VALENCIA, Calif. (AP) -- Shares of MannKind Corp. lost nearly a quarter of their value Thursday after the company announced plans to sell up to 140 million shares of stock.
MannKind will use the funds to pay for new trials of its inhaled diabetes drug Afrezza and cancel more than $200 million in debt owed to its CEO.
News that a company is selling a large amount of stock often weighs on shares, as existing shareholders worry that their individual holdings will be worth less with a bigger supply of stock on the market. MannKind had about 199 million shares outstanding as of Aug. 6.
MannKind said in September that it would sell up to $500 million in common and preferred stock, warrants, and debt securities as it seeks approval from the Food and Drug Administration for Afrezza. It's been trying to win approval for years, and expects to complete new studies of the drug and the inhaler that delivers it in 2013. The Valencia, Calif., company has no approved drugs.
One offering consists of 40 million shares of restricted stock and warrants to buy 30 million more restricted shares to a group controlled by MannKind's CEO and biggest shareholder, Alfred Mann. In return, The Mann Group LLC will cancel $224.6 million in debt MannKind owes it. Alfred Mann is MannKind's largest shareholder by far, with a nearly 42 percent stake.
The public offering, of 40 million shares and 30 million warrants to buy another 0.75 share, priced at $2 each. The exercise price of the warrants is $2.60 per share. The banks managing the stock sale may buy another 6 million shares and 4.5 million warrants.
In morning trading, the shares declined 62 cents, or 24 percent, to $1.98. The stock has traded between $1.57 and $3.48 in the last year and closed at $2.60 on Wednesday.