"The naysayers want to knock down Mallinckrodt, trying to plant...

"The naysayers want to knock down Mallinckrodt, trying to plant seeds of doubt that their negotiations with Mesoblast amount to diddly squat and lying that MNK's financials are bad. Nice try, I say."

For someone who has some posters on ignore, you must have psychic powers given that declared insight.


1. MNK board just expanded the company's share buy-back plan by $1.0 Billion, reflecting the company's ongoing strong performance and future prospects. This authorization is in addition to prior authorizations approved by the Board.

To take an announcement about an intention to do something on an "open-ended basis" (Mallinkrodt's words, not mine), without checking whether that thing is physically possible, is of a similar degree of naivety as concluding that Teva are committed to ongoing funding of MSB's heart program because someone happened to answer the phone when you called a heart trial recruiting center.

If MNK buys back even a mere 50 cents of stock for each dollar the raise by the selling of businesses this year (so far $893m raised from business sales), I'll buy you a nice new shiny goldfish.

And - given that MNK's share price has fallen by a further 5% since the much-vaunted $1.0bn stock repurchase authorisation announcement - suggests that the market sees the announcement for what it is... mere jawboning in an attempt to arrest the fall in the MNK share price, which is now languishing at a 3.5 year low and close to its all-time lows, having lost two-thirds of its value from its peak price.

I think investors are smart enough to know that anyone can announce an intention to do something, but actually being able to execute on it is a separate thing altogether.

MNK hasn't even bought back $1.0bn of its stock over its entire listed life, and for most of that period its financial health was in far better shape than it is today, with Net Debt-to-EBITDA currently in excess of 4.0x, EBIT-to-Net Interest Coverage just 1.8x and the Current Ratio of 1.19x (compared, respectively, to 5.8x, 2.7x and 2.9x two years ago).

The fact is that MNK's Operating Income is today barely changed from 2 years ago, despite the company having spent a whopping $3.8bn (net) [*] on acquisitions over the past 24 months.

([*] In the context of a current market value of a little over $5.0bn today, a $3.80bn acquisition spree can only be described in terms such as "whopping", I think.)

Either they have spent $3.8bn on buying businesses that are not profitable, or the the core MNK businesses are contracting at a spectacular rate.

But clearly, now that the process has run its course and the balance sheet is maxed out, MNK is changing tack and selling businesses to raise funds for the repair of its balance sheet.

Besides the Nuclear Imaging business which has just been sold for $690m (just $575m will have hit MNK's bank account, with the balance being deferred), MNK on 30 January announced it has also sold another business, this time for $203m (of which 90% of the consideration will only be received in 12 months'time).

It is unclear how profitable the latter business was, but we know that - from information published by the company - the sale of Nuclear Imaging business will cause reductions this year in MNK's EBITDA, EBIT and Pre-Tax Profits of $8%, 15% and 30%, respectively.

Having plugged earnings holes by aggressive acquisitions during 2015 and 2016, MNK is now scrambling to undo some of the balance sheet damage, by doing the exact opposite.

Trouble is, that's going to leave an even bigger earnings hole.

Little wonder the MNK share price is performing the way it is.

Which goes to show that one shouldn't just take things at face value.
One should always test whether or not the financial facts support the stated intentions.

To this end, DYOR is the oft-observed acronym of choice.