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MannKind Corp. Message Board

  • patrick.lytle patrick.lytle Oct 30, 2013 7:20 PM Flag

    Legit shorts, help me understand

    Those of you have seen my few posts over the years know I'm not a trader...just a retail guy who bought into this stock about 4 months prior to the last resubmission. I sit today just about the same place I sat years ago - hopeful for approval and all that we all hope comes with it. I've averaged down over the years so I stand to do better if approval happens, but I got in knowing I'd hold on until approved or denied or abandoned. As I've primarily sat on the message board sidelines, I have listened. And for two years the commentary has never changed. The thing that u don't understand - and I'd love to understand from someone who shorts stocks - is when a stock is this low, what's the desire in shorting? I don't think anyone believes the company will go bankrupt even if Afrezza is denied...which means what - you stand to gain $3/share tops? On the contrary, if the drug is approved, the upside potential is far greater, no? And wouldn't you want to bet on that chance? Or do traders play both sides? I'm truly asking out of interest and ignorance. Anyone care to answer?

    Sentiment: Strong Buy

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    • I've been wondering the same. I am not an equity guy. Although having studied the div. discount model, ROE, Random Walk, Efficient Market, "theory soup", I wouldn't profess to understand the stock market in it's entirety. But here's a few thoughts:

      1. There is a lot of pending dilution in the form of warrants, convertible bonds and general financing uncertainty. Some of this has likely been pre-sold.
      2. A lot of long investors are delta hedging long exposure - for example, option MM's delta hedging written puts with short shares.
      3. This is what I'm a bit unclear about. It's pretty evident nothing is going to happen for at least a few months. If anything the trend will likely be own. As such, an investor could short MNKD and put the proceeds to work somewhere else. From what I can gather MNKD is trading special in the lending market and it costs about 3% to borrow the shares. That's not an outrageous cost of funding, even taking margin requirements into consideration.

    • shorts will be squashed like a bug.

    • Know your opponents are you will be successful in thousand battles- Sun Tzu. It is important to know the short argument and see why it falls short so to speak.
      1- Most of these shorts are mostly looking backward towards the history and believe that it will be a repeat of history. Like Exubera, like other two submission. That this drug submission will be rejected, partnership wouldn't happen and even if both of these happen the drug would not be successful.
      2-Some shorts truly believe that it is another insulin maker competing in the crowded diabetic market with entrenched opposition.
      3- Some others are simply following the trend and listening to so called experts who have ulterior motives

      The long argument that I totally embrace is forward looking. Most long believe that this is just not another drug and it is going to cause a real shakeup in the diabetic marketplace. They ignore the past and believe that the past issues have been resolved and it is time to finally move forward. Most long like me also believe that this is not just another drug and it will really cause a big shakeup in the diabetic market place and others drugs in future due to innovative delivery platform.

      The way I see is that risk reward ratios in this stocks are tremendously tilted. If it fails (i would give a generous 20% chance of failure), then stock might drop to 2.5 to $3 a loss of 50% from now. That is what was Jan 2012 to Jan 2013 range. But if it succeeds then you can easily see it being 4 to 5 times from now. I have about 16% of my portfolio in MNKD . I am willing to take risk with 8% or even 10-12% of my capital to get significant gains.

      After partnership is announced it will be steadily rising as shorts will start to reevaluate their backward looking perspective and a number of people will give it another look. Good news is that we don't have to wait long now. The worst case scenario is wait until April 2014 and best case scenario is anytime from Nov 4th to end of this year.

      Sentiment: Hold

      • 2 Replies to thefool_2012
      • Very reasonable reply to this question ----- so i have another one.... With all the debate about the ''necessity'' of mnkd to partner up prior to approval.... is there any situation whereby a bio did not do this, yet partnered or sold AFTER an approval... and went on to great success....? I am still trying to understand how important it is to partner NOW vs. later... I see arguments on both sides actually.... But, i would like to hear about actual situations and not just conjecture. Maybe partnering prior to approval is the ""norm"", and I can accept that ----- but is it a "requirement for success...."...???

        Sentiment: Hold

      • Thanks "thefool". All makes sense - aside from the fact that I assume that anyone risking money in an investment in stock wouldn't all have the same information at their hands...which would mean all would clearly understand the differences (and there are many) between Exubera and Affrezza. Doesn't change my position - I'm happy as a clam being long and am willing to risk it all (where all is about 30% if my portfolio) on the chance it goes big. Netflix was once just another movie company. If I'd invested at the same level there 10 years ago, I'd have 1.8 million in my pocket today. And we 're sitting on a potential market that's much larger. Thanks again for the honest , smart, and sarcasm-free reply.

        Sentiment: Strong Buy

    • 1. Don't look at the price of the stock. Look at the market cap. It's $2 billion. That's a long way to fall. 2. This is the final filing for Afrezza. If it's rejected again, then yes Mannkind will file bankruptcy and this is a zero. 3. Put in the odds of failure vs. the odds of success. Failure chances are about 80% in my opinion. Therefore short sale with some call protection guarantee profit $$$. Thanks for your moolah Bro. LMFAO

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