The BIGGER Con
Yesterday we wrote about how recklessly money is being thrown around to develop a non-invasive CGM, we called it a con game. Well thanks to Tandem (NASDAQ: TNDM) we have an even bigger con and this one too will rip off millions of dollars. Based on a series of SEC filings Tandem has proven beyond a shadow of a doubt that if nothing else they brass ones.
The first filing came yesterday late afternoon and noted the following;
“We previously entered into an Amended and Restated Term Loan Agreement with Capital Royalty Partners II, L.P. and its affiliate funds (“Capital Royalty Partners”), which has since been amended by Consent and Amendment Agreement, dated June 20, 2014, Omnibus Amendment Agreement No. 2, dated February 23, 2015, Amendment No. 3 to Term Loan Agreement, dated January 8, 2016 and Waiver and Amendment No. 4 to Term Loan Agreement, dated March 7, 2017 (as so amended, the “Term Loan Agreement”).
On February 6, 2018, we entered into Waiver and Amendment No. 5 to Term Loan Agreement with Capital Royalty Partners (the “Fifth Amendment”). The Fifth Amendment includes a limited advance waiver of a potential event of default that could result in the future in the event the audit report of our independent registered public accounting firm contained in our financial statements for the year ended December 31, 2017 contains an explanatory paragraph that expresses a qualification regarding our ability to continue as a going concern. The Fifth Amendment includes a covenant requiring us to complete a financing in which our gross proceeds from the sale of equity securities is at least $20.0 million, no later than August 30, 2018.
In addition, in connection with the current Term Loan Agreement, we previously agreed to pay, on the earlier of (i) the maturity date of the Term Loan Agreement, which is March 31, 2020, (ii) the date that the loan under the Term Loan Agreement becomes due, and (iii) the date on which we make a voluntary pre-payment of the loan, a financing fee equal to 5.0% of the aggregate principal amount of borrowings outstanding, including total PIK Loans issued, under the Term Loan Agreement (collectively, the “Back End Financing Fee”). In consideration for the waiver described above and in connection with the Fifth Amendment, we have agreed to increase the Back End Financing Fee from 5.0% to 6.0% of the entire aggregate principal amount of borrowings outstanding, including total PIK Loans issued, under the Term Loan Agreement, which was $82.3 million as of September 30, 2017. The Back End Financing Fee is payable at maturity of our loans and on the principal amount of any loans for which we make an optional prepayment, and may be payable in connection with asset sales not permitted under the Term Loan Agreement or in connection with a change of control. “
Ok let’s simplify a little as everyone knows Tandem is running out of money, with over $80 million in debt and with no money are having a tough time paying the creditor. They have yet to execute their offering (more on that in a second) so they have renegotiated the terms of the loan with their creditor. Now the creditor did not have to agree to the new terms but honestly what choice did they have, sure they could take over the company and attempt to sell it but being their major creditor, they know no one wants the company so might as well agree or risk getting nothing.
See not everyone is like Johnson and Johnson (NYSE: JNJ) a company which seems to believe it’s better to get nothing than something for their insulin pump unit, but we digress.
Ok now onto the coming offering which was originally slated for 13.5 million shares which was supposed to raise over $45 million. In a move which proves OneDrop is not the only company that has chutzpah Tandem has taken chtuzpah to a new level this morning when the company filed a revised S-1A which says;
“We are offering 19,084,000 shares of our common stock, par value $0.001 per share. Our common stock is listed on the NASDAQ Global Market under the symbol “TNDM.”
But wait it gets better as they are now looking to raise almost $58 million.
On Tuesday we posted under the title “Just when it couldn’t get any worse” many of the issues Tandem and their lead underwriter Oppenheimer were having with the original offering. Well with these new SEC documents we can say without hesitation things just got a lot worse. This revised offering adding another 6 million shares takes dilution to a whole new galaxy. Listen it’s bad enough the company was telling existing stakeholders to bend over and take it, now they are telling them to take it with a red-hot cattle prod and like it.
Ok let’s say Oppenheimer can find investors dumb enough to buy this crap and given how things are going they probably will. As Momma Kliff says so often there is no cure for stupid. What’s the plan? Or as Fred Dalton Thompson in the movie The Hunt for Red October said; “The Russian’s don’t take a dump without a plan.” Listen we know we don’t have an advanced degree from Harvard, but one just might think that Tandem would tell investors what the plan is once they bilk them out of more money.
Well the fact is Tandem hasn’t a clue.
Will this capital solve any of the structural issues facing the company? No
Will it make the company more attractive to potential buyers? Nope as we keep saying many have come in kicked the tires and said thanks but no thanks.
Will it turn this inept management team into geniuses? Nope
Will it transform the company’s clueless Board of Directors? Nope
Will Medtronic (NYSE: MDT) the market leader in insulin pumps collapse? Not a chance, nor will Insulet (NASDAQ: PODD) go away either.
The fact is about the only people who will gain anything here is the company’s creditor.
Even worse the capital will prolong the agony for Tandem patients. Patients who at this very moment are wondering if they will too will suffer the fate of their Animas brothers and sisters. Patients who are dependent on the company for the continual sale of pump supplies and support. Sure, the extra capital buys time but how much time is the question. Without major changes all this money does is delay the inevitable. Even with major changes it will be a struggle for survival.
Listen we know many in the pump community hate what JNJ did but at least the company had the decency to give their Animas customers a path and time to walk that path. JNJ did not just shutdown Animas and tell them to take a long walk off a short pier which is a likely scenario with Tandem.
Needless to say, shares are falling in early trading which is something Tandem shareholders should get used to as with another 19 million shares on the way the Tsunami hasn’t hit yet.
At this point we’re not sure what to say other than April 1 is right around the corner and our annual April Fool’s Post can’t come close to topping the crap that’s going on in our wacky world. Seriously we are beginning to think all these idiots have conspired together making writing our annual piece next to impossible. They’re like hey let’s do the stupidest thing possible so that David cannot make fun of us in his April Fool’s post. Honestly there is no other reasonable explanation for this level of stupidity.
And here’s the irony of it all had Momma Kliff waited just 10 minutes April Fool’s Day would be just another day. But no Momma Kliff had to push me out so that for the rest of my life April Fool’s Day would be special. Little did she know that it has become a special event for the wacky world of diabetes too. But these past few years have extraordinarily difficult for as our cousin Al used to say; real life is stranger than fiction. Or as Momma Kliff used to say and she’s been quoted by so many you just can’t make up this shit.