The "Quality Four" coming to light?

Recent updates to the Nasdaq website are revealing the identities of large acquirers of REFR stock -- almost certainly the four "quality investors" that bought $5 million of the stock last February and have been choking on it ever since. As of this writing two such names have appeared.

The first one is a name familiar one to REFR message board denizens and not in a good way. Botti Brown has long been decried as one of the "fake longs" whose positions in actual fact represent a covering of a short position. This upsets them because it indicates, in theory anyway, potential ammunition to drive the share price down even further. The fact that no sane financial entity uses its own selling to drive down a share price (without a death-spiral convert to hedge against) never seems to register with them.

The second one is less familiar, and, predictably, has the longs considerably more excited. Stark Offshore Management, LLC, one of a small group of similarly named hedge funds (the only other one of significance being the creatively-named Stark Onshore Managment, LLC) operating out of the Milwaukee area by Brian Stark and Michael Roth. These two are relative veterans of the hedge fund industry, which makes their choices in recent events a bit peculiar, such as bankruptcy candidates Delta Air Lines and Calpine. There is surely some hedging involved with those positions, of course, but going long the common stock is nevertheless an unusual way to play those companies regardless of what tricks you might have.

A couple of trouble signs for Stark: One of "onshore"'s largest holdings is the GM debt that was recently downgraded to "junk" -- an event that has proven lethal to several hedge funds already. More telling is a 2002 newspaper article that lists them as controlling $2.2 billion in customer assets. Today that figure has dwindled to $1.5 billion: never a good sign.

Not that investing over $2.5 million in REFR, without anything apparent to hedge against, is a raging positive either.