MannKind (MNKD) Surges as Plan to Sell Stock to Israeli ETFs Moves Forward, Alleviating Liquidity Fears

Shares of MannKind (NASDAQ: MNKD) are surging today (+22%) after the company confirmed plans to sell up to 50 million shares directly to Israeli ETFs that will be required to hold a certain number of shares by 11/15. The news followed two days of speculation that the offering would be cancelled upon pressure from the Israel Securities Authority. However, it appears that only certain restrictions will apply to the issued shares on TASE under the Israeli Securities Authority.

Commenting on the restriction, Jefferies analyst Shaunak Deepa said it may cause more funds to buy in the open market versus direct from MannKind.

"While we are not entirely clear on the details, we understand that this means shares purchased from MNKD directly would have certain holding limitations that would not affect shares bought on either the TASE or Nasdaq," Deepa said. "This suggests to us that at least some portion of the ETFs target holding amount will need to be bought on the open market, in order to allow the funds to dynamically adjust their positions in MNKD and account for redemptions and other factors."

Overall, the analyst anticipates the company selling 40 million shares directly to investors for proceeds of $94 million. This will keep liquidity concerns at bay.

"Although we no longer expect MNKD to sell quite so much to investment funds due to liquidity concerns, we are under the impression that investors at these funds remain interested in purchasing shares at a discount directly from the company. We note that the TASE’s weekly “Expected Changes in Indices’ Parameters” was updated to include MannKind on Wednesday and identified 418.3m Shekels ($107m) worth of MNKD shares to be added to indexes by 11/15. Without trying to guess the exact amount of stock investors will buy from the company versus on the open market, proceeds from this issue should materially add to the current cash position of $37m and help calm concerns about nearterm liquidity."

The firm has a Buy rating and price target of $9 on MNKD.

For an analyst ratings summary and ratings history on MannKind click here. For more ratings news on MannKind click here.

Shares of MannKind closed at $2.22 yesterday.

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