Financing Idea

[hiker]

With it becoming ever more likely that Mannkind will require additional financing, I wonder if the existing shareholder base might be the source of that funding. I am a long-term owner who believes in the company, its technology, and most importantly it’s potential for helping diabetics manage their disease. I am willing to put more money into this, but am frustrated as a small shareholder that my only option at present is to buy stock on the open market where it gets vaporized as shorts and traders play their games. What we need is a way to get money directly into the hands of Mannkind.

Here is an idea to kick around and send on to Mannkind if it seems feasible. To make the numbers easier to handle, let’s assume a 5:1 reverse split to get us down to 100 million shares outstanding. The dates are just placeholders to help present the idea.

1. Mannkind issues rights to holders of record on 12/1/16 to buy 1 share of a new preferred stock on 1/1/17.
2. The preferred stock has a par value of $1 per share and pays a 10% annual dividend. Mannkind has the right to redeem the preferred stock at a price of $1.20 per share.
3. If additional money is needed in 2017 or 2018 and the common share price is still at an unattractive level to do a normal financing, repeat the process.

To illustrate, here are numbers for a hypothetical individual investor and for the Mann Estate/Foundation.
Common shares before reverse split: 100,000 ----- 180,000,000
Common shares after reverse split: 20,000 ----- 36,000,000
Value of current investment: $50,000 ----- $90,000,000 ($.50 per share, before split)
Investment in preferred offering: $20,000 ----- $36,000,000

If 60% of the rights are exercised, that provides $60 million of funding and another 6 months of operating cash for Mannkind to build the business.

That’s it. Would you participate in such a rights offering?

[derek2]

So, upside of 20% (plus any dividend) and downside of 100%?

I think the idea of a rights offering is interesting, just not at those terms.

[peppy]

I like ideas.
Will read them all.

[rodell]

I wouldn't participate. There are too many problems and current management just doesn't seem up to the task.

[silentknight]

It's in interesting idea. I'd consider it but like others have said, I've sunk about as much money into MNKD as I can stomach currently. I'm not sure I'm willing to anymore without evidence that things are going to get better.

Besides, who's to say that MNKD would ever redeem the preferred shares at a 20% upside for preferred holders. If they're running out of money again and they simply issue more rights, you keep buying into shares with no return. If cash is tight, MNKD coudln't even pay the dividend, just like they couldn't now.

It's in interesting way to raise money and it might have merit. I just don't think preferred shares would end up returning much more to holders than the common stock has. If there are some positive developments, I'd probably do it. As it stands, no.

[goyocafe]

I'd want to see a compromise in the compensation schedules that are costing the co a lot of money every month, and a lot of restrictions on more stock options until this things turns around.

[pengiep]

I'm in. Though I don't have much money, I'd use what I have for this.

[Deleted]

preferred shares with royalty from epi hale with certain conditions:

1. management buy in
2. management salaries reduction and tied to performance

[matt]

Rights offerings have a long history, especially in some countries, but they work better on a high growth stock with lots of demand and a shortage of public shares. The problem is that you can't issue a right with "use it or lose it" terms because that takes value away from cash poor shareholder and gives it to cash rich shareholders. The fix for that is to make the rights themselves tradable, they are essentially a special type of warrant, but if there are a large number of shareholders unable or unwilling to use the right it creates a discounted market for the warrants.

If you don't like short sellers, imagine what happens if you create a downward spiraling market for soon to expire warrants to buy preferred shares with rights superior to that of the common. Besides, the new class of stock would have to be authorized and registration statements filed on both the shares and the warrants. I think Matt is dealing with enough business issues at the moment; he doesn't need the additional distraction of a few months of SEC paperwork hell.

[lakon]

mnkd.proboards.com/post/62832/thread

Obviously, I like the idea of a rights offering, and I think that my previous thread is worth reiterating as we are now almost exactly plus 8 months from my original post of that survey.

Your idea has an interesting twist what with the preferred shares; however, I think that other classes of shares are verboten under the TASE.

I like the concept, and I could get behind something like this with a few changes to make the deal more palatable. I would prefer that MNKD remain listed on the TASE, and I would favor expanding our listing options further as possibilities to sell the IDEA to other markets may be better received. Think Asia. Cultural issues with needles change the argument in the US that nobody really cares about needles anymore. That's just not true outside of the US in a large part of the world, not to mention the improvements to logistics and bio-hazards.

mnkd.proboards.com/post/81464/thread

A "cult stock" has the benefit of a loyal diehard following that might go for such a rights offering. Just a thought: turn the negative into a positive. Sit and spin as the shorts go round and round...

[applogic]

At this point, I would have to give blood to raise money... Just what I need, more needle sticks

I wonder how many are still lending shares. I'd like to see people stop that instead. The mentality is they will have more shares when this goes up but in reality what happens due to the greed is the share price drops to the point liquidity can no longer be raised or covanants are broken which forces bankruptcy.