The day-to-day movement of the share price of REFR is for the most part not worth obsessing over. In a stock that trades with as little volume as REFR does, with as little institutional involvement as REFR has, there is a very small signal-to-noise ratio in REFR's trading. One not-particularly-wealthy person could easily have the power to move the stock 5% or more in the short term, if they chose to. Don't even get me started on the dweebs that go into trade-by-trade analyses. Those are the same people that try to find patterns in the spins of roulette wheels at casinos.
But there has been a definite overall pattern to recent trading. It has a simple and quite easy-to-explain cause, and that makes the efforts, particularly among the promoters, to portray it as something other than what it clearly is, all the more amusing.
As I referenced earlier, there are four unnamed hedge funds who agreed to buy an aggregate of 1,000,000 shares of REFR at $5.00 apiece, at the time about a 17% discount to market. Since then, the price dropped quickly to $5.00, steadily rose to $6.50, and is now in a steady downtrend towards $5.00.
For the answer to what is going on, I refer you to the classic book "Reminiscences of a Stock Operator", authored pseudonymously by Edward Lefevre. In one chapter, the book's author tells a story of a group of investors with a large position in the stock of a company that they know to be in trouble, and wanted to be able to disburse their holdings without depressing the market for too terribly -- in other words, to get as much as they can for their shares. This, it seems clear, is quite analogous to the situation REFR's four hedge funds face.
What they did was to alternate back in forth in buying and selling shares of the stock, hoping to attract outside buyers on the upswings of the stock, so that they can sell more shares on the downswings as they had to buy to cause the upswings. In that manner, they would maintain a price range for their shares, while slowly but steadily reducing their stake. This same model for exiting a large, otherwise unmarketable position has been followed ever since, and it is clearly being followed again by our four hedge funds.
But of course, that would imply that the hedge funds wish to exit their positions in REFR, and if it is your desire to promote REFR, there is no way you can allow that to become prevailing wisdom! So what do the promoters do? They same thing they always do when in doubt -- blame everything on the shorts.
The shorts, they say, were covering in a panic, to explain the rise from $5.00 to $6.50. And now that the price is in decline, they reverse themselves and say that the shorts are in full control, "walking down" the price. Quite the manic-depressives, the shorts of these promoters' imaginations!
To listen to the promoters consistently over the years, the shorts have sold enough shares -- without ever managing to buy a single one from the infinitely loyal shareholder base -- to cover the total shares outstanding five times over. Where these shares supposedly keep coming from, and where they go after being sold to bring down the share price, is a subject of much hand-waving and changing of the subject.
At any rate, the funds have about a year to work their way out of their positions, before REFR has to sell more shares to keep the company running. Presumably, then, we'll see a steady cycle of back-and-forth between $5.00 and somewhere in the sixes, until such time as the company needs to raise more funds, or one of the funds decides they've sold enough that they can simply dump the rest at whatever price, or one of the funds goes broke and has to liquidate (always a risk in the hedge fund world), or some other outside influence comes into play, whether for good or ill from the company's perspective.
But whatever happens, of course, it will all be the shorts' fault.
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