I have been as vocal/critical as anyone (except maybe OPC) regarding Al's recent share purchase. Since all he is doing is swapping debt for stock, he is investing no new cash and diluting current shareholders in the process. As I was considering the possible share price reaction to future dilution, it occurred to me that Al's debt for stock swap definetly increases Al's risk and more closely aligns Al's financial outcome with that of current shareholders. Let me explain (and I apologize to anyone who already realizes this). Reason #1: If MNKD was a complete bust and had to either declare BK or sell at deep discount, Al has a good chance of recovering some portion of the money he has loaned. I say this because debt is senior to stock and there has to be some value in the patents, property, intellectual property, and equipment, and maybe inventory. By converting to debt, Al is giving up that standing as preferred creditor. Reason #2: If mnkd raises funds through secondary offering and the stock tanks, that portion of Al's net worth held in mnkd stock will take a beating; whereas, his mnkd debt holdings would stay the same and potentially have a greater chance of being repsid with the $ raised through offering.
Please don't misunderstand - I still don't like the additional dilution caused by Al's debt conversion - I simply want to explain that this transaction wasn't without some cost to Al in the form of increased risk. A perfect example is the roughly 60% hit Al has taken on the shares he purchased (swapped) on the Seaside deal.
