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Post by themarlin on Apr 20, 2017 21:50:45 GMT -5
So let's say the price drops and drops and Mannkind faces delisting again. The shorts continue pushing it down while nobody has confidence scripts will rise (as they appear not to be) and the pps is exploited for a takeover, a "transfer of ownership"? How could this play out? 1) MNKD sells for some amount, say $1B and what happens to shareholders? They get $1B/100m per share they hold? What then happens to those holding shares short - who at some point right now are on deck to buy back their shares? 2) Deerfield buys up shares, more and more of a stake while pps is low, and as the price rises and shorts run for the doors and the price shoots up but Deerfield has taken control and "ownership" and replaces mgmt? 3) Mannkind runs out of cash and declares bankruptcy - Deerfield loses on the recent conversion but swoops in to buy at what price - and who would determine the price, a judge? Would the judge deem all current shares void?
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Post by uvula on Apr 20, 2017 22:17:50 GMT -5
Market cap is 100M. Why would someone pay 10x that amount?
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Post by themarlin on Apr 20, 2017 22:40:15 GMT -5
Ok $100m/100m; doesn't matter too much here; I'm interested in what happens to the shares short - shorts are forced to buy back at $1/sh, not the buyer of the company?
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Deleted
Deleted Member
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Post by Deleted on Apr 20, 2017 23:04:43 GMT -5
the close their short out at the buyout price. Why would they even care?
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naykitop
Newbie
Posts: 14 
Sentiment: Long
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Post by naykitop on Apr 20, 2017 23:56:29 GMT -5
buyout will not cause the long awaited squeeze. it's a defined price, so brokers will orderly buy shares at that price to close all short positions. BO is not the answer.
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Post by agedhippie on Apr 21, 2017 7:20:21 GMT -5
So let's say the price drops and drops and Mannkind faces delisting again. The shorts continue pushing it down while nobody has confidence scripts will rise (as they appear not to be) and the pps is exploited for a takeover, a "transfer of ownership"? How could this play out? 1) MNKD sells for some amount, say $1B and what happens to shareholders? They get $1B/100m per share they hold? What then happens to those holding shares short - who at some point right now are on deck to buy back their shares? 2) Deerfield buys up shares, more and more of a stake while pps is low, and as the price rises and shorts run for the doors and the price shoots up but Deerfield has taken control and "ownership" and replaces mgmt? 3) Mannkind runs out of cash and declares bankruptcy - Deerfield loses on the recent conversion but swoops in to buy at what price - and who would determine the price, a judge? Would the judge deem all current shares void? It doesn't work like that. If someone wants to buy the company they will do it via a tender where they give a price they are prepared to pay, suppose for Mannkind they set it at $2 per share. The price will rise to a percentage of $2 based on the likelihood of success (say 90%). At this point the merger arb funds will pile in and buy up to that price. The price will not go higher because if it does the funds will exercise the arbitrage and sell (the price then drops and they buy back in). Setting the price to trade around is far more complex than this but that's the general idea. The shorts cover over that period, and the arbs will hedge, usually via options rather than shorts though but that depends on price. Merger arbitrage can be easy money but occasionally it goes badly wrong (I have a pile of RAD shares if anyone wants some). The analogy used is 'picking up nickels in front of a steamroller'. Like all investing diversity is your friend and if you have a spread of them you do ok. |
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Post by derek2 on Apr 21, 2017 7:48:24 GMT -5
So let's say the price drops and drops and Mannkind faces delisting again. The shorts continue pushing it down while nobody has confidence scripts will rise (as they appear not to be) and the pps is exploited for a takeover, a "transfer of ownership"? How could this play out? 1) MNKD sells for some amount, say $1B and what happens to shareholders? They get $1B/100m per share they hold? What then happens to those holding shares short - who at some point right now are on deck to buy back their shares? 2) Deerfield buys up shares, more and more of a stake while pps is low, and as the price rises and shorts run for the doors and the price shoots up but Deerfield has taken control and "ownership" and replaces mgmt? 3) Mannkind runs out of cash and declares bankruptcy - Deerfield loses on the recent conversion but swoops in to buy at what price - and who would determine the price, a judge? Would the judge deem all current shares void? It doesn't work like that. If someone wants to buy the company they will do it via a tender where they give a price they are prepared to pay, suppose for Mannkind they set it at $2 per share. The price will rise to a percentage of $2 based on the likelihood of success (say 90%). At this point the merger arb funds will pile in and buy up to that price. The price will not go higher because if it does the funds will exercise the arbitrage and sell (the price then drops and they buy back in). Setting the price to trade around is far more complex than this but that's the general idea. The shorts cover over that period, and the arbs will hedge, usually via options rather than shorts though but that depends on price. Merger arbitrage can be easy money but occasionally it goes badly wrong (I have a pile of RAD shares if anyone wants some). The analogy used is 'picking up nickels in front of a steamroller'. Like all investing diversity is your friend and if you have a spread of them you do ok. It's a great simple example of efficient market hypothesis and price discovery after news. Like seeing a card trick with the cards face-up. Like you say, the tender price acts as an anchor for buying up to and selling down to. No manipulation - just an ongoing auction centering around buyer's and seller's comfort points. My opinion is that a similar anchor typically exists every day - we just don't explicitly see it; we calculate it (in the case of a company with products and revenues) or feel it (in the case of start-ups, or for some elements of established companies). |
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Post by themarlin on Apr 21, 2017 8:21:52 GMT -5
Thanks for the comments, analogies, explanations. So they may have received tenders/bids already but said No, meanwhile the pps is pushed down and the company seems more and more desperate and with the parachutes in place they say Goodbye but TS and Afrezza lives on. But this conversion for Deerfield...and their expressed fact they want to be buying healthcare device companies; I think that's what they're up to. So Deerfield owns 5% now and with other debt and covenants may get more...so then they own say 20% of shares and make a bid for %100. Now I understand that shorts will pay whatever amount Mannkind acquiesces to, retail shareholders get that amount too....or possibly shares in the new company right?
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Post by matt on Apr 21, 2017 8:27:21 GMT -5
1. If the company sells for $1B, then all the creditors get paid off first which leaves about $700MM for shareholders. However, a $1B deal for a company with a market cap of $100MM isn't going to happen in the real world. Remember always that huge takeover numbers, while fun to fantasize about, have to be justified to the board and shareholders of the acquiring company. The executives of the acquirer want to keep their jobs and explaining to their bosses why they just paid a huge premium for a stock with a sustained downward trajectory is essentially impossible.
2. Could happen, but unlikely. Deerfield is not a private equity firm that acquires companies, turns them around, and takes them public again. They like to place debt, get some contingent rights if the product is a success, and exit. That strategy has not worked so well for them in the past, but that is how they are structured. They operate more similar to a hedge fund than to private equity.
3. If the company goes bankrupt, there is a 99% chance the assets go up for auction. Those which have been pledged as security for debt (like the Danbury plant) will be foreclosed upon and disposed in a UCC-3 sale, which happens in parallel but separate from the bankruptcy, by the owner of the debt (Deerfield can bid the amount of what they are owed and will likely keep the asset). The other unpledged assets go to auction and are sold to the highest bidder. If the high bidder wants to keep on making Afrezza, they have to cut a deal with the new owner of the plant or they have to build a new plant themselves.
Keep in mind the role of a bankruptcy judge. They are not normal "Article III" judges, but rather a special class of judge placed there to administer the bankruptcy code. The judge is not there to decide what is "fair"; their main job is to insure that the rules as codified in the bankruptcy code are applied as Congress intended, and they largely let the market decide on prices (i.e. through the auctions). Once a case gets to bankruptcy, the process moves very quickly because the company doesn't have any money to keep running and the value of the assets declines by the day. If there is money left over after all the creditors are paid what they are owed, shareholders get the rest, but in most cases there isn't anything left. If MNKD files either Chapter 11 or Chapter 7, it will likely be the end of the road for shareholders.
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Post by themarlin on Apr 21, 2017 9:30:25 GMT -5
matt
Yes, apparently the 13G filing indicates a "passive" investment on the part of Deerfield, if I understand correctly. But then there's also this, saying Deerfield wants to OPERATE healthcare enterprises. With Mannkind PPS down, struggling, golden parachutes in place, and all the redactions related to "July 2017" a couple years ago, I have to wonder if Deerfield isn't somehow taking over.
New York – February 6, 2017 – Deerfield announced Vicki Gaddy will be joining as the Head of Human Resource Strategy and Talent Acquisition. In this role, Ms. Gaddy will lead Deerfield’s efforts to identify and attract outstanding leaders to companies in which Deerfield has invested.
Over the next decade, Deerfield expects to form and operate dozens of new healthcare enterprises across the fields of biotherapeutics, medical devices and healthcare services. These companies will have the potential to greatly improve treatment and healthcare delivery paradigms and require strong operational leadership. By leveraging Deerfield’s extensive healthcare industry networks and creating a formal recruiting infrastructure, Ms. Gaddy will provide invaluable strategic and tactical support to our founding scientists, engineers and entrepreneurs.
Read more: mnkd.proboards.com/thread/7610/deal-deerfield-convertible-notes-2019#ixzz4etV4aeMr
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Post by mnkdfann on Apr 21, 2017 9:34:50 GMT -5
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Post by mango on May 3, 2017 23:22:48 GMT -5
3. If the company goes bankrupt, there is a 99% chance the assets go up for auction. Those which have been pledged as security for debt (like the Danbury plant) will be foreclosed upon and disposed in a UCC-3 sale, which happens in parallel but separate from the bankruptcy, by the owner of the debt (Deerfield can bid the amount of what they are owed and will likely keep the asset). The other unpledged assets go to auction and are sold to the highest bidder. If the high bidder wants to keep on making Afrezza, they have to cut a deal with the new owner of the plant or they have to build a new plant themselves. • The Alfred E. Mann Living Trust owns the MannKind Danbury plant. Third one from the bottom—   • Source pharmacy.az.gov/sites/default/files/January%202017%20Meeting.pdf |
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Post by rossomalley on May 4, 2017 3:56:34 GMT -5
3. If the company goes bankrupt, there is a 99% chance the assets go up for auction. Those which have been pledged as security for debt (like the Danbury plant) will be foreclosed upon and disposed in a UCC-3 sale, which happens in parallel but separate from the bankruptcy, by the owner of the debt (Deerfield can bid the amount of what they are owed and will likely keep the asset). The other unpledged assets go to auction and are sold to the highest bidder. If the high bidder wants to keep on making Afrezza, they have to cut a deal with the new owner of the plant or they have to build a new plant themselves. • The Alfred E. Mann Living Trust owns the MannKind Danbury plant. Third one from the bottom— • Source pharmacy.az.gov/sites/default/files/January%202017%20Meeting.pdfInteresting, but what does it mean? |
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Post by peppy on May 4, 2017 4:18:09 GMT -5
matt
Yes, apparently the 13G filing indicates a "passive" investment on the part of Deerfield, if I understand correctly. But then there's also this, saying Deerfield wants to OPERATE healthcare enterprises. With Mannkind PPS down, struggling, golden parachutes in place, and all the redactions related to "July 2017" a couple years ago, I have to wonder if Deerfield isn't somehow taking over.
New York – February 6, 2017 – Deerfield announced Vicki Gaddy will be joining as the Head of Human Resource Strategy and Talent Acquisition. In this role, Ms. Gaddy will lead Deerfield’s efforts to identify and attract outstanding leaders to companies in which Deerfield has invested.
Over the next decade, Deerfield expects to form and operate dozens of new healthcare enterprises across the fields of biotherapeutics, medical devices and healthcare services. These companies will have the potential to greatly improve treatment and healthcare delivery paradigms and require strong operational leadership. By leveraging Deerfield’s extensive healthcare industry networks and creating a formal recruiting infrastructure, Ms. Gaddy will provide invaluable strategic and tactical support to our founding scientists, engineers and entrepreneurs.
Read more: mnkd.proboards.com/thread/7610/deal-deerfield-convertible-notes-2019#ixzz4etV4aeMr
Thanks for all your posts Marlin. The continued hiring by MNKD stands out to me.
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Post by matt on May 4, 2017 6:33:45 GMT -5
I think you confuse the ownership of Danbury with the ownership of the foreign pharmacy license in Arkansas, or the Arkansas file is simply wrong (that happens a lot with state filings made years ago). The SEC filings are clear that Mannkind owns Danbury and has used it to collateralize the Deerfield loan, the operative phrase below being this: "...are also secured by the mortgage on the Company’s facilities in Danbury, Connecticut".
In connection with the Facility Agreement, the Company and its subsidiary, MannKind LLC, entered into a Guaranty and Security Agreement (the “Security Agreement”) with Deerfield and Horizon Sante FLML SA’RL (collectively, the “Purchasers”), pursuant to which the Company and MannKind LLC each granted the Purchasers a security interest in substantially all of their respective assets, including respective intellectual property, accounts, receivables, equipment, general intangibles, inventory and investment property, and all of the proceeds and products of the foregoing. The Security Agreement includes customary covenants by the Company and MannKind LLC, remedies of the Purchasers and representations and warranties by the Company and MannKind LLC. The security interests granted by the Company and MannKind LLC will terminate upon repayment of the 2019 notes and Tranche B notes, if applicable, in full. The Company’s obligations under the Facility Agreement and the Milestone Agreement are also secured by the mortgage on the Company’s facilities in Danbury, Connecticut, which has a carrying value of $28.7 million.Even if one of the trusts had a residual ownership interest in Danbury, they have obviously consented to offer it as a security for Deerfield. This is equivalent to a parent guaranteeing a debt for one of their children using their house as collateral; if the child defaults on the loan the bank will foreclose on the mortgage and take the house notwithstanding the fact that it is the child that defaulted and not the parents. Deerfield has rights to substantially all of the assets which puts them in control in any insolvency proceeding. I won't go into all the rules about priority of liens in bankruptcy situations, but suffice it to say that Deerfield has locked up anything of value and can legally prevent the estate from borrowing any more money unless their claims are first satisfied in full. In past bankruptcies, like Dendreon, they have not played that card because they were mostly interesting in getting paid and didn't want to take over the company, and were happen to let the court auction off the assets rather than assert their rights to the collateral under the Uniform Commercial Code. If what they really wanted was to own the company, they wouldn't have done that. |
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