The short end of the stick

Although this blog is intended to focus on the company Research Frontiers itself, the discussion elsewhere often strays into tangential topics, frequently at the encouragement of management. One of the most popular side tracks is that of the short position in REFR.

Now, I personally don't think it should be a surprise to anyone that a company trading at over 400 times revenues would have a substantial short position. But of course that doesn't account for the Type 3 mindset, which is constantly surprised that anyone could have the audacity to disagree with it.

Today's post for the dissection table is a more generalized rant against the concept of short selling. It was in response to a question, what would REFR's valuation would be in the absence of a short position.

Value of REFR ? It is in the eye of the beholder.

Well, that's unarguable, if unsubstantive.

There have been stocks that have been viewed to have large potential, that went up to have 100's of millions in market cap.
Yet when the run up was made they had no to little in earnings.

Yes, and then 2000 came and those stocks got crushed.

Look most NASD stocks can not make a profit and yet their Market Cap is HUGE.

Again, the poster appears to be living in the bubble era.

SPD's potential is HUGE,we can see how GNTX using an inferior tech (for large applications) has over 2 bill in market cap.

Amusing. Gentex's tech is "inferior", but it was marketable and SPD wasn't.

The bet is, can RFI's licensees succeed in producing end products using SPD tech.The longs are convinced this will happen!

Aren't they always? The fact that they're never proven right never seems to matter.

The shorts have done harm to RFi's shareholders,by causing dilution & causing RFI to spend money on defending themselves and pursing justice for those who manipulated and libeled the Co.

This is where it gets a little bizarre. The "pursuing justice" part apparently refers to the company's insinuation that Manuel Asensio attempted extortion against them in early 2001. Their "pursuit" consisted of turning their claims over, not to the police or the FBI, but the SEC, an agency with no police power.

But the shorts "caused dilution"? Forced the company to spend money "defending themselves"? Against what, pray tell? Is there some investigation going on that we don't know about?

REFR should be selling for 20 a share IMO based on the markets,the superior tech,the # of licensees,the quality of licensees,the patent portfolio,etc...

The "superior" tech, which the auto companies rejected in favor of "inferior" Gentex, the licensees of which even the company admits the majority are dormant, and the patent portfolio that the company doesn't even carry on its balance sheet as an asset; their most recent patent acquisition was immediately expensed.

Yes,you shorts have tried to destroy this Company but you have failed and RFI will become a large dividend paying machine.

This brings up another insidious vision perpetrated by Mr. Harary: his declaration that when REFR becomes profitable, that the vast majority of profits will be cycled back to the shareholders in the form of dividends. Because apparently the company has no actual growth ambitions whatsoever. It apparently plans to be the same 12-person outfit ten years from now, the only difference being that they'll be funnelling hundreds of millions a year in royalty revenues to its beloved shareholder base.

As the Brits say, pull the other one.

However I wonder how many companies you have suceeded in destroying?
How many shareholders have you shafted?

Isn't that always the way? It's never the company failing on its own, or management shafting the shareholders, it's always the fault of the shorts. In truth, the only way shorts can actually destroy a company is through something called a "toxic convertible", which requires the complicity of company management to happen anyway.

Short selling is harmful to the economy and can never stand the test of time.
Why?
Because, when you base a market on anything but successs, it is doomed to fail.

By that reasoning, the insurance industry is a passing fad. After all, isn't it based on the notion that bad things can happen?

Shorting is done all the time in business.
Yes it is,
however the intent is to deliver the product or service.
Short selling in the stock market is to drive the stock (business) to 0.

The poster gets a little incoherent towards the end, apparently thinking that "stock" and "business" are interchangeable terms, and that a short sale can only gain if a company goes bankrupt. Besides that, though, REFR, by its own admission, isn't in place to deliver a product or service, but to just sit there like an overgrown leech, sucking royalty revenue off a technology that other companies (they hope) develop. Where is the economics of that?