You asked me if I'd care to purchase your shares of REFR at $1.00. Sorry, I think that's a bit overpriced. The June 10Q showed them with about $8.7 million in total assets, or $.80 of assets per share. Assuming they had cash burn of $0.8 million, comparable to the first two quarters, that's down to a bit less than $8 million, or around $.73/share. They claimed in August that they'd been buying back shares, so they may have a bit less cash and a bit fewer shares. I won't bother going into the question of why a company would buy back shares in August and announce a punitive financing arrangement on October 1, because that's been debated at length already. Suffice it to say that the tangible value of the company is probably around $.70/share after the costs of terminating leases, employment agreements, etc. If you want to sell me your zillions of shares for 5/8, I would probably be a buyer, but it's hardly going to represent a huge profit for me.
I assume your response will be that success is just around the corner, that the company's technology and patents are worth bazillions, that your friends tell you they're going to cover the world with this stuff, and your stockbroker friend who owns half the company has never been wrong. I think I've heard this from at least three quarters of the companies I've shorted, including such great names as ALTIF, BTIM, CCSI, CFON, CYBG, ENML, EQMD, GBUR, GUMM, HPRT, ORG, ZITL, and ZONA. Funny thing was, whatever was supposed to happen never did. You (and the investors in most of the aforementioned) seem to think that a skeleton staff working on a shoestring can develop a product which will justify more than the current price. Maybe REFR will be the exception that proves the rule, but the odds against it are so long you're better off buying lottery tickets. Let's face it, most research today costs big bucks and involves big teams to produce anything commercially worthwhile. If an idea were simple or cheap, chances are that someone would have commercialized it long ago.
So, I guess we can go on from here, with you buying more and more shares of this sinking ship, while I watch my short debit dwindle to less than 1 and chortle over comments like "just wait a few weeks and there'll be deathly silence from the shorts". Alternatively, we could speed things up and just have you tender your shares to me at 5/8.
Thanks, though, for raising the topic; if I'd kept my original target price for covering, I would have left at least a point on the table.
Warm regards,
CMason |
