Insmed Inc (INSM)

[coinstarz]

You could be right. MM2006

Let me use a hypothetical example to explain why Notes holders have to sell/short. According to SEC S-3 and 8-K filings, any stockholder (including warrants, CD notes holders) cannot hold more than 9.9% of OS at any given time.

Now, assume INSM has OS of 55 M shares just for talking purpose. When INSM decides to use Notes, say $20M (hypothetical), notes holders will receive 15.5 M INSM shares ($20M/$1.29) automatically that represents more than 28% of O/S (1.29 is conversion price). Therefore, notes holder must sell at least 10M shares to meet 9.9% requirement. If they tell the market they will/have to sell 10M shares, then the market will sell with notes holders. So, notes holders will short selling 10 M shares first during the good news and convert notes to shares later to deliver to the market within 5 trading days. That may be why we saw 8-K issued on 12/19/05 that told the market they sold shares during 12/13-12/19.

I believe Notes holders are smart people because they are investment funds. They don’t care the long-term; they want make money like a day trader. And they cannot hold more than 9.9% of common shares IF they really love the company. Does Insmed want Notes holders to take over the company at $1.29?

SO, I just say don’t worry be happy. Get to go to bed.

We will talk about it more tomorrow.