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Post by straightly on Jun 26, 2017 10:45:57 GMT -5
Something to keep in mind: For MNKD to dilute to the extent that they cover a year's worth of operating funds, approximately $75 million, MNKD would need to sell approximately 50 million shares at the current share price, give or take a few cents. With approximately 100 million shares outstanding (post-split), you're looking at a 50% dilution to get what many believe would be the result of a secondary offering. That's a huge haircut, not to mention a golden opportunity for shorts to cover AND the need to get shareholder approval to increase the authorized share count. I'd rather see them do a rights offering to shareholders before going straight to dilution. If they can show continued improvement, I'd wager that many longs would buy more and give them at least a long(er) runway without eroding value. Can somebody start a poll to guage how many longs would and could invest more should there be a rights offer? Up to what percentage to his/her position? Also, will a rights offer force the naked shorts and shorts in general some way? Don't they need to come up the shares to sell to the long who now have the rights?
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Post by sportsrancho on Jun 26, 2017 11:50:21 GMT -5
A rights issue is a way by which a listed company can raise additional capital. However, instead of going to the public, the company gives its existing shareholders the right to subscribe to newly issued shares in proportion to their existing holdings.
For example, 1:4 rights issue means an existing investor can buy one extra share for every four shares already held by him/her. Usually the price at which the new shares are issued by way of rights issue is less than the prevailing market price of the stock, i.e. the shares are offered at a discount.
Why does a company go for it?
The basic idea is to raise fresh capital. A rights issue is not a common practise that a corporate organisation resorts to. Ideally, such an issue occurs when a company needs funds for corporate expansion or a large takeover. At the same time, however, companies also use rights issue to prevent themselves from being conked out.
Since a rights issue results in higher equity base for the organisation, it also provides it with better leveraging opportunities. The company becomes more comfortable when it comes to raising debt in the future as its debt-to-equity ratio reduces. Code Sample: Doorbell in Python*Ad Intel
What is the effect on the company and what if a shareholder does not exercise his right?
A rights issue affects two important elements of a company ��� equity capital and market capitalisation. In case of a rights issue, since additional equity is raised, the issuing company���s equity base rises to the extent of the issue. The effect on m-cap depends on the perception of the market.
In theory, every new issue has some kind of diluting effect and hence as a result of a fall in the market price in proportion to an increase in the number of shares, the market capitalisation remains unaffected. However, if the market sentiment believes that the funds are being raised for an extremely positive purpose then price of the stock may just rise resulting in an increase in the market capitalisation. If a shareholder does not want to exercise the right to buy additional shares then he/she can sell the right as the rights are usually tradable. Alternatively, investors can just let the rights issue lapse.
What should an investor be careful about in case of a rights issue?
An investor should be able to look beyond the discount offered. Rights issue are different from bonus issue as one is paying money to get additional shares and hence one should subscribe to it only if he/she is completely sure of the company���s performance.
Also, one must not take up the rights if the share price has fallen below the subscription price as it may be cheaper to buy the shares in the open market.
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Post by agedhippie on Jun 26, 2017 11:54:51 GMT -5
Something to keep in mind: For MNKD to dilute to the extent that they cover a year's worth of operating funds, approximately $75 million, MNKD would need to sell approximately 50 million shares at the current share price, give or take a few cents. With approximately 100 million shares outstanding (post-split), you're looking at a 50% dilution to get what many believe would be the result of a secondary offering. That's a huge haircut, not to mention a golden opportunity for shorts to cover AND the need to get shareholder approval to increase the authorized share count. I'd rather see them do a rights offering to shareholders before going straight to dilution. If they can show continued improvement, I'd wager that many longs would buy more and give them at least a long(er) runway without eroding value. Can somebody start a poll to guage how many longs would and could invest more should there be a rights offer? Up to what percentage to his/her position? Also, will a rights offer force the naked shorts and shorts in general some way? Don't they need to come up the shares to sell to the long who now have the rights? In my opinion the biggest blocker to a rights issue will be the foundation as a rights issue would cost them $50 million to avoid dilution. I think the trackers will pick up their share though because they need to avoid dilution but I am not sure. I expect they will do this as placement like they did last time with the R&R deal because it is simple and the cash is certain.
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Post by me on Jun 27, 2017 11:54:53 GMT -5
Something to keep in mind: For MNKD to dilute to the extent that they cover a year's worth of operating funds, approximately $75 million, MNKD would need to sell approximately 50 million shares at the current share price, give or take a few cents. With approximately 100 million shares outstanding (post-split), you're looking at a 50% dilution to get what many believe would be the result of a secondary offering. That's a huge haircut, not to mention a golden opportunity for shorts to cover AND the need to get shareholder approval to increase the authorized share count. I'd rather see them do a rights offering to shareholders before going straight to dilution. If they can show continued improvement, I'd wager that many longs would buy more and give them at least a long(er) runway without eroding value. I would not argue against your characterization of your example as being, "a huge haircut." I would ask, however, that we do our arithmetic properly...your example would be a 33 1/3% dilution, not 50%.
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