And this is good why?

And this is good why?

Let’s be honest here while we do our best to understand the reasons why companies do certain things, there are times when no matter how hard we try we just can’t grasp why they are doing what they are doing, we just don’t get it. Take our friends at MannKind (NASDAQ: MNKD) who for reasons we haven’t quite figured out yet decided that is was a good idea to spend money on a reality show. Now this not the Kardashians no this an Afrezza reality show, which will sell more Afrezza how?

Keep in mind that while MannKind is better financial shape than our friends at Tandem (NASDAQ: TNDM), well that isn’t saying much as most every company in diabetes is in better financial shape than Tandem, but let’s get back to MannKind. Yes, they have cash on hand but cash which will be quickly eaten away if sales don’t start increasing in a big way. Therefore, we questioned using some of this precious cash on a reality show.

We hate to sound like a broken record but the many issues facing Afrezza and MannKind won’t be solved by a reality show.

Well it seems MannKind is doubling down per today’s announcement they are drawing the remaining capital available from the Mann Group Credit Facility. Per a company issued press release;

“MannKind Corporation (Nasdaq: MNKD) (TASE: MNKD), announced today that it has delivered a funding request notification to the Mann Group LLC pursuant to the terms of the Mann Group Loan Arrangement (the “Loan Arrangement”) to draw the remaining $30.1 million of availability thereunder. Upon funding, MannKind will concurrently use $10.6 million of the proceeds to capitalize all accrued but unpaid interest under the Loan Arrangement. Under a subordination agreement with Deerfield, the Mann Group previously agreed with Deerfield not to demand or accept any payment under the Loan Arrangement until MannKind’s payment obligations to Deerfield have been satisfied in full, except for payments (such as interest payable in-kind) that are permitted under the subordination agreement.  After the request is funded, MannKind will (i) receive $19.4 million of cash, (ii) have drawn the full amount available under the Loan Arrangement, and (iii) have paid all accrued interest outstanding thereunder as of June 30, 2017. The outstanding balance under the Loan Arrangement after this transaction will be $79.7 million, which is due on January 5, 2020.”

In the release company CEO Michael Castagna states;

“This advance will meaningfully increase our cash on hand as we continue to explore potential opportunities to enhance our capital structure. We truly appreciate our working relationship with the Mann Group and their continued support of MannKind. In addition, we have engaged Greenhill & Co., Inc. as a financial and strategic advisor, a firm that we believe will provide independent advice as I transition into my new role.”

Ok if we’ve got this straight and remember we are not the sharpest knife in the drawer, MannKind gets $19.4 in cash and increases their debt load with this note alone amounting to almost $80 million. Which is somewhat as our cash strapped friends at Tandem also are carrying almost $80 million in debt, which is even more ironic since their market cap is now just over $40 million, which basically means the company is upside down. Kind of like the Titanic before it finally sank to the bottom of the ocean, but we digress.

Now we will admit we don’t have an advanced degree in corporate finance but it seems to us that it doesn’t make sense to fund a reality show which will do nothing to help increase sales and then to add to company’s already heavy debt load by drawing down a loan agreement.  Like we said we are not sophisticated in the ways of corporate finance so perhaps someone can explain to us why these moves make sense. Keep in mind BEFORE this move the company had nearly $150 million in debt.

Which means MannKind shares something with our financially challenged friends at Tandem, in that with a market cap of about $155 million MannKind will also be upside down. Guess being upside down is a trend in diabetes these days.

Listen we must admit that we are delighted that we have an extended weekend coming up. Perhaps after a few mimosas, some Miller Lite’s and a Grey Goose or two we just might understand what the heck is going on here. We could be become like our chardonnay guzzling friends who after chugging down several bottles thought it was a good idea to partner with MannKind.

As Momma Kliff used to say; “Sometimes it’s better not to try and figure things out. Sometimes its just better to let stupid be stupid.”