Architect of nothing

Yes, REFR has recovered some of its losses today, and of course the longs are dancing in the streets. Never mind that they're celebrating prices that, until a week ago, they were saying REFR could never possibly fall to.

I'll give them this, they're a happy lot when they want to be. The stock rises, and they're delighted; it falls and they're ecstatic, because it's another excuse to do their favorite thing in the world, and that's claiming to be buying more REFR stock. I say "claiming" because I doubt more than 10% of the claimed buys are actually real. But hey, you call the bottom enough times, eventually one will stick. For a while.

Anyway on to today's PR retrospective. This one is a PR and photo gallery in one, and is a summation of all of SPD Inc. exploits outside of their final appearances in the DaimlerChrysler vehicles.

You can review this for yourself, of course, but for posterity's sake I'll run down the list. First, we have an office in Jakarta, Indonesia. You'll note throughout that these installations are scattered in out-of-the-way, or otherwise unspecified locations. Almost as if they didn't want anyone checking up on any of them. Anyway, the office contains two chairs and a table too small for any practical use, even as an interview room. Furthermore, we don't actually see photos of the SPD turned on (clear), so it might as well be just a bunch of darkened glass. The doors built in to the walls than form a complete circle are snazzier than anything SPD could hope to be, anyhow.

Then we have a few glass panels in a Singapore office building. Once again, we only see photos of the dark state. This time the SPD isn't upstaged by any cool architectural features, but as a result the whole thing looks kind of dumpy. It's a glass door. And a glass wall. Whoop de doo.

Finally, we come to the big finish, a pool in an unidentified location in Greece. This one, at least, seems to show panels in both light and dark states, though it seems clear (har!) that regardless of the film's state it's not difficult to see straight through the panels. So much for privacy! More curiously, those panels don't even seem to be hooked up to anything. This may be just as well, as having household current that close to a swimming pool would certainly make me wary. Oh, and in a nice piece of photographic mastery, the photographer's legs are clearly visible in the second pane from the left. Nice work!

Amazingly, despite all these lovely installations (no mention is made as to whether they were actually paid for), SPD Inc. was even then in the process of being written down by its joint owners and was less than a year away from disappearing. Such a pity.

It's also worth a reminder that it has now been a full year since SPD Inc.'s shutdown, and the "competition" which supposedly drove them out of business has yet to actually materialize. I wonder how long before any of the promoters admit that competition might not have been the reason after all.

Keen and Krekorian

A strange little bit of parallelism yesterday arose between Victor Keen of REFR and Kirk Kerkorian of GM. Both are associated with troubled companies, and both made "statement buys" of their company into the teeth of the selling. Kerkorian put out a tender offer for 9% of GM, while Keen contented himself with a modest 10,000 shares (less than 0.1%) of REFR. Both stocks rallied throughout the day on the offer.

Then the new day dawned and realization set in. In the case of GM, it was that their financial situation was still dire, a fact puncutated by Standard & Poor cutting their bond rating to junk status. In the case of REFR, well, it was that it was REFR.

And so today both are giving back. In fact, it's starting to look like a horse race as to which one will go under first. Right now REFR looks to last a bit longer, as they, in theory anyway, still have the "debt" card to play, and could buy themselves another year with that. Then again, GM probably has some tricks left in their bag, if there's anyone left there will the brains to use them.

One thing for sure, I don't expect to see any SPD-equipped GM cars anytime soon.

The Annual Distort

REFR also published its annual report yesterday. As with much of what REFR says, it's great comedy if you take it the right way.

"The SPD industry came of age in 2004", the letter to the shareholders begins. So apparently "coming of age" involves taking in even less revenue than the pathetic year before. But then they talk about "momentum building to the rebirth of the new SPD industry". Aren't those kind of contradictory concepts?

In the next paragraph, the letter describes the state of production of the major production licensees. Some are said to be in "advanced testing", others "even in fine-tuning". I guess we have to take as given the implication that fine-tuning is a later stage than advanced testing.

After some hand-waving about how much work they're doing to help the licensees get to a mass production stage, they reference the Setra and Rescue displays from DaimlerChrysler, and how they are "typical" of automotive interest in SPD. Indeed, so great a "success" were those two installations that the product supplier folded within a year. Except that the letter to the shareholders doesn't mention that part. Ever.

But they do mention InspecTech, and how they have "either installed or engineered" windows for various aircraft models. Of course, not only is a breakdown of "installed" vs. "just engineered" unavailable, and not only is there no indication as to just what "engineered" entails (figuring out the size of the window might well qualify), but the claim and list of model has been on the Inspectech website for years.

Oh, and the trade shows. Yes, SPD is always getting taken to trade shows. From the press releases it seems the SPD "industry" spend as much on travel as it does anything else. Las Vegas, Florida, Germany, Switzerland... these guys really get around. With all the worldwide exposure SPD was getting you might think there'd be some pretty good demand for the stuff built up, but of course you'd be wrong.

They run down the Licensee Class of 2004, thank the shareholders for their continued patience (your money is very important to us, please stay on the hook), talk about their ever-present optimism, and that's about it.

They're working hard, they're losing money, but they're optimistic. That's the gist of the shareholder letter in one line. Wow, sure makes me want to buy their stock.

Can't wait for next year's excuses. If they're still around to make them, that is.

Kittanning Kapers

Today's spotlight licensee is a bit of an anomaly in many respects. It is a product-side licensee, yet clearly independent of the SPD "in-group", and not at all involved in any promotional efforts for REFR.

Meet Custom Glass Corporation.

Located in sleepy Kittanning, Pennsylania, it's not entirely clear what the state of the company's financial health is, what with it being a private company and all. Though given what information there is on Kittanning (the proudest photo the city has is the bridge leading out of town), it can't be the biggest growth area ever. Most likely, they do what they do and make a decent living off of it, and there's not a whole lot else to say. Except for that one day when those guys from NYC came to town...

Truth be told, any comments about the circumstances of how Custom Glass came to be an SPD licensee would be just speculation. Most likely, Custom put nothing into it and got nothing out of it, and is just going on with business just as before, with the license all but forgotten. REFR, for its part, however, did get something out of it -- the ability to claim "up to" 15% royalties on SPD products produced, as Custom's license happens to contain the highest royalty rate of any licensee. In a sense, you could say Custom got ripped off, but in another, they really got ripped off of nothing.

GE: Even We Can't Bring SPD to Life

Today I'm going to go back to near the beginning of what is considered "recorded history" for REFR. Since no PR's exist on the REFR website prior to their 1991 production of SPD into a film form, conventional shareholder "wisdom" is that the first quarter-century of the company's existence consisted of Saxe and company "working hard" to perfect SPD, sometime during which somebody took them public. Yes, you'd swear that company management had practically nothing to do with the company going public, and certainly didn't make any indications about their state of progress to investors in their IPO, to listen to the current party line of the promoters.

But at any rate, 1994 came along and REFR hooked its biggest fish ever, as no less a company than General Electric became a licensee. Needless to say, the stock took off on this obvious validation. Then, just as some started asking the right questions, such as, what exactly has GE committed to, REFR followed up with a beaut of a PR: "Research Frontiers Denies Knowledge of Possible General Electric Buyout" . Shockingly (I know!) this only served to feed rumors of such a buyout, and shoot the stock higher, if only momentarily.

Soon, cooler heads prevailed, and as investigations went on, it soon came out that GE's role was strictly as a contract manufacturer. In other words, GE would make SPD film to REFR's specifications, when, and only when, one of REFR's licensees put in an order.

This never happened, of course, and REFR never brought up GE ever again, except when publishing an enumeration of its licensees.

Today's promoters of REFR completely hate it when GE is brought up. GE is still officially listed as a licensee (though some sources say the license will finally expire later this year), so in theory, there's no reason why REFR shouldn't be able to turn to them to alleviate the problem of "supply capacity" they keep complaining about.

Of course, that is because the truth is, the problem is not, and has never been, the ability to produce in quantities large enough to meet demand. That whole business is a red herring to distract from the fact that, at the price at which SPD film products can be sold, demand for them is negligible.

Worse, it gives the company's critics easy ammunition, in the form of the argument, "well if GE couldn't do anything with it, why should we think anyone else can?"

Finally, it leads one to the easy conclusion that current "big-name" licensees, such as Hitachi, DuPont and Air Products, have essentially the same kind of relationship with REFR, and will do nothing of their own accord with SPD until prompted to do so by REFR. This is not diminished in any way by the fact that Hitachi (actually Hitachi Chemical, a very small subsidiary of the giant conglomerate), a licensee since 1999, has, so far, proven to have been at least one year from picking up the SPD film production "slack" when SPD Inc. went under.

What, exactly, was Hitachi doing with their license from 1999-2004? That's a question that only ever seems to get answered with a question, such as, "who's paying you to ask these questions?"

And so it goes at the stock circles the drain...

The 1% Solution

Have you ever heard any variation of this line from someone talking about their favorite stock?

"If we can just capture 1% of the market, why, that's millions and millions of dollars! We'll be rich!!"

Where "the market" is something ludicrously huge for a tiny company to be taking on, like the number of households in the United States, or, in REFR's case, the worldwide market for glass, which runs around 20 billion square feet per year.

It's an easy trick for the uninitiated to fall for, as the promoter makes some huge undertaking seem trivial by placing it aside something even larger. Still, it's a trick that gets recycled so often (and always with the "1%" figure), that it becomes harder and harder to understand how that keeps its "freshness" as a promotional tool.

Think about how ludicrous it would be for me to expect 1% of the world's web surfers on a given day to view my site. That'd be millions of hits. I'd be one of the most famous bloggers out there (instead of my current state of being one of the most anonymous).

The reality is, just like there are too many blogs out there for anyone to get that "1%", there is too much competition in the overall "market" the one-percenters claim to target, for any but the extremely powerful companies of the world to be able to attain them. Certainly a tiny company, like REFR, cannot aspire to such levels at this point. And yet that's just what their shareholders have been led to do...

A new low, literally.

Something to think about: the last time REFR stock traded lower than this morning's low of $4.168, the current second-term US President's father was in office.

Yes, not since the waning days of the George H. Bush administration, January 13, 1993, when REFR touched $7 3/4, factoring to $4.1333 after the 1994 stock splits, has REFR traded as low as it has did this morning. That comes to a twelve-year low.

Yet, even at $4.168, that represents a valuation of 286 times trailing revenues, and a price-to-book of 22.3.

It should be painfully obvious by now that hedge fund buyers of February are now resigned to getting whatever they can for their shares. Which means the thought probably hasn't even occurred to the Type 3 group.