Post by liane on Aug 17, 2013 11:11:23 GMT -5
So this (at the bottom of the page here) is the pertinent paragraph from the agreement that talks about converting $40M of debt into MNKD equity. My understanding is that anytime after 11 days of the successful PIII results being made public, Deerfield can (but is not obligated to) convert up to $40M of debt to shares based on the previous 20 day VWAP. And this can be done all at once or in portions. The maximum number of shares that they can obtain is 12M. So far so good.
The rest of it is a bit hairy for me. The way I'm interpreting it is as such:
If the VWAP is 3.33 or less, Deerfield can get up to 12M shares. 12M X 3.33 = 40M. So no incentive to drive the price below 3.33.
If the VWAP is 6.67 or more, Deerfield can get up to 6M shares. 6M X 6.67 = 40M. What happens if the price is say $10? Does Deerfield still have the right to get 6M shares, but pony up extra cash? Or would they be limited to 4M shares at this price?
VWAP between 3.33 and 6.67 - Deerfield can convert up to $40M into shares at the VWAP - so this would amount to somewhere between 6M and 12M shares. This I understand.
I guess my question to the board - It seems Deerfield has every incentive to drive the s/p down to an average 3.33 for a 20 day period. I doubt they have the extreme firepower to do that, but I am aware that they do play dirty pool. Working against this strategy is the fact that a partnership could occur at any time (but it's not like I'm expecting it next week). So I think smart money is going to want to load up again soon and drive up the s/p again. If Deerfield waits too long, they may not be able to influence the price for too long. What does everyone think?
www.investors.mannkindcorp.com/phoenix.zhtml?c=147953&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTkwMTA3NDMmRFNFUT0wJlNFUT0wJlNRREVTQz1TRUNUSU9OX0VOVElSRSZzdWJzaWQ9NTc%3d
"(iii) Applicable Limits on Conversion of the Note. Notwithstanding anything to the contrary herein, (A) this Note shall not be convertible, and the Company shall not issue Shares upon conversion of this Note, if the number of shares that would otherwise be issuable upon such conversion, together with all shares previously issued upon conversion of all Notes or issuable upon conversion of any other Notes converted on the same Conversion Date, exceeds 12 million shares (subject to appropriate adjustment to reflect any Stock Event), and (B) this Note shall not be convertible, and the Company shall not issue Shares upon conversion of this Note, if the number of shares that would otherwise be issuable upon such conversion, together with any shares issuable upon conversion of any other Notes converted on the same Conversion Date, exceeds the then Applicable Limit. For purposes herein, “Applicable Limit” shall initially mean (x) 12 million Shares (subject to appropriate adjustment to reflect any Stock Event) for all conversions of Notes at a “Conversion Price” of $3.33 (subject to appropriate adjustment to reflect any Stock Event) or less, (y) 6 million Shares (subject to appropriate adjustment to reflect any Stock Event) for all conversions of Notes at a “Conversion Price” of $6.67 (subject to appropriate adjustment to reflect any Stock Event) or more, and (z) $40 million of “Conversion Amounts” for all Note conversions at a “Conversion Price” of between $3.33 and $6.67 (subject to appropriate adjustment to reflect any Stock Event); provided, however, that, after each Conversion Date, the Applicable Limit under all three clauses (regardless of which clause such conversion relates to) shall be reduced by an amount equal to the Applicable Limit immediately preceding such conversion multiplied by a fraction, the numerator of which is the number of Shares actually converted on such date (in the case of clauses (x) and (y)) or the applicable “Conversion Amount” for all shares actually converted on such date (in the case of clause (z)) and the denominator of which is the Applicable Limit in respect of the clause under which such conversion falls immediately prior to such conversion. For purposes of illustration: (a) If 6 million shares are converted under any Notes at $3.00 per shares, the Applicable Limit Shall be reduced by one-half to 3 million, 6 million and $20 million, respectively; (b) If an additional $5 million are then converted under any Notes at $5.00 per Share, each Applicable Limit shall then be further reduced by one-quarter to 4.5 million, 2.25 million and $15 million, respectively. As an additional illustration, if 5 million shares are converted under any Notes at $8.00 per share, each Applicable Limit shall be reduced by 83.33% to 2,004,000, 1,002,000 and $6,680,000, respectively; and (b) if an additional 500,000 shares are then converted under any Notes at $5.00 per share, each Applicable Limit shall be further reduced by 24.95% to 1,504,002, 752,001 and $5,013,349, respectively. "
The rest of it is a bit hairy for me. The way I'm interpreting it is as such:
If the VWAP is 3.33 or less, Deerfield can get up to 12M shares. 12M X 3.33 = 40M. So no incentive to drive the price below 3.33.
If the VWAP is 6.67 or more, Deerfield can get up to 6M shares. 6M X 6.67 = 40M. What happens if the price is say $10? Does Deerfield still have the right to get 6M shares, but pony up extra cash? Or would they be limited to 4M shares at this price?
VWAP between 3.33 and 6.67 - Deerfield can convert up to $40M into shares at the VWAP - so this would amount to somewhere between 6M and 12M shares. This I understand.
I guess my question to the board - It seems Deerfield has every incentive to drive the s/p down to an average 3.33 for a 20 day period. I doubt they have the extreme firepower to do that, but I am aware that they do play dirty pool. Working against this strategy is the fact that a partnership could occur at any time (but it's not like I'm expecting it next week). So I think smart money is going to want to load up again soon and drive up the s/p again. If Deerfield waits too long, they may not be able to influence the price for too long. What does everyone think?
www.investors.mannkindcorp.com/phoenix.zhtml?c=147953&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTkwMTA3NDMmRFNFUT0wJlNFUT0wJlNRREVTQz1TRUNUSU9OX0VOVElSRSZzdWJzaWQ9NTc%3d
"(iii) Applicable Limits on Conversion of the Note. Notwithstanding anything to the contrary herein, (A) this Note shall not be convertible, and the Company shall not issue Shares upon conversion of this Note, if the number of shares that would otherwise be issuable upon such conversion, together with all shares previously issued upon conversion of all Notes or issuable upon conversion of any other Notes converted on the same Conversion Date, exceeds 12 million shares (subject to appropriate adjustment to reflect any Stock Event), and (B) this Note shall not be convertible, and the Company shall not issue Shares upon conversion of this Note, if the number of shares that would otherwise be issuable upon such conversion, together with any shares issuable upon conversion of any other Notes converted on the same Conversion Date, exceeds the then Applicable Limit. For purposes herein, “Applicable Limit” shall initially mean (x) 12 million Shares (subject to appropriate adjustment to reflect any Stock Event) for all conversions of Notes at a “Conversion Price” of $3.33 (subject to appropriate adjustment to reflect any Stock Event) or less, (y) 6 million Shares (subject to appropriate adjustment to reflect any Stock Event) for all conversions of Notes at a “Conversion Price” of $6.67 (subject to appropriate adjustment to reflect any Stock Event) or more, and (z) $40 million of “Conversion Amounts” for all Note conversions at a “Conversion Price” of between $3.33 and $6.67 (subject to appropriate adjustment to reflect any Stock Event); provided, however, that, after each Conversion Date, the Applicable Limit under all three clauses (regardless of which clause such conversion relates to) shall be reduced by an amount equal to the Applicable Limit immediately preceding such conversion multiplied by a fraction, the numerator of which is the number of Shares actually converted on such date (in the case of clauses (x) and (y)) or the applicable “Conversion Amount” for all shares actually converted on such date (in the case of clause (z)) and the denominator of which is the Applicable Limit in respect of the clause under which such conversion falls immediately prior to such conversion. For purposes of illustration: (a) If 6 million shares are converted under any Notes at $3.00 per shares, the Applicable Limit Shall be reduced by one-half to 3 million, 6 million and $20 million, respectively; (b) If an additional $5 million are then converted under any Notes at $5.00 per Share, each Applicable Limit shall then be further reduced by one-quarter to 4.5 million, 2.25 million and $15 million, respectively. As an additional illustration, if 5 million shares are converted under any Notes at $8.00 per share, each Applicable Limit shall be reduced by 83.33% to 2,004,000, 1,002,000 and $6,680,000, respectively; and (b) if an additional 500,000 shares are then converted under any Notes at $5.00 per share, each Applicable Limit shall be further reduced by 24.95% to 1,504,002, 752,001 and $5,013,349, respectively. "
