On March 31st, 2005, REFR licensee Thermoview filed an amended 10-Q (as well as a notification that their 2004 10-K would be late, never a promising sign). Among the disclosures in the amendment were changes to the company's licensing agreement with REFR, and specifically their schedule of payments, which they say were put into effect on December 31st, 2003. These changes are not presently reflected in any filing by REFR. Their most recent 10-K continues to reference the original 2000 agreement as the effective version.
The amendments substitute a reduced payment in 2003, for additional, larger payments in 2005 and 2006, although, with net tangible assets of around negative $20 million, the question arises as to whether any of this payment schedule will survive long, what with the prospect of a Thermoview bankruptcy looming ever larger.
Nevertheless, the discrepancy between the two companies' stories is disturbing. How can it be that troubled, filing-delayed Thermoview can keep track of changes to its agreement with REFR, while REFR itself, cannot?
Saturday, April 02, 2005
Thermo Breakdown
Thermoview Industries is something of a rarity among REFR's licensees, an actual, established retailer that agreed to sell SPD-based products, specifically, Alterlite-brand variable transparency windows.
The licensing terms were a relative coup for REFR, in that Thermoview committed to paying predetermined minimum royalties even if they never sold an SPD product. Speaking of which...
The "rollout" at at Thermoview was an interesting event in and of itself. The windows were supposed to be on display at various California locations throughout late July and early August of 2002. The official debut on July 15, 2002, was portrayed as a big event. A followup release four days later appeared to confirm that the introduction was a smashing success, with "better-than-expected results" and "accelerated progress".
Oddly, though, on the same day of the followup release, July 19th, the stock of REFR, which had been hovering right at $10, suddenly cratered to $7. The promoters, of course, blamed this on the short sellers, but then again, they blame everything short of rainy days on short sellers.
The truth of the matter came out a short while later, as an SEC filing revealed that none other than REFR chairman and founder Robert Saxe had sold 100,000 shares of stock right into the teeth of that July 19th press release.
Now, one might think that this would raise the ire of even the most loyal of shareholder bases. And, indeed, it does lend a considerable amount of credence to the theory that those posting as longs on the message boards are not, in fact, longs, but simply paid promoters. Oh, but Saxe had an excuse for selling, though. He had a margin call. No, really. The chairman of the board of a public company suffered a margin call on his own personal shares! So he claimed anyway; that contention was never proven. Further clouding the issue is the fact that Saxe never rebought those shares, even at today's prices which are lower than any at which he sold. One might well wonder why.
But all's well if the Thermoview rollout was a smashing success, right? Well, not so much there, as it turned out. Spot visits to Thermoview's California locations revealed no SPD on display. Calls to Thermoview's order line failed to find anyone who knew about SPD or Alterlite. Anticipated royalties in excess of the minimums never materialized. In general, the whole rollout seemed to have been a phantom event and the statements about "better-than-expected results" outright lies.
Over the years that followed, Thermoview's financial state has steadily deteriorated and they have fallen behind even in their minimum royalty payments to REFR. REFR began carrying an allowance for uncollectable receivables reflecting this. Thermoview's recent 10-Q/A filing had further disclosures on their relationship with REFR, which will be covered in part two of this posting.
The licensing terms were a relative coup for REFR, in that Thermoview committed to paying predetermined minimum royalties even if they never sold an SPD product. Speaking of which...
The "rollout" at at Thermoview was an interesting event in and of itself. The windows were supposed to be on display at various California locations throughout late July and early August of 2002. The official debut on July 15, 2002, was portrayed as a big event. A followup release four days later appeared to confirm that the introduction was a smashing success, with "better-than-expected results" and "accelerated progress".
Oddly, though, on the same day of the followup release, July 19th, the stock of REFR, which had been hovering right at $10, suddenly cratered to $7. The promoters, of course, blamed this on the short sellers, but then again, they blame everything short of rainy days on short sellers.
The truth of the matter came out a short while later, as an SEC filing revealed that none other than REFR chairman and founder Robert Saxe had sold 100,000 shares of stock right into the teeth of that July 19th press release.
Now, one might think that this would raise the ire of even the most loyal of shareholder bases. And, indeed, it does lend a considerable amount of credence to the theory that those posting as longs on the message boards are not, in fact, longs, but simply paid promoters. Oh, but Saxe had an excuse for selling, though. He had a margin call. No, really. The chairman of the board of a public company suffered a margin call on his own personal shares! So he claimed anyway; that contention was never proven. Further clouding the issue is the fact that Saxe never rebought those shares, even at today's prices which are lower than any at which he sold. One might well wonder why.
But all's well if the Thermoview rollout was a smashing success, right? Well, not so much there, as it turned out. Spot visits to Thermoview's California locations revealed no SPD on display. Calls to Thermoview's order line failed to find anyone who knew about SPD or Alterlite. Anticipated royalties in excess of the minimums never materialized. In general, the whole rollout seemed to have been a phantom event and the statements about "better-than-expected results" outright lies.
Over the years that followed, Thermoview's financial state has steadily deteriorated and they have fallen behind even in their minimum royalty payments to REFR. REFR began carrying an allowance for uncollectable receivables reflecting this. Thermoview's recent 10-Q/A filing had further disclosures on their relationship with REFR, which will be covered in part two of this posting.
Friday, April 01, 2005
Foolery of all types
On April Fools' Day, I thought it only fitting to highlight one of REFR's more vocal and frequent critics of recent days. He is Bill Mann, senior editor at the Motley Fool, a long-running website dedicated to financial education.
Mann's interest in REFR appears to simply one of fascination, about how a company with such a dreadful history of performance combined with such a lofty valuation relative to the fundamentals, could have such a zealous following. Indeed, even in articles where REFR is far from the main focus, such as this one, he still manages to draw all kinds of fire from those who seem to have no other purpose than to smear him.
The accusations he mentions hearing that he is part of some vast conspiracy involving short sellers and/or hedge funds are real; I've read them myself. To listen to some of these clowns, citing Manuel Asensio favorably is practically a jailable offense.
Pity they don't have much of a sense of humor. Then they might realize the joke is on them.
Mann's interest in REFR appears to simply one of fascination, about how a company with such a dreadful history of performance combined with such a lofty valuation relative to the fundamentals, could have such a zealous following. Indeed, even in articles where REFR is far from the main focus, such as this one, he still manages to draw all kinds of fire from those who seem to have no other purpose than to smear him.
The accusations he mentions hearing that he is part of some vast conspiracy involving short sellers and/or hedge funds are real; I've read them myself. To listen to some of these clowns, citing Manuel Asensio favorably is practically a jailable offense.
Pity they don't have much of a sense of humor. Then they might realize the joke is on them.
Thursday, March 31, 2005
A quarter to nothing
And so we come to the end of fiscal Q1 2005, with REFR producing nothing but bitter disappointment for its shareholders.
Of course, the promoters on the message boards will tell you now that they held no expectations for this quarter. But that is a lie. See this post for example:
Well, admittedly, the alias sjuan2 has subsequently disappeared from the board, but there is little doubt that person will be or is already posting again under a new alias. And so the cycle continues.
Meanwhile, Joe Harary collects another 100 grand or so for all this failure. Nice work if you can get it.
Of course, the promoters on the message boards will tell you now that they held no expectations for this quarter. But that is a lie. See this post for example:
100% confidence in an announcement, which didn't come. You'd think that just might shake the confidence of those posting there, but no.
Confidence Level on Commercialization
by: sjuan2 (52/M/Fremont, CA)
Long-Term Sentiment: Strong Buy12/07/04 02:59 pm
Msg: 191116 of 195140
For those who like numbers, the confidence level that SPD film commercialization will be announced:
January : 50%
February: 75%
March : 100%
sj
Well, admittedly, the alias sjuan2 has subsequently disappeared from the board, but there is little doubt that person will be or is already posting again under a new alias. And so the cycle continues.
Meanwhile, Joe Harary collects another 100 grand or so for all this failure. Nice work if you can get it.
Wednesday, March 30, 2005
Fraud, party of one?
One more promoter canard showed up today for the first time in a while. It's the "innocence by association" argument, that if REFR is in fact committing a fraud of some kind, then all their licensees, including several big name corporations, must be party to this fraud. Thus, if you question REFR's integrity, you likewise question the integrity of GE, Hitachi, DuPont, Air Products, etc.
This is, of course, absurd. The relationship REFR has with these large companies, while technically one of licensor-licensee, is in reality more like customer-supplier. REFR needs manufacturing capacity to produce SPD film, and the large companies are willing to lend it to them. (The fact that, so far, all this capacity has gone unused, is another issue and another post.) As long as the large companies have clear direction on how to make the film, that is all they really need to know. As hard as the promoters attempt to make the claim to the contrary, none of this constitutes any endorsement of the product, the technology, or REFR as an investment.
REFR investors should (read: don't) ask themselves, if REFR should happen to fail to achieve a revenue stream, fail to achieve new financing, and, as a result, fail as a company sometime next year, will that be DuPont's fault? Will they sue Hitachi for misleading them? Will they demand Jack Welch be thrown in prison for GE's complicity in the scam? Of course not. (Indeed, if anyone, they'll go after the shorts and those who warned them about REFR all along. That bit of psychosis is another post topic.)
To say that the supplier-licensees are a "party" to any of REFR's failures is like saying the power plants were a party to the Enron scandal for selling their energy to them. Utterly ridiculous. Much like everything else REFR.
This is, of course, absurd. The relationship REFR has with these large companies, while technically one of licensor-licensee, is in reality more like customer-supplier. REFR needs manufacturing capacity to produce SPD film, and the large companies are willing to lend it to them. (The fact that, so far, all this capacity has gone unused, is another issue and another post.) As long as the large companies have clear direction on how to make the film, that is all they really need to know. As hard as the promoters attempt to make the claim to the contrary, none of this constitutes any endorsement of the product, the technology, or REFR as an investment.
REFR investors should (read: don't) ask themselves, if REFR should happen to fail to achieve a revenue stream, fail to achieve new financing, and, as a result, fail as a company sometime next year, will that be DuPont's fault? Will they sue Hitachi for misleading them? Will they demand Jack Welch be thrown in prison for GE's complicity in the scam? Of course not. (Indeed, if anyone, they'll go after the shorts and those who warned them about REFR all along. That bit of psychosis is another post topic.)
To say that the supplier-licensees are a "party" to any of REFR's failures is like saying the power plants were a party to the Enron scandal for selling their energy to them. Utterly ridiculous. Much like everything else REFR.
Bounce time
With REFR back trading near the $5.00 it is almost certainly time for the hedge funds to stop selling stock and return to support mode, which, if recent history is a guide, will guide REFR back into the $6.00-$6.50 range. (Of course, it might not work out that way -- trade at your own risk.) By tomorrow we should have a fine sampling of chest-thumping from the Type 3 crowd that the coming run-up is "the big one", this time for sure!
The tragendy of Elgindy
This has no direct connection to REFR, but it does provide a further look into the mindset of what I call the Type 3 investor.
Amr "Anthony" Elgindy was convicted last January of exortion, racketeering, and securities fraud, involving his illegal acquisition of confidential FBI data regarding a number of small companies.
The bitter irony is that the truth that Elgindy went over the line to bring out, was promptly roundly ignored by those who stood to benefit most from the information, the shareholders of the companies involved.
Let me quote from a recent post on the REFR board that says it about as well as possible:
Once reasonable doubt is gone, it's too late to sell anyway.
Amr "Anthony" Elgindy was convicted last January of exortion, racketeering, and securities fraud, involving his illegal acquisition of confidential FBI data regarding a number of small companies.
The bitter irony is that the truth that Elgindy went over the line to bring out, was promptly roundly ignored by those who stood to benefit most from the information, the shareholders of the companies involved.
Let me quote from a recent post on the REFR board that says it about as well as possible:
Elgindy was a criminal. He was not lying about honest companies in order to turn a profit. He was using INSIDE information (read REAL FACTS) about CORRUPT companies.My summation: The stock market is not a courtroom, and investors are not a jury. One is not bound to disregard evidence simply because the methods for obtaining it may have been illegal. Investments are not presumed good until proven bad beyond a reasonable doubt.
...I remember when Elgindy was recomending shorting a small corporation based in NJ. They sold medical equipment. When Elgindy was charged, the stuckholders of this company were celebrating on the yahoo message board. I tried to explain to them that the charges were that Elgindy had illegal access to information taken from federal investigations. He KNEW their beloved company was a FRAUD, for a FACT. I got nothing but grief for my attempts to explain this very simple concept to them.
The offices of the company were later raided by the FBI. The company was delisted.
That's when I realized that SUCKERS are beyond redemption. You can show them in black and white that they have been had, and IT WILL NOT MATTER.
Once reasonable doubt is gone, it's too late to sell anyway.
Tuesday, March 29, 2005
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?
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?
Monday, March 28, 2005
Asensio angst
It can be a hazardous thing, at times, to write critically about a company with as zealous a group of shareholders and/or promoters as the one REFR enjoys.
Take for example the case of Manuel Asensio. An outspoken critic of companies to say the least, Asensio turned his wrath on REFR for about six months in 2001, writing a scathing series of articles (acceptance of site agreement may be required to view) about REFR and its activities at the name.
In the intervening years, two things have happened. One, Asensio was proven correct on virtually every score (apart from his $1 price target for the stock). And two, the shareholders of REFR have never forgiven him.
The enduring hatred that REFR's shareholders have for Asensio is partially incited by the website AsensioExposed.com, a website dedicated to destroying Asensio's reputation at all costs. They do this not by attempting to refute any of his criticisms of companies, but rather by making hay over his battles with the National Association of Securities Dealers (NASD, from which is derived the name of the Nasdaq Stock Exchange), leading to his eventual disbarrment by that association.
It is not my desire to get into the details of what Asensio has or has not done right now. But the fact the the posters to the REFR board still enthusiastically revile the man four years after he penned his warnings about REFR, at prices three or more times today's levels, only goes to show that this is a lot that does not have their collective head on straight.
Back in 2001 and 2002 there just might have been a sort of point to attacking Asensio, in order to discourage people from believing what he had to say about their favorite company. But with everything he has said about so many companies, including REFR, having been borne out, what seems to be left is nothing more than hatred for its own sake.
Take for example the case of Manuel Asensio. An outspoken critic of companies to say the least, Asensio turned his wrath on REFR for about six months in 2001, writing a scathing series of articles (acceptance of site agreement may be required to view) about REFR and its activities at the name.
In the intervening years, two things have happened. One, Asensio was proven correct on virtually every score (apart from his $1 price target for the stock). And two, the shareholders of REFR have never forgiven him.
The enduring hatred that REFR's shareholders have for Asensio is partially incited by the website AsensioExposed.com, a website dedicated to destroying Asensio's reputation at all costs. They do this not by attempting to refute any of his criticisms of companies, but rather by making hay over his battles with the National Association of Securities Dealers (NASD, from which is derived the name of the Nasdaq Stock Exchange), leading to his eventual disbarrment by that association.
It is not my desire to get into the details of what Asensio has or has not done right now. But the fact the the posters to the REFR board still enthusiastically revile the man four years after he penned his warnings about REFR, at prices three or more times today's levels, only goes to show that this is a lot that does not have their collective head on straight.
Back in 2001 and 2002 there just might have been a sort of point to attacking Asensio, in order to discourage people from believing what he had to say about their favorite company. But with everything he has said about so many companies, including REFR, having been borne out, what seems to be left is nothing more than hatred for its own sake.
Thursday, March 24, 2005
Mr. Belmonte, You're Trying to Seduce Me
Today saw the unveiling of the REFR's latest PR shenanigan. It wasn't released by REFR, of course. They seem a little antsy about anything remotely of substance being released under their corporate name. No, as per their usual MO of late, they are promoting through a surrogate, in this case one Steve Belmonte, of Hospitality Solutions, LLC, and apparently only for purposes of promoting SPD, Hotel Technologies (no Inc., LLC or any other corporate designation).
Mr. Belmonte has developed what he calls the Grad-U-Wake Timer. Not to be confused with the Graduwake brand of alarm clock radio by General Electric. Not to worry about trademark issues, of course, since there will only be confusion if Mr. Belmonte's invention goes on to become an actual for-sale product.
The idea behind the Grad-U-Wake timer is that it will incrementally change the light transmittance of a hotel window equipped (naturally) with SPD, steadily letting in more and more sunlight so as to gently wake the room occupant. Much nicer than one of those wake-up calls, don't you think? Of course, it's not going to be of much use if one needs to rise before dawn, but hey, nothing is perfect.
But the real problem lies in the properties of the SPD film itself, along with the small issue that when you get right down to it, the sun is one really bright sucker.
SPD, in its darkest formulation is rated, so they say, to block 98.5% of incoming light. That certainly sounds good, until you run the math. Even towards its low end sunlight measures about 32000 lux. 1.5% of that, the amount SPD lets through even in its darkest phase, comes to about 480 lux, which is comparable to the light in a reading library. Not exactly ideal conditions for sleeping in, if your window happens to be facing east!
And that's to say nothing of the privacy issues. Sure, it's no big deal if you're on the 20th floor, but if you happen to be in a ground level room, you'll probably note that, for all its light-block properties, SPD does not become opaque under any circumstances. The upshot being that if you have a light on in your room at night, an SPD window will not do much little to protect your privacy.
Promoters of SPD technology continuously make the claim that windows equipped with SPD will make curtains, shades and blinds obsolete. I personally tend to doubt Levolor is quaking in their boots over SPD.
Mr. Belmonte has developed what he calls the Grad-U-Wake Timer. Not to be confused with the Graduwake brand of alarm clock radio by General Electric. Not to worry about trademark issues, of course, since there will only be confusion if Mr. Belmonte's invention goes on to become an actual for-sale product.
The idea behind the Grad-U-Wake timer is that it will incrementally change the light transmittance of a hotel window equipped (naturally) with SPD, steadily letting in more and more sunlight so as to gently wake the room occupant. Much nicer than one of those wake-up calls, don't you think? Of course, it's not going to be of much use if one needs to rise before dawn, but hey, nothing is perfect.
But the real problem lies in the properties of the SPD film itself, along with the small issue that when you get right down to it, the sun is one really bright sucker.
SPD, in its darkest formulation is rated, so they say, to block 98.5% of incoming light. That certainly sounds good, until you run the math. Even towards its low end sunlight measures about 32000 lux. 1.5% of that, the amount SPD lets through even in its darkest phase, comes to about 480 lux, which is comparable to the light in a reading library. Not exactly ideal conditions for sleeping in, if your window happens to be facing east!
And that's to say nothing of the privacy issues. Sure, it's no big deal if you're on the 20th floor, but if you happen to be in a ground level room, you'll probably note that, for all its light-block properties, SPD does not become opaque under any circumstances. The upshot being that if you have a light on in your room at night, an SPD window will not do much little to protect your privacy.
Promoters of SPD technology continuously make the claim that windows equipped with SPD will make curtains, shades and blinds obsolete. I personally tend to doubt Levolor is quaking in their boots over SPD.
Suckers Only
Today's quote from the message boards:
Of course a number of inconvenient questions arise:
The usual answers to these are:
"The longs have private discussions lists that unlike this joke of a message board are truly useful. That's where all the action is."It's a frequently-made claim on the REFR boards, that the shareholders have this private club where they discuss the "really good stuff" with respect to REFR. And if you truly give yourself over to REFR, maybe one day you'll be blessed with the password to the private club. Or something like that anyway.
Of course a number of inconvenient questions arise:
- If the information is so bullish for REFR, why keep it private?
- It you guys are in possession of material nonpublic information, doesn't that constitute a Reg. FD violation?
- What's so great about information that caused you to buy at twice today's prices, anyway?
The usual answers to these are:
- "Because sharing it with the shorts will only help the shorts." Which makes no sense, because if the information is good and sound, what will the shorts be able to do about it? An alternative response: "Because it's more fun to string you along." Whatever.
- Either "The info isn't really nonpublic -- you just have to know where to look" (much like with this blog), or "The info comes from the licensees, which aren't public companies, and therefore not subject to Reg. FD".
- "Shut up. Who pays you to spend so much time asking these questions anyway?". Or sometimes, if they're in a good enough mood, "It won't matter what I paid for it because it's going to be worth hundreds of dollars a share anyhow."
Wednesday, March 23, 2005
Pump up the Volume
Today's promoter quote for the dissection table:
"up almost 8% on less than 4K traded? Took 40K to take it down that much"
The implication being that it is taking much more effort to move REFR down than it does to move it up.
The thing is, despite the attractive logic of that point of view, anyone with experience in the market will tell you that that is completely bass-ackwards. Why is that?
Think of it in these terms. Higher volume on downtrends means that the sellers are more enthusiastic with their selling, than the buyers are with their buying.
The divergence comes from one's perspective about what the motivation of the selling is. Now, normally, one would tend to think that the motivation of a sale is straightforward: the price one can get for the stock is higher than the seller believes the stock is worth.
Ah, but things are never that easy in the world of the Type 3 investor. From the Type 3 perspective, the notion that anyone could believes the current price is worth selling at is absurd. Why? Because they themselves paid much more for the stock! Remember that a Type 3 investor is allergic to admitting being wrong. Therefore if REFR was a buy at, say, $10, it cannot possibly be a sell under $6. The fact that the price remains over 400 times revenues (not earnings), or any other numerical argument that REFR is not worth anywhere near its present market capitalization, means nothing to them.
So why, you ask Mr. Type 3, is there selling at this level. Why, manipulation, of course! Refer back to my post on the task facing our four hedge fund investors, and then turn it on its head. Portray it instead as the shorts being on a very long-term project of escaping a large short position by selling to attract other selling, then buying back into the decline, and you have the perspective of the Type 3 investor in a nutshell.
So what's wrong with that, you might well ask. Aren't the arguments symmetrical? Well, no, not quite. For one thing, it's a lot easier to talk someone into buying on a rally than into selling on a decline. This is because there's a little of the Type 3 investor in most everyone. Buying, especially adding to a position, is an reaffirmation that one is right. Selling at a loss is a confession to having been wrong. Who wants to be the pessimistic seller, when you can be the optimistic buyer?
Another big assymetricality comes in what the industry refers to as the "uptick rule". This rule, a holdover from the 1929 crash, essentially states that you can't drive a stock's price down with short selling. The precise mechanics of the rule vary from market to market, but the gist of it is that if a stock last traded at $5.45, you can't fill a short sell order at $5.40.
So how is downward manipulation supposed to work, then? This is where things start to get a bit silly. The idea is, that the short sellers hold a substantial number of shares long, in accounts seperate from their short positions. (For a time, the promoters even referred to these as "illegal long accounts", as if there was such an animal.) They then dump these shares on the market, to improve the value of their short position. Simple, huh?
This is why the promoters get all excited about uptrends coming on lower volumes than the downtrends. From their point of view, the shorts expended 40,000 of their shares in driving the price down yesterday, but were only able to buy 4,000 of them back before the price got back to where it was before. At this rate, the theory goes, the shorts will quickly run out of shares to dump in such a manner, and there will be nothing left to keep the stock down ever again.
Multiple years of fruitless waiting for the shorts to "run out of shares", never seems to dissuade the touters of this theory of the markets.
And all the while they play right into the hands of the real players in the market of REFR, who are selling, not buying, large positions, and happily scooping up the money of the marks just as fast as it can be laid out.
Welcome to Looking-Glass Land, Alice.
"up almost 8% on less than 4K traded? Took 40K to take it down that much"
The implication being that it is taking much more effort to move REFR down than it does to move it up.
The thing is, despite the attractive logic of that point of view, anyone with experience in the market will tell you that that is completely bass-ackwards. Why is that?
Think of it in these terms. Higher volume on downtrends means that the sellers are more enthusiastic with their selling, than the buyers are with their buying.
The divergence comes from one's perspective about what the motivation of the selling is. Now, normally, one would tend to think that the motivation of a sale is straightforward: the price one can get for the stock is higher than the seller believes the stock is worth.
Ah, but things are never that easy in the world of the Type 3 investor. From the Type 3 perspective, the notion that anyone could believes the current price is worth selling at is absurd. Why? Because they themselves paid much more for the stock! Remember that a Type 3 investor is allergic to admitting being wrong. Therefore if REFR was a buy at, say, $10, it cannot possibly be a sell under $6. The fact that the price remains over 400 times revenues (not earnings), or any other numerical argument that REFR is not worth anywhere near its present market capitalization, means nothing to them.
So why, you ask Mr. Type 3, is there selling at this level. Why, manipulation, of course! Refer back to my post on the task facing our four hedge fund investors, and then turn it on its head. Portray it instead as the shorts being on a very long-term project of escaping a large short position by selling to attract other selling, then buying back into the decline, and you have the perspective of the Type 3 investor in a nutshell.
So what's wrong with that, you might well ask. Aren't the arguments symmetrical? Well, no, not quite. For one thing, it's a lot easier to talk someone into buying on a rally than into selling on a decline. This is because there's a little of the Type 3 investor in most everyone. Buying, especially adding to a position, is an reaffirmation that one is right. Selling at a loss is a confession to having been wrong. Who wants to be the pessimistic seller, when you can be the optimistic buyer?
Another big assymetricality comes in what the industry refers to as the "uptick rule". This rule, a holdover from the 1929 crash, essentially states that you can't drive a stock's price down with short selling. The precise mechanics of the rule vary from market to market, but the gist of it is that if a stock last traded at $5.45, you can't fill a short sell order at $5.40.
So how is downward manipulation supposed to work, then? This is where things start to get a bit silly. The idea is, that the short sellers hold a substantial number of shares long, in accounts seperate from their short positions. (For a time, the promoters even referred to these as "illegal long accounts", as if there was such an animal.) They then dump these shares on the market, to improve the value of their short position. Simple, huh?
This is why the promoters get all excited about uptrends coming on lower volumes than the downtrends. From their point of view, the shorts expended 40,000 of their shares in driving the price down yesterday, but were only able to buy 4,000 of them back before the price got back to where it was before. At this rate, the theory goes, the shorts will quickly run out of shares to dump in such a manner, and there will be nothing left to keep the stock down ever again.
Multiple years of fruitless waiting for the shorts to "run out of shares", never seems to dissuade the touters of this theory of the markets.
And all the while they play right into the hands of the real players in the market of REFR, who are selling, not buying, large positions, and happily scooping up the money of the marks just as fast as it can be laid out.
Welcome to Looking-Glass Land, Alice.
Tuesday, March 22, 2005
Recommend if you think this is silly
This is another example of the type of silliness you see on the Yahoo boards a lot:
While it's nice to see the shareholders support their company and hoping that those who bet against them fail, these kinds of "polls" are just abject silliness. So you have 35 accounts (representing at most 35 people -- who can say how many accounts some of these jokers have?) in the whole world rooting for REFR. La dee da. Yet for some reason some of these people take them seriously. In fact, one day a couple of weeks ago, the Yahoo message boards were having glitches (which continue to this day). In this case, recommendations were appearing and disappearing somewhat randomly from messages. This post was typical of the reaction:
Oh, and the punch line:
Sigh.
| | |
| Reco this post if you by: aa11000000 Long-Term Sentiment: Strong Buy | 03/22/05 06:55 am Msg: 194911 of 194925 |
Support RFI's licensees,SPD tech,it's management, the complete and total destruction of the shorts & the scum bashers that post here day and night. | |
While it's nice to see the shareholders support their company and hoping that those who bet against them fail, these kinds of "polls" are just abject silliness. So you have 35 accounts (representing at most 35 people -- who can say how many accounts some of these jokers have?) in the whole world rooting for REFR. La dee da. Yet for some reason some of these people take them seriously. In fact, one day a couple of weeks ago, the Yahoo message boards were having glitches (which continue to this day). In this case, recommendations were appearing and disappearing somewhat randomly from messages. This post was typical of the reaction:
| RFI in Perspective -- Glitch by: petrichgetrich Long-Term Sentiment: Strong Buy | 03/07/05 07:29 am Msg: 194327 of 194926 |
Yesterday, when I looked, my "RFI in Perspective" post had 15 recommendations. Now it has none. Either Yahoo has had a glitch or some desperate short has figured out how to play with the Recs. column -- most likely the latter. | |
Oh, and the punch line:
Recommend this post if you agree. |
Sigh.
Up and down
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.
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.
Monday, March 21, 2005
Technically correct
An exchange today on the Yahoo board highlights a major aspect of the REFR "style" of being in the "right".
A critic complained, in part:
Of course, while focusing on the inaccurate statement, the promoter deftly sidesteps the actual issue, which was that Joe Harary delivering a monologue running nearly an hour does not meet standard investor expectations as to what a corporate conference call is supposed to be. The promoter was right, but he didn't exactly prove the critic wrong, either.
Indeed, the promoter, in extracting his technical definition, chose to overlook the very next paragraph, which says, in part:
A critic complained, in part:
"Calling that monologue a conference call was an insult to shareholders. Announcing it in a press release as a conference call was a lie. There is no such thing as a conference of one."To which a promoter replied with a dictionary definition of "conference call":
Conference CallTechnically, the promoter is correct. There is no inherent promise of interactivity in a conference call. All a conference call technically requires is participants in three or more locations, including the central point.
An event in which investors can call into a special phone number and hear the management of their company comment on the financial results of the recently completed quarter.
Of course, while focusing on the inaccurate statement, the promoter deftly sidesteps the actual issue, which was that Joe Harary delivering a monologue running nearly an hour does not meet standard investor expectations as to what a corporate conference call is supposed to be. The promoter was right, but he didn't exactly prove the critic wrong, either.
Indeed, the promoter, in extracting his technical definition, chose to overlook the very next paragraph, which says, in part:
"Most publicly held companies hold four conference calls per year."Clearly, REFR, for whom this was the first such call in two years, is not like"most publicly held companies".
Holding out hope
In my last two posts, I described how the company's management has no particular incentive to make REFR into a profitable corporation, and how the board of directors is effectively a puppet of management. Given this knowledge, what sane investor would have anything to do with such a company?
In my experience, there are basically three types of investors in REFR. First, you have Type 1 (I'm numbering arbitrarily here), the true victims, unaware, largely elderly folk, who trust brokers and money managers with their wealth, only to have them unscrupulously place them in such horrid investments as REFR. They are unlikely to be aware of REFR, and even if they somehow hear the story, they have no particular reason to think it has anything to do with them. Their story is a tragedy, and unfortunately one about which there is very little else to say. Regulation of brokers and money managers is pathetic and we are miles away from reform on that front.
Then you have Type 2, the run of the mill suckers. They see SPD demonstrated, and they say, wow, I gotta get me a piece of that. It's a mistake that investors make all the time, and probably every one of us has done something like that at some point, but it's a mistake all the same. Being "wowed" by the SPD demonstration, by the way, is nothing to be ashamed of, even in long-term retrospect. The little demonstration panel, roughly one foot square including a thick border in which the wiring is kept, works quite well and is quite an impressive sight. Indeed, for all we know, that might be what led Robert Saxe to acquire the patents for SPD and incorporate Research Frontiers to begin with.
But, inevitably, the investor reaches a state of disappointment, when it becomes clear that their expectations with respect to REFR and SPD are not being met. At this point, a lot of different things can happen, depending the psychology of the specific investor. Some will shrug and say, oh well, and walk away. A handful of others will get angry at management for having led them on, and become sharply critical of the company. (This is not the path I treaded with REFR, though I have met a number of people who did.)
Others, sadly, will continue to hang on. They'll accept management's constant alibi that they only thing they were guilty of is too much optimism. They blame themselves for having set expectations too high, or they decide that management deserves another chance. Or maybe they put past failures out of their mind as irrelevant, after all, that's the past, and they're investing in the future! Welcome to the world of the Type 3 investor in REFR.
Type 3 is the type that you see on the message boards, staunchly defending (usually in the sense of "the best defense is a good offense") the company and everything it has ever done, and, if something is so ridiculous as to be indefensible in retrospect, dismiss it out of hand as some ancient relic with no bearing on the present day.
It gets to a point where their rationalization of every single foible of managment becomes so comical, that one begins to question, are these real investors in the company, or are they plants, shills if you will, there to egg on potential Type 3 investors and encourage them to believe exactly what REFR would like them to believe.
It would be truly comical if the entire board full of REFR bulls were all shilling to each other and no legitimate buyers were actually listening to them, but the evidence indicates that there are at least some genuine longs caught up in the bizarre web of hype surrounding REFR. Who is who, is much harder to determine, however.
Type 3 investors in REFR, whether genuine or simulated, generally have one common trait, and that is an inability to admit being wrong. About anything. They will rationalize just about anything to escape the conclusion that they made a mistake. And if cornered, they change the subject, frequently to the motivations of the person asking the question to begin with. Indeed, when this blog is eventually "discovered" by someone from this group, their first reaction will almost certainly be to question my motivation for saying all the things I am saying. They will do this because they will not be able attack the substance of what I am saying in a meaningful way.
So that gives a full reckoning of the players in this tragedy: a management clique looking out only for itself, a board that is a puppet of management, and a shareholder base consisting of the ignorant and the ego-blinded. And all around this motley group, a number of spectators, alternating between grieving the overall tragedy and guffawing at the pratfalls of those involved.
Welcome to my box seat. Enjoy the view. There's a lot more to see.
In my experience, there are basically three types of investors in REFR. First, you have Type 1 (I'm numbering arbitrarily here), the true victims, unaware, largely elderly folk, who trust brokers and money managers with their wealth, only to have them unscrupulously place them in such horrid investments as REFR. They are unlikely to be aware of REFR, and even if they somehow hear the story, they have no particular reason to think it has anything to do with them. Their story is a tragedy, and unfortunately one about which there is very little else to say. Regulation of brokers and money managers is pathetic and we are miles away from reform on that front.
Then you have Type 2, the run of the mill suckers. They see SPD demonstrated, and they say, wow, I gotta get me a piece of that. It's a mistake that investors make all the time, and probably every one of us has done something like that at some point, but it's a mistake all the same. Being "wowed" by the SPD demonstration, by the way, is nothing to be ashamed of, even in long-term retrospect. The little demonstration panel, roughly one foot square including a thick border in which the wiring is kept, works quite well and is quite an impressive sight. Indeed, for all we know, that might be what led Robert Saxe to acquire the patents for SPD and incorporate Research Frontiers to begin with.
But, inevitably, the investor reaches a state of disappointment, when it becomes clear that their expectations with respect to REFR and SPD are not being met. At this point, a lot of different things can happen, depending the psychology of the specific investor. Some will shrug and say, oh well, and walk away. A handful of others will get angry at management for having led them on, and become sharply critical of the company. (This is not the path I treaded with REFR, though I have met a number of people who did.)
Others, sadly, will continue to hang on. They'll accept management's constant alibi that they only thing they were guilty of is too much optimism. They blame themselves for having set expectations too high, or they decide that management deserves another chance. Or maybe they put past failures out of their mind as irrelevant, after all, that's the past, and they're investing in the future! Welcome to the world of the Type 3 investor in REFR.
Type 3 is the type that you see on the message boards, staunchly defending (usually in the sense of "the best defense is a good offense") the company and everything it has ever done, and, if something is so ridiculous as to be indefensible in retrospect, dismiss it out of hand as some ancient relic with no bearing on the present day.
It gets to a point where their rationalization of every single foible of managment becomes so comical, that one begins to question, are these real investors in the company, or are they plants, shills if you will, there to egg on potential Type 3 investors and encourage them to believe exactly what REFR would like them to believe.
It would be truly comical if the entire board full of REFR bulls were all shilling to each other and no legitimate buyers were actually listening to them, but the evidence indicates that there are at least some genuine longs caught up in the bizarre web of hype surrounding REFR. Who is who, is much harder to determine, however.
Type 3 investors in REFR, whether genuine or simulated, generally have one common trait, and that is an inability to admit being wrong. About anything. They will rationalize just about anything to escape the conclusion that they made a mistake. And if cornered, they change the subject, frequently to the motivations of the person asking the question to begin with. Indeed, when this blog is eventually "discovered" by someone from this group, their first reaction will almost certainly be to question my motivation for saying all the things I am saying. They will do this because they will not be able attack the substance of what I am saying in a meaningful way.
So that gives a full reckoning of the players in this tragedy: a management clique looking out only for itself, a board that is a puppet of management, and a shareholder base consisting of the ignorant and the ego-blinded. And all around this motley group, a number of spectators, alternating between grieving the overall tragedy and guffawing at the pratfalls of those involved.
Welcome to my box seat. Enjoy the view. There's a lot more to see.
Sunday, March 20, 2005
The stiffs of the board
Traditionally, a board of directors is supposed to watch out for the interests of the shareholders, and make certain that the business is being properly run. So why, in REFR's case, does its board of directors sit complacently by as the company racks up its 39th consecutive year of unprofitability?
The answer lies in the makeup of the board. REFR's board has just five members: Robert Budin, Joe Harary, Victor Keen, Dr. Albert Malvino, and chairman Robert Saxe.
Right away we see a huge problem in terms of conflict of interest. 40% of the board, including the chairman, is made up of the two people who benefit the most from the status quo! That is certainly no way to get things on the right track for the investors.
And what of the other three members of the board? Robert Budin, we know relatively little of. Among other things, he is the chairman of the audit committee (which has no other known members). His role appears to be primarily interfacing with the outside auditor (KPMG) and ensure that the quarterly and annual reports are, if nothing else, technically accurate. REFR's reported results are dismal enough for it to be presumable that there are no accounting irregularities going on, so Mr. Budin's role in the company is generally not considered controversial.
Victor Keen is another matter, as he is on the REFR payroll with the title of Corporate Secretary. His presence on the board means that a majority of the board are direct company insiders. This state of affairs is widely considered a red flag, as far as corporate governance is concerned.
Finally, the last and quite possibly flashiest member of the board, Dr. Al Malvino. A sufficient biography of this person would (and most likely will) cover several posts. For one thing, he maintains a website containing a lot of his personal views, including one page devoted to the science behind SPD.
But far beyond being knowledgeable about the science of the technology, for several years, prior to joining the board of directors, he was a tireless advocate of investment in REFR. He is known to have posted on the Yahoo! REFR board until the alias George_Soros99, and would frequently post lengthy treatises explaining in excrutiating detail every aspect of REFR and ultimately reach the conclusion of that REFR was simply a miraculously great investment that would enrich anyone wise enough to agree with him.
Links to sample posts by Malvino:
The "PRO-CON" series:
#1 #2 #3 #4 (after 94 "pro"s, Malvino finally gets around to the "con"s, which in this iteration number three.)
#5 #6 (the "neutrals")
The "Fact or Fiction" series:
#1 #2 #3 #4 #5 #6 #7 #8 #9 #10 #11 #12 #13 #14 #15
Needless to say, Dr. Malvino can hardly be considered "independent", either. If nothing else, he has a huge ego stake in being proven right all along, and making radical changes to the company would be tantamount to an admission that all of the above was just twaddle. (Not that this can't, in many cases, be done quite thoroughly by now. More topics for more future posts!)
So we have a management with no incentive not to fail, and a board of directors with little to no interest in holding their feet to the fire. Why would any shareholder put up with this state of affairs? That's coming up...
The answer lies in the makeup of the board. REFR's board has just five members: Robert Budin, Joe Harary, Victor Keen, Dr. Albert Malvino, and chairman Robert Saxe.
Right away we see a huge problem in terms of conflict of interest. 40% of the board, including the chairman, is made up of the two people who benefit the most from the status quo! That is certainly no way to get things on the right track for the investors.
And what of the other three members of the board? Robert Budin, we know relatively little of. Among other things, he is the chairman of the audit committee (which has no other known members). His role appears to be primarily interfacing with the outside auditor (KPMG) and ensure that the quarterly and annual reports are, if nothing else, technically accurate. REFR's reported results are dismal enough for it to be presumable that there are no accounting irregularities going on, so Mr. Budin's role in the company is generally not considered controversial.
Victor Keen is another matter, as he is on the REFR payroll with the title of Corporate Secretary. His presence on the board means that a majority of the board are direct company insiders. This state of affairs is widely considered a red flag, as far as corporate governance is concerned.
Finally, the last and quite possibly flashiest member of the board, Dr. Al Malvino. A sufficient biography of this person would (and most likely will) cover several posts. For one thing, he maintains a website containing a lot of his personal views, including one page devoted to the science behind SPD.
But far beyond being knowledgeable about the science of the technology, for several years, prior to joining the board of directors, he was a tireless advocate of investment in REFR. He is known to have posted on the Yahoo! REFR board until the alias George_Soros99, and would frequently post lengthy treatises explaining in excrutiating detail every aspect of REFR and ultimately reach the conclusion of that REFR was simply a miraculously great investment that would enrich anyone wise enough to agree with him.
Links to sample posts by Malvino:
The "PRO-CON" series:
#1 #2 #3 #4 (after 94 "pro"s, Malvino finally gets around to the "con"s, which in this iteration number three.)
#5 #6 (the "neutrals")
The "Fact or Fiction" series:
#1 #2 #3 #4 #5 #6 #7 #8 #9 #10 #11 #12 #13 #14 #15
Needless to say, Dr. Malvino can hardly be considered "independent", either. If nothing else, he has a huge ego stake in being proven right all along, and making radical changes to the company would be tantamount to an admission that all of the above was just twaddle. (Not that this can't, in many cases, be done quite thoroughly by now. More topics for more future posts!)
So we have a management with no incentive not to fail, and a board of directors with little to no interest in holding their feet to the fire. Why would any shareholder put up with this state of affairs? That's coming up...
Saturday, March 19, 2005
What's in it for them, anyway?
So why would they do it? What could make the people running this company accept, even appear content with, an unbroken string of 39 years of consecutive losses?
The answer is really no mystery. For running a company with net margins of roughly minus 2000%, Robert Saxe, chairman, treasurer and founder, takes down a salary of $434,000 in 2003, while president, COO and general counsel Joe Harary collected $390,000 that year. (2004 salaries have not yet been revealed.) Put another way, these two employees collected in salary in 2003 slightly more than the company's last four years of revenue.
Given that those two are the ones basically running the show (Harary more so as of late than Saxe, who is rapidly approaching retirement), it's not particularly hard to figure out why they're pretty well content with the status quo. We all should be able to collect that kind of money for accomplishing so little!
Now, how the board of directors, and the shareholders, are kept happy with such a state of affairs, is another matter. For another post.
The answer is really no mystery. For running a company with net margins of roughly minus 2000%, Robert Saxe, chairman, treasurer and founder, takes down a salary of $434,000 in 2003, while president, COO and general counsel Joe Harary collected $390,000 that year. (2004 salaries have not yet been revealed.) Put another way, these two employees collected in salary in 2003 slightly more than the company's last four years of revenue.
Given that those two are the ones basically running the show (Harary more so as of late than Saxe, who is rapidly approaching retirement), it's not particularly hard to figure out why they're pretty well content with the status quo. We all should be able to collect that kind of money for accomplishing so little!
Now, how the board of directors, and the shareholders, are kept happy with such a state of affairs, is another matter. For another post.
Friday, March 18, 2005
Silence is Relative
From the promotional message boards:
"Were you paying attention when Joe said that THIS week two licensees had contacted Joe with requests that the company remain silent about certain customer' plans?"Maybe it's just me, but blabbing that you were asked to remain silent, isn't my idea of remaining silent.
Thursday, March 17, 2005
Boring
Joe Harary seems to have found the way to critic-proof his conference calls, and that is to speak in such a dull tone that it's next to impossible to listen to the whole thing and stay awake.
At any rate, in between bouts of unconsciousness I did hear snippets where he hangs on tenaciously to the idea of paying dividends (words fail), while admitting that they have no control over when or if the licensees will come out with products. (Something about the licensees being concerned about quality control -- the nerve!) There was also some discussion about last year's shutdown of SPD Inc. Best I could tell, Harary's story was that he basically seemed to have no idea what went wrong or why they chose to close up shop, much less why they couldn't have simply switched over to the "new" process for making SPD (actually developed in 1998).
Maybe a little more detail tomorrow.
At any rate, in between bouts of unconsciousness I did hear snippets where he hangs on tenaciously to the idea of paying dividends (words fail), while admitting that they have no control over when or if the licensees will come out with products. (Something about the licensees being concerned about quality control -- the nerve!) There was also some discussion about last year's shutdown of SPD Inc. Best I could tell, Harary's story was that he basically seemed to have no idea what went wrong or why they chose to close up shop, much less why they couldn't have simply switched over to the "new" process for making SPD (actually developed in 1998).
Maybe a little more detail tomorrow.
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