Not liking this...it happened again.

[seanismorris]

Another insider selling.

Just when I was feeling good about where we were at going into FDA approval...

MannKind (NASDAQ:MNKD) VP David Thomson unloaded 133,000 shares of MannKind stock on the open market in a transaction that occurred on Wednesday, June 4th. The shares were sold at an average price of $9.95, for a total value of $1,323,350.00. Following the transaction, the vice president now directly owns 102,286 shares of the company’s stock, valued at approximately $1,017,746. The transaction was disclosed in a filing with the SEC, which can be accessed through this link.

www.wkrb13.com/markets/318527/mannkind-vp-david-thomson-unloads-133000-shares-mnkd/

FYI

David B. Thomson, Ph.D., J.D. has been our Corporate Vice President, General Counsel and Corporate Secretary since January 2002. Prior to joining us, he practiced corporate/commercial and securities law at the Toronto law firm of Davies Ward Phillips & Vineberg LLP. Earlier in his career, Dr. Thomson was a post-doctoral fellow at the Rockefeller University in New York. Dr. Thomson obtained his bachelor’s degree, master’s degree and Ph.D. degree from Queens University and obtained his J.D. degree from the University of Toronto. - See more at: www.mannkindcorp.com/about-us-executive-management-david.htm#sthash.2xrbu35z.dpuf

----
Actually, Diane and Juersen also sold this month.

www.investors.mannkindcorp.com/phoenix.zhtml?c=147953&p=irol-sec

[seanismorris]

Someone should have put restrictions on senior management before giving them stock options....

This management team is not as strong as I thought...very disappointing.

This doesn't change the Afrezza story, but... If I was Al these three wouldn't be part of my long term plan for the company.  

Yes, I mean fire them before Afrezza goes to market.

[babaoriley]

If I were worth, excluding my home, less than $2,000,000, and had a chance to sell a little over half my shares for $1.3 million (and possibly retain a bunch of options), I would have to give very serious thought to selling. He should have waited until the next morning to sell though, LOL. I don't mind insiders doing that under such circumstances, so long as it's not based on insider knowledge. It is difficult to conceive of the general counsel not being in possession of material inside information at this point in time, so my guess is this sale was arranged some time ago, and happened by agreement on June 4. I sure hope so, anyway, cuz there should be a potful of material information he has at his fingertips right now.

[seanismorris]

Baba,

It's a good thing I believe in Al because otherwise I'd be selling; just like three of the top six executives at Mannkind have been selling.

Juergen sells his stock (options) as often as he changes underwear.  Considering he made 5 mil last year it's hard to believe he's just playing it safe.

Insider Trading, or convicting someone of insider trading is very difficult as long as that person plans in advance.

------quote
This staff interpretation raises the possibility that executives can exploit this safe harbor by entering into 10b5-1 trading plans before they have inside information while retaining the option to later cancel those plans based on inside information. Although paragraph (c)(1)(i)(C) does deny the affirmative defense to offsetting or hedged transactions, in that case there would still be an actual trade (whichever of the offsetting trades was not canceled) that could constitute insider trading and violate Rule 10b-5. The SEC's position is that there can be no insider trading without a trade, so that a person could cancel a planned trade based on inside information and avoid liability. Although technically any plan that is cancelable does not come under the 10b5-1 safe harbor, proving that an executed trade was hypothetically cancelable might be very difficult.
------quote

What this means is that David could plan out advanced sales of MNKD stock, but cancel them when he receives positive FDA or partnership insider information.  No trade = no insider trading (loophole)

Because he could have cancelled and didn't isn't encouraging...

[BD]

This type of chatter seems to arise any time any insider ever sells. I don't begrudge an insider their right to generate some cash. It's a matter of priorities. I'm selling more than I would otherwise because I'm building a large addition onto my house. I need the cash. I never jump to conclusions about insider sales, although I'm sure the shorts are dancing around watching folks on this board whining about it.

[spiro]

You guys have got to be kidding. If Spiro had that many shares with more to come, he would have sold a lot more than 133,000 shares.  Spiro says good for them, it's obvious they know how to manage their wealth. Spiro also said that he would fire all their butts as soon as he could. 

[savzak]

My take on these sales is simple. If they are truly made "in the blind" then I have no problem with them. We all have to make our own investment decisions and those decisions are based on factors that we can not know or evaluate. If, however, there is any ability whatsoever to time trades, cancel trades, place trades based on inside information, then I do have a very big problem with that.

I looked a little deeper into the issue of cancelation of trades. While it does appear that trade cancelation can happen, it is only by canceling the plan itself. The insider would then have to establish a new plan and would be constrained from establishing any pre-planned future trades under the new plan until after the occurrence of any events of which he has material nonpublic information.

Further, there is some indication that management and general counsel might have a substantial say in whether a plan could be canceled under such circumstances. I suspect that general counsel and outside securities counsel may even require the plan to be set up in such a fashion so as to make it virtually impossible to cancel it, although I found nothing to corroborate this suspicion. It should be easy enough to structure the plan so that the shares are placed in a sort of irrevocable trust until the trigger date arrives, at which time the trade is executed.

I've cut and pasted a couple of interesting blurbs below. The first is from a publication by Gibson Dunn, the second from Davis Polk. Both are 5 Star securities law firms.

At bottom, I'm not convinced the cancelation of a plan is easy, wise or even possible depending on the terms of the applicable plan.

www.gibsondunn.com/publications/pages/SECStaffIssuesInterpretiveGuidance-10B5-1Plans.aspx

REVISED INTERPRETATIONS
Question 120.17
Question: 15. After the written trading plan described in Q&A 11(a)Question 120.11 has been in effect for several months, the person terminates the selling plan by calling the broker and canceling the limit order. (a) DoesStanding alone, does the act of terminating a plan while aware of material nonpublic information, and thereby not engaging in the planned securities transaction, result in liability under Section 10(b) and Rule 10b-5?
No. Section 10(b) and Rule 10b-5 apply "in connection with the purchase or sale of any security." Thus, a purchase or sale of a security must be present for liability to attach. See Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975).
Answer: No. Section 10(b) and Rule 10b-5 apply to any fraudulent conduct "in connection with the purchase or sale of any security." The “in connection with” requirement is satisfied when a fraud “coincides” with a securities transaction. See, e.g., SEC v. Zandford, 535 U.S. 813 (2002) and Merrill Lynch, Pierce, Fenner & Smith, Inc., v. Dabit, 547 U.S. 71 (2006). [Mar. 25, 2009]
Question 120.19
(c)Question: Does canceling one or more plan transactions affect the availability of the Rule 10b5-1(c) defense for future plan transactions?
Answer: The cancellation of one or more plan transactions would be an alteration or deviation from the plan, which would terminate that plan. The Rule 10b5-1(c) defense would be available for transactions following the alteration only if the transactions were pursuant to a new contract, instruction or plan that satisfies the requirements of Rule 10b5-1(c). See Securities Act Release 33-No. 7881 (Aug. 15, 2000), at n. 111 and Answer 14, above. fn. 111 and Question 120.16. Moreover, if a person established a new contract, instruction or plan after terminating a prior plan, then all the surrounding facts and circumstances, including the period of time between the cancellation of the old plan and the creation of the new plan, would be relevant to a determination whether the person had established the contract, instruction or plan “in good faith and not as part of a plan or scheme to evade” the prohibitions of Rule 10b5-1(c). [Mar. 25, 2009]
NEW INTERPRETATIONS
Question 120.20
Question: Is the Rule 10b5-1(c) affirmative defense available where a person establishes a Rule 10b5-1 written trading plan while aware of material nonpublic information if the plan is structured so that plan transactions will not begin until after the material nonpublic information is made public?
Answer: No. [Mar. 25, 2009]


www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&uact=8&sqi=2&ved=0CDYQFjAD&url=http%3A%2F%2Fwww.davispolk.com%2Fdownload.php%3Ffile%3Dsites%2Fdefault%2Ffiles%2Ffiles%2FPublication%2Fc0b412f9-d08e-4abf-a327-3f215728160e%2FPreview%2FPublicationAttachment%2F5dbd1bac-15b1-4b37-ae75-4388773478c4%2F011813_10b5_1.pdf&ei=OrmRU-mQBZPNsQSqzoGoBQ&usg=AFQjCNHvQB8oQHX-4_7tdpYMyRQ5ExaDYg


Can a plan be terminated or suspended? Unlike amending a plan, a 10b5-1 plan may legally
be terminated before its predetermined end date even though the insider is in possession of
MNPI (although some brokers’ forms prohibit this as a contractual matter). Because plan sales
shortly before the announcement of bad news can generate unwanted attention, an insider may
decide to terminate a plan in the face of an impending negative announcement, even though as a
technical matter the affirmative defense would be expected to cover the sales. On the other hand,
terminating a selling plan before an impending positive announcement may raise the suspicion
that the insider is using Rule 10b5-1 as a way to opportunistically time the market, thereby risking
the likelihood that his or her future use of the affirmative defense will be successful.
We generally suggest that plan terminations initiated by an insider take place during an open
window, absent special circumstances and approval by the general counsel. It may also make
sense for the general counsel to have the ability, but not the responsibility, to terminate the plan.
Plans should also allow for mandatory suspension if legally required, for example due to
Regulation M or tax reasons.

[ezrasfund]

IMO this issue is completely overblown. The sales are pre-planned and cannot be based on any inside information. Every financial planner would caution against having too much of your net worth in one company, especially the one you were dependent on for your job. If MannKind succeeds these folks will be very rich in any case. The relevant insider is Al Mann, and he's not selling. But I will again mention that I believe Matt has made some sales in the past at pre-determined levels which have been short term valuation peaks. So I will pay attention to those.

[babaoriley]

All very interesting; here's how I would sum this up: If there were any doubt before, now we know for sure why the audience cheered when the T-Rex ate the lawyer in Jurassic Park.

[seanismorris]

I disagree, the issue of insiders selling isn't overblown.

For Example:

If I was David, on Jan. 1st 2014 (or pick a day) I'd realize that the April 15th date was to soon after the Adcom for Afrezza to be approved (Mannkind management has already said that it was no surprise that the FDA decision was delayed) 3 months.

So, with that information I could set up a planned sale 6 months in advance.  Now, I wouldn't want the sell date to late (to closed to the full three months) because that would be suspicious- I pick 50 day's. 

By the time this 'scheduled sale' comes around, I have very specific insider information to make a decision on if to sell or hold the stock.  

It's a win-win situation and I'm fully protected.  If I sell, I can argue that the sell was scheduled way way in advance. But, if I cancel I can argue I felt it was morally wrong to sell into a major turning point for the company, and it might look like I was acting on insider information.  No sale takes place, so no Insider Trading to prosecute.

------
Am I wearing a little metal cap today?  Perhaps, but investing has taught me to be always be suspicious of suspicious actions.  

And, everyone has to agree we are looking at a loophole large enough to drive a bus through.

Some people don't like my post because it's not blindly bullish. But somewhere out there, someone might find it useful. 

Also, note I'm not selling stock or shorting on the news.

[seanismorris]

That part of the movie was classic.  

I also liked when the fat computer (DNA) thief got his comeuppance.  

Perhaps, we can equate him to High Frequency Traders and do a highlight reel for Congress (dominated by lawyers).

Unfortunately, it would probably go over their heads.  

They are too busy lining their pockets over issues like Net Neutrality and Finance Reform....while lobbyists are writing the laws.

[Chris]

IIRC Juersen sold stock for a divorce settlement not too long ago - he might want/need the cash to continue living his typical lifestyle.

Diane has always been a serial seller of MNKD with pre-planned sales.

I'm not alarmed at all - risk aversion is the name of the game for shareholders both employees and investors alike.

When Al starts selling - that's when I'll be alarmed, personally. That's probably when I'll sell a vast majority of my shares too.

[alcc]

Sean,

Your reaction is rational but misguided. Let me explain:

1) Background: I worked in Silicon Valley (many moons ago) where stock options are, well, stock of the trade. In addition, I was a Rule 144 (insider/control person), so I know the rules and practice of Form 4 transactions very well, short of any very recent changes to the law.

2) Mr. Thomson, as an insider, faces several Rule 144 restrictions, including trading windows, volume rules, no short swing trades etc. One common company practice is to require execs to do 10b5 planned sales (and purchases). 10b5 sales not only eliminate any taint of insider trading on material, non-public information but is also prima facie defense against insider trading allegations. The former makes for good "optics", because it assures the public that such trades are done regardless of good news, bad news, or no news. The latter keeps you out of jail. No small matter, both counts.

3) 10b5 plans can be cancelled. However, consider the counterfactual: if Mr. Thomson cancels his planned sale and the stock goes to $15 next week on the news of FDA approval and then pops again to $30 on a buyout offer from a BP a month later. Now, not only should shareholders (who took profit and sold this week) be rightly howling over this appearance of trading on material non-public info but the SEC may/should initiate an investigation. Considering the likelihood of pending material new developments for the company, if I were corporate counsel I would sternly advise any 144 person (including myself) against any unusual moves.

4) Then there is the practical side of the matter. In addition to the above legal reasons, there is the additional consideration that if you regularly sell yours options once they are vested, thus keeping your position thin, the board may feel the need to grant more options to you to keep you "on board". Conversely, if you hoard your shares after they vest, the board may feel you are already adequately invested in the company, not to mention that it actually looks bad for the company to keep granting options to you, adding to your pile. Again, bad optics. This is why if you look at most tech companies, execs, including the CEO, regularly unload all their options as soon as they vest, only to receive a new block grant. I note, as a shareholder (even as an insider) I hate this badly dilutive practice.

Hope this is of use to everyone here.

[bobw]

alcc. I couldn't agree more.

[seanismorris]

This is fun : )

Well let me say that I agree with alcc on point number #3.

Where we disagree is on how much you can trust the system (SEC) company Executives, or Board Members (in general).

My Background (my last job position) was IT Manager of a small public company (there was no CIO) I set up every system they had and there was no data I didn't have access too.  Let me just say (from that and other experiences) is that you can count on Executives to lie, cheat, and steel, to try to keep their company afloat.  Also, in my experience, you can't count on the 'Board' to look out for your interests (as investors).  You don't write their pay check...

My experience with company stock options was from being issued some.  The stock option paperwork was about 25 pages for something that you might think would fit in a paragraph.  Basically, I need to stay with the company another three years before they could become worth something (that I could sell). Unfortunately, I left the company before that could occur,  because the legal team grew to be larger than the sales team.  And, I didn't like spending 50% of my time on legal discovery.

Now, I wouldn't have a problem with people selling their stock options if I had access to the actual documents. What are the sale restrictions, etc. I'd also like know when an employee starts a planned sale, etc.  The problem is we (investors) don't have all the information to make an educated decision.  Not having what I consider critical information, is why I question every insider sale.  

For Example, because Juergen has unloaded shares so may times that leaves me to believe he's not selling on any specific information.  Many people believe that he's getting divorced...unless I see an divorce certificate I'm not (automatically) buying it.  If the divorce thesis is true, is he Muslim? did he die? and is he now trying to divorce his '20 virgins'?  (Lots and lots of sales)

Now David selling is my real stumbling block, he's the one guy that has the education (and access to critical information) to get around any legalities (and profit from it).  Also, I don't remember the last time he sold stock...but the one time he does sell is now?... Sorry, but I'm going to stay suspicious.  As far as I know the shorts were waiting in the wings to double down, because he told them he was selling. There are a lot of potential ways to profit from insider information...

On a side note, I bought stock in a company (over 70k) that did business in China.  There were signs that the company was receiving suspicious signals from their Chinese partner (that something was wrong). But rather than keep the investors informed, they gave upbeat guidance, and performed what I'd like to call 'funky' accounting to conceal the problem - basically they were not getting paid on time.  It turned out, that the Chinese company had stolen the 'secret sauce' Intellectual Property and was creating a competing product.  End result, Chinese company brakes the supply contract (illegally) keeps the unpaid for inventory, and has a comparable product they can sell for less.  ....my investment tanks and is now worth less than 2k (down from 70+k).  Of course there is a lawsuit, but it dragged on for many years.  The US government gets involved, and investors think we are getting some where, but suddenly the governments documents for corporate espionage disappear and the company's management no longer discusses it on investor calls. 

So, moral of the story, investors can't assume that Executives are working in there best interest, the Board is often MIA, and the government have political priorities that supersede everything else.

I still hold the shares as a reminder, "stay suspicious my friends"