A small problem

Short sellers in REFR got to see that magic word many of them have been waiting to see for years.

Yes, REFR has been delisted. Sort of. Technically, what has happened is that REFR has "phased down" from the Nasdaq National Market to the Nasdaq Small Cap Market.

(Editorial note: Actually, the notice of delisting was given today. Research Frontiers can avoid delisting by reaching a market cap in excess of $50 million, roughly $3.62 per share, for 10 consecutive trading days between now and August 4th. This probably explains in part today's uptrend in the stock.)

What does that mean? Well, as with so many other events related to REFR, it actually means very little in a substantive sense. REFR will remain REFR, and most people with positions in the company, long or short, will notice no direct changes in the way REFR trades.

One distinction that used to put some dread in the hearts of naive shareholders was the removal of the "bid test" for short sales. In other words, assuming that borrows were readily available, short sales could go off just as easily as any other sort of sales. Contrary to prevailing "wisdom", however, this omission did not open the floodgates for abusive short selling of small cap stocks.

However, that distinction has been removed with the implementation of Regulation SHO, so in fact there is no practical functional difference between the two markets.

Lack of substance notwithstanding, this event will no doubt be an irritation to fans of the stock. What it signifies is that REFR is roughly among the lowest sixth of market capitalizations among Nasdaq-listed companies. This is not necessarily a mantle of shame for new, small companies still on the ramp-up. For a company with two decades of history of public trading, however, it can be rather humiliating. If nothing else, it will be another negative factor for the inevitable next round of capital raising.

Promoters will doubtless downplay this development, and perhaps in a strict sense be right, but it's at least worth bringing up that REFR seemed to think it meant something when it first joined the National Market in 1997.

Apart from that, just another milestone on the road to blue oblivion.