In The Mind Of A Short.......

[centralcoastinvestor]

To begin with, I do not know anything about Herbalife.  I have followed the headline news from time to time because of Bill Ackman.  Also, this thread definitely relates to MannKind.

So let's get started.  Bill Ackman runs a $12 Billion dollar hedge fund called Pershing Square Capital.  This guy really has it in for Herbalife. (See link below.)  It seems like for at least a couple of years he has bashed this company relentlessly.  Oh by the way, he made a huge short bet against the company.  That short bet has cost him a 20% loss over the last year.  So now Herbalife faces a guy who apparently can say anything he wants that is negative about the company without being held liable for false info.  What is more intriguing is that Mr. Ackman was anti Herbalife before his losses.  Now he has the additional "burr under his saddle" that Herbalife stuck it to him by not going out of business. How can the media keep printing everything he says when he is so clearly biased.  This guy and the company he represents is like a boat anchor permanently hung around the neck of Herbalife.

So how does this relate to MannKind?  MannKind, much to its misfortune, attracted intense short interest almost from the IPO.  The short interest really expanded once Afrezza went through its first NDA with the FDA.  It seems completely unfair that once short interest takes an interest in a company, they are allowed to announce to the world why they chose the "rotten, no good, lying, cheating" company to short.  Thus insuring that their negative bet pays off.  Add to that, if the short interest has substantial financial backing, they can almost insure that the stock price stays depressed by selling infinite "air" shares.  My long held belief is that there is an entity or a group of entities that have backed the short interest against Mnkd.  Maybe that's just my paranoia coming into play.  The way the short game is played, just is not fair to the average company and in many cases lethal to a company that's intentionally targeted.

So what.  I am not sure that even if we get continuous good news, that the shorts will ever leave this stock alone.  Once the shorts set their target on a company (see Ackman), they are like leaches that will bleed a company even when it no longer makes sense.  Some financial writers have stated that shorting helps keep markets balanced.  As far as I can tell, the short selling the way it's done now is a drag on innovation of any kind.  

finance.yahoo.com/news/bill-ackman-000000441.html

[peppy]

CCI come down out of that tree.

MNKD gets scripts, and the shorts will cover.
we have been shorted by big pharma.
They do not want the competition.

(There is a reason the status quo is chemo and radiation.)

[centralcoastinvestor]

Jul 20, 2016 15:18:33 GMT -5 peppy said:

CCI come down out of that tree.

MNKD gets scripts, and the shorts will cover.
we have been shorted by big pharma.
They do not want the competition.

(There is a reason the status quo is chemo and radiation.)

Swinging in the trees keeps me safe from the "bad people".  

[matt]

Short and long are opposite sides of the same coin. Some people think a stock is overvalued so they short, some think it is undervalued so they accumulate. While you might find it annoying that the short sellers can announce that they think the company's story is full of holes and that they are betting against it, you can't really prevent it unless you are willing to shut down promotional activities for the stock and sites like this one that are heavily weighted towards advocates of the company and its product. For every Ackerman out there who shorts Herbalife, there are ten Warren Buffets that look for good companies and take the long side.

The reality is once Al Mann decided to take the company public, he lost the right to control the spin and who owns the shares. That is the cost of accessing the huge amount of funding available in the capital markets.

[centralcoastinvestor]

Jul 20, 2016 15:30:15 GMT -5 matt said:

Short and long are opposite sides of the same coin. Some people think a stock is overvalued so they short, some think it is undervalued so they accumulate. While you might find it annoying that the short sellers can announce that they think the company's story is full of holes and that they are betting against it, you can't really prevent it unless you are willing to shut down promotional activities for the stock and sites like this one that are heavily weighted towards advocates of the company and its product. For every Ackerman out there who shorts Herbalife, there are ten Warren Buffets that look for good companies and take the long side.

The reality is once Al Mann decided to take the company public, he lost the right to control the spin and who owns the shares. That is the cost of accessing the huge amount of funding available in the capital markets.

In concept what you say is true.   But my observations from watching what has happened to MannKind over the years is that the shorting has been used as a weapon not a counter bet to the long position.  The sustained short attack has really hamstrung Mnkd's ability to raise capital on the open market.  Even comments from financial pundits over the years have expressed confusion as to why the shorts were even bothering with this company as all of the easy money had been made.  

[Deleted]

Jul 20, 2016 15:46:01 GMT -5 centralcoastinvestor said:

Jul 20, 2016 15:30:15 GMT -5 matt said:

Short and long are opposite sides of the same coin. Some people think a stock is overvalued so they short, some think it is undervalued so they accumulate. While you might find it annoying that the short sellers can announce that they think the company's story is full of holes and that they are betting against it, you can't really prevent it unless you are willing to shut down promotional activities for the stock and sites like this one that are heavily weighted towards advocates of the company and its product. For every Ackerman out there who shorts Herbalife, there are ten Warren Buffets that look for good companies and take the long side.

The reality is once Al Mann decided to take the company public, he lost the right to control the spin and who owns the shares. That is the cost of accessing the huge amount of funding available in the capital markets.

In concept what you say is true.   But my observations from watching what has happened to MannKind over the years is that the shorting has been used as a weapon not a counter bet to the long position.  The sustained short attack has really hamstrung Mnkd's ability to raise capital on the open market.  Even comments from financial pundits over the years have expressed confusion as to why the shorts were even bothering with this company as all of the easy money had been made.  

Mnkd management is one of the reason shorts exist. They are now scaling down to see how the new commercial team does and then act accordingly

[gamblerjag]

CCI... agreed.  Shorts will always be here  or until a buyout ever occurs.

[mechstan]

You can't compare Bill Ackman's shorting of Herbalife to the shorting of MNKD.

If you dig deep into Herbalife's business, it is essentially a Multi-Level Marketing Scheme aka Ponzi Scheme where most of their employees are also customers buying then consuming products. 

Herbalife creates this illusion that they are a legitimate company trying to sell various health-related products.  They force their employees (soldiers) to earn their pay in 1 of 2 ways:

1. Buy Herbalife's products at wholesale at a discount, then resell it (doesn't matter who you sell it to, even to yourself)

2. Recruit lots of salespeople and create a pyramid where you are at the top of the recruiting structure.

The problem with number 1 is that most of Herbalife's products on average are at least 2x/3x as expensive as their competitors' so their agents find it hard to sell the products. In the end, Herbalife's employees end up consuming the products because they have to meet a sales quota every month in order to get a paycheck

The majority of people that have become millionaires at Herbalife did not get there by selling Herbalife's products. The main reason they became millionaires is because they were able to recruit lots and lots of people.  And with each person getting recruited, they get a commission off of it.

So Bill Ackman has every right to short it.  If I were him, I would short Herbalife too.  But he has been unlucky as Herbalife has been able to dodge the government's investigation into its business practice.

MNKD, on the other hand, has a proven technology and product.  The shorts are betting on MNKD's failure to market it and take market share away from the big boys.  The shorts understood very well that diabetes is a complex disease which requires a complicated dosing method followed by due diligence. 

Unfortunately for us MNKD-believers, dosing by injection came to the market unchallenged and has become the norm for diabetics as well as prescribers.  The shorts understood very well it would be extremely difficult for MNKD to penetrate the market as we've all seen with the Spirometry requirement, black-box warning, non-inferior label, inadequate sample pack dosing, then to add further insult to injury, Sanofi decided to lay off its pro-Afrezza CEO and put in place a plan to stop Afrezza in its track. 

While we MNKD-believers thought the opposite would happen. Afrezza would take the world by storm, so on and so on.

Just for the record, I have all of my investment in MNKD.  It is down about 80%.  It doesn't make sense to sell now.  I don't blame the shorts.  They have been right so far and I've realized now I underestimated how hard it is to penetrate the diabetes space with a different drug.

But I still believe in MNKD.  I think it just takes time.  And I also know time is running out. 

I will conclude with this: if you believe in MNKD, then relax.  We will know very soon who will be right, longs or shorts.  And when the time comes, just accept the outcome.  This is a gamble after all.

[babaoriley]

"I will conclude with this: if you believe in MNKD, then relax. We will know very soon who will be right, longs or shorts. And when the time comes, just accept the outcome. This is a gamble after all."

Great post, mechstan! Your last phrase about it being a gamble, sure, but not so much after we got FDA approval, right? LOL, egg all over our faces!

[sportsrancho]

I've had so many people over the years try and get me involved in selling a product. They say, are you making as much money as you'd like? It doesn't matter what your answer is. They say, but you'd like to make more right? They are trained to get you on board. I was in one multi-level marketing scam which was selling makeup. It all came crashing down and my friend lost her car ( that she had won) and all the money she had put into promoting the product. Old friends call you, because the company tells them to. And they say they have a great opportunity for you. IMHO...RUN! Yep, that's what Herbalife is.

[op2778]

Interesting post.

I'll try to be very clear on this:

1. SEC is useless. They settle with Herbalife for 200mm to close the case. If you believe in public institutions (that everyone of you pay with your taxes) you have to accept their decision. Done. Ponzi What? It doesn't exist a case. Stop. Ackman lose, game over for him. Actually, he is running a worst scheme (Valeant). He is a GOD? Well, probably looking to his bank account he is, but, until now, he get What he deserves.

2. Short side: I'm agree with people shorting, but only with shares they really own. Like you said, If you can create "air", "fake", "artificial" shares it's like playing a basket game with an handicap of -25 before game start. Solution? I said it before. Really simple, do like Germany done, BAN naked short. That's it (sometimes easy it's to stupid to be true right?). If longs could create shares to add to their position for free, I'll bet you, we will win no doubt.

3. FDA is corrupted: I'll not say too much on this. Just read this and it's enough to understand. www.davidicke.com/article/369770/former-fda-commissioner-margaret-hamburg-named-massive-conspiracy-racketeering-lawsuit-involving-johnson-johnson-wall-street-hedge-fund-levaquin-drug When the head of FDA in collusion with his husband (who run an hedge fund) do this kind of thing, or even worst (do you remember she accepted to delay Afrezza approval because of Shrekil letter??) what can you get from the market?

4. Mnkd: like someone said, this is a WAR to take down a STATUS QUO. David vs Goliat. Can MNKD win? Probably will not, but at least they tried. God bless Mr Al. Big Pharma are just part of the picture. The big MONSTER here is WS and MM. 

thanks
OP

[Deleted]

It's not sec that settled. It's FTC

[op2778]

Thanks for correction, FTC, another Useless institution.

but hey, we can drink more beer tonight, they approved Ambev merger......

[surplusvalue]

Jul 20, 2016 15:30:15 GMT -5 matt said:

Short and long are opposite sides of the same coin. Some people think a stock is overvalued so they short, some think it is undervalued so they accumulate. While you might find it annoying that the short sellers can announce that they think the company's story is full of holes and that they are betting against it, you can't really prevent it unless you are willing to shut down promotional activities for the stock and sites like this one that are heavily weighted towards advocates of the company and its product. For every Ackerman out there who shorts Herbalife, there are ten Warren Buffets that look for good companies and take the long side.

The reality is once Al Mann decided to take the company public, he lost the right to control the spin and who owns the shares. That is the cost of accessing the huge amount of funding available in the capital markets.

 While some percentage of the short side is a reflection of one side of a coin as you describe it, there is much more than that here and I tend to agree with centralcoastinvestor that MNKD was "intentionally targeted" by "big pharma" (peppy). Putting the herbal life comparison completely aside, the level of shorting, clearly visible manipulation at level 2 including HFT and dark pool activity over the course of this stock, even continuing when this stock has been battered to $1 and below, points to more than two sides of the same coin. iam2sekc4U2002 point is also well taken that MNKD had a hand in contributing to all this (by action -lending to BofA and inaction). No tin foil hat here but looking at all this , including the hatchet jobs by "analysts" this is about destroying MNKD and
thereby stemming off any innovative threat. Everything after Brandicourt took over points to collusion and malfeasance on Sanofi's part and we shouldn't be surprised if this was a coordinated effort; look what happened to the shorting immediately after
Sanofi signed on. This is not the first stock I have invested in where a small company with an innovative and disruptive FDA approved product was brutalized by big pharma and its interests with an attempt to grind the company into oblivion. Fool me once ... but in this case MNKD has the fortitude to keep fighting. Let's hope the gamble (mechstan) pays off for the sake of our investment and the diabetic community.   

 

[centralcoastinvestor]

Jul 20, 2016 16:16:13 GMT -5 mechstan said:

You can't compare Bill Ackman's shorting of Herbalife to the shorting of MNKD.

If you dig deep into Herbalife's business, it is essentially a Multi-Level Marketing Scheme aka Ponzi Scheme where most of their employees are also customers buying then consuming products. 

Herbalife creates this illusion that they are a legitimate company trying to sell various health-related products.  They force their employees (soldiers) to earn their pay in 1 of 2 ways:

1. Buy Herbalife's products at wholesale at a discount, then resell it (doesn't matter who you sell it to, even to yourself)

2. Recruit lots of salespeople and create a pyramid where you are at the top of the recruiting structure.

The problem with number 1 is that most of Herbalife's products on average are at least 2x/3x as expensive as their competitors' so their agents find it hard to sell the products. In the end, Herbalife's employees end up consuming the products because they have to meet a sales quota every month in order to get a paycheck

The majority of people that have become millionaires at Herbalife did not get there by selling Herbalife's products. The main reason they became millionaires is because they were able to recruit lots and lots of people.  And with each person getting recruited, they get a commission off of it.

So Bill Ackman has every right to short it.  If I were him, I would short Herbalife too.  But he has been unlucky as Herbalife has been able to dodge the government's investigation into its business practice.

MNKD, on the other hand, has a proven technology and product.  The shorts are betting on MNKD's failure to market it and take market share away from the big boys.  The shorts understood very well that diabetes is a complex disease which requires a complicated dosing method followed by due diligence. 

Unfortunately for us MNKD-believers, dosing by injection came to the market unchallenged and has become the norm for diabetics as well as prescribers.  The shorts understood very well it would be extremely difficult for MNKD to penetrate the market as we've all seen with the Spirometry requirement, black-box warning, non-inferior label, inadequate sample pack dosing, then to add further insult to injury, Sanofi decided to lay off its pro-Afrezza CEO and put in place a plan to stop Afrezza in its track. 

While we MNKD-believers thought the opposite would happen. Afrezza would take the world by storm, so on and so on.

Just for the record, I have all of my investment in MNKD.  It is down about 80%.  It doesn't make sense to sell now.  I don't blame the shorts.  They have been right so far and I've realized now I underestimated how hard it is to penetrate the diabetes space with a different drug.

But I still believe in MNKD.  I think it just takes time.  And I also know time is running out. 

I will conclude with this: if you believe in MNKD, then relax.  We will know very soon who will be right, longs or shorts.  And when the time comes, just accept the outcome.  This is a gamble after all.

I appreciate your clarification.  As I mentioned in my first post in this thread, I truly know nothing about Herbalife.  I think what struck me is that a self proclaimed huge short of the stock was shouting to the world that he is right.  The problem is that when a short proclaims how bad a company is, it is so disingenuous and self serving.  But as you say, in this case he may be right.