What is THE $3.25?

[straightly]

To start with, MNKD (M) owes Sheerfield (S) $10m which has to be paid back. Now, without any strings attached, this is bad, especially since M is short on cash currently.

But M is doing well and hitting the numbers. So S is willing to buy stocks from M with the $10m. This, in and of itself, is good, if the price is fair.

A very fair price would be the average price of the previous three sessions.

So, by getting this concession, S wanting M stocks at price determined this way is good.

M actually wanted it better. So it improved the deal. It further improved the deal so that the price cannot be lower than $3.25. Adding the price safeguard below, in and of itself, is better.

Remember, the fact that M owes $10m that needs to be paid back in October WAS where we started with. So, this deal, SHOULD be better for M.

The stock price, however, did not think so. This $3.25 becomes an anchor holding the sp down.

You all sages of the board, please enlighten me. My intuition disliked this deal when I saw it. But that was because with all such fancy deals I have the misfortune to be a stakeholder, I got bitten after it played out.

[dreamboatcruise]

It is highly unlikely that Deerfield would ever convert if the method of calculating the price would yield something greater than where the market is trading. You should think of this as MNKD offering a discount. It would be very different if the conversion was not at Deerfield's option, then they might pay less than market price or they might pay more. That said, offering a discount for conversion of debt is not uncommon and staving off another PIPE or secondary offering could well be worth that discount. None of this is an exact science, as the timing and size of successful capital raises has to do with market sentiment.

Putting a floor on the price is wise for MNKD, but in the end they might well want to convert even below that. In the meantime the market knows they would not be forced to do so if they are willing to part with precious cash. Who knows, maybe there will be some source of additional capital/revenue before then and MNKD would choose to use cash. I'm thinking that is not likely, but I'm sure there are many here that would believe otherwise.