the issue who decides later to implement this strategy at favorable prices (i.e., after MNKD makes a run up and the institution wants to switch sides again). |
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Post by yossarian on May 10, 2016 11:59:34 GMT -5
You'd have to come up with the cash to exercise the warrants that is true. If MNKD went crazy before May 2017, yes you'd have to put up more money to cover the .25 share shortfall. But since you know you can cover in May 2017, I wouldn't be too concerned about the 12 month exposure. Only a problem if you don't have the cash to cover the position. But it's alas all moot. MNKD is plunging. The potential profit is down now to .20. Plus don't think us peons will get in on the offering.
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Post by capnbob on May 10, 2016 12:49:00 GMT -5
You'd have to come up with the cash to exercise the warrants that is true. If MNKD went crazy before May 2017, yes you'd have to put up more money to cover the .25 share shortfall. But since you know you can cover in May 2017, I wouldn't be too concerned about the 12 month exposure. Only a problem if you don't have the cash to cover the position. But it's alas all moot. MNKD is plunging. The potential profit is down now to .20. Plus don't think us peons will get in on the offering. Not necessarily exactly. First, if the buyer was already short the stock at, say, $2, then taking part in the offering delivers shares with a significant profit locked in. Also, the "B" warrant -- "B warrant to purchase 0.25 of a share of common stock at a combined purchase price of $1.03" -- also helps lock in any profit on shares already sold short above that price. Furthermore, the buyer would acquire the "A" warrants which have a "price adjustment" feature: "...that provides that if we sell shares of our common stock or common stock equivalents at an effective price per share that is less than $1.50, the exercise price of the A warrants will be reset to such lower effective price. This feature does not apply to certain exempt issuances of common stock or common stock equivalents, including issuances under our equity incentive plan or employee stock purchase plan, securities issued upon exercise or conversion of existing securities or securities issued in connection with acquisitions or strategic transactions, and issuances of common stock pursuant to our At Market Issuance Sales Agreement with FBR Capital Markets & Co. (the “ATM Agreement”) after 90 days following the closing of the offering, up to a certain limit, and without limit after 180 days following the closing of the offering (each an “Exempt Issuance”)." The buyer could short the stock lower, and if MNKD tried to raise any more money with a secondary at the lower price, the buyer could exercise at the offering price, use those to cover the short position and lock in yet another gain. It's possible that the buyers reaped a true "windfall." |
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Post by matt on May 10, 2016 15:21:23 GMT -5
The way this game is played, especially by Rodman & Renshaw, it that they circulated an offering memorandum yesterday. As soon as one of the buyers had signed an irrevocable offer to participate, they can short the stock and that does not count as a naked short. Since they are economically exposed the second they signed the offer the short is a true hedge of their economic exposure. If the buyers shorted before yesterday's close, after hours, or immediately at the open, they can deliver the new shares they just bought at $1.03 to close the position. This gives investors an instant profit of up to 30 cents.
Since the warrant units will trade separately, those can be sold off as well. The 18 month calls with $1.50 strike are selling for 24 cents and a warrant has slightly less value than a call option, say 21-22 cents, but that is still a nice additional profit. Added to the profit if they shorted into the transaction, a savvy investor can pocket up to 50 cents over the course of 3 days with zero risk and no exposure to MNKD and its business.
The types of investors that buy into these deals don't really care if MNKD is going up, going down, or moving sideways. They grab their dimes and nickels within a few days and move on to the next deal, and so long as they buy into EVERY Rodman & Renshaw deal without question they will always get a bite of the next apple.
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