December 27, 2011


As I have previously noted, I read the chat boards for Provectus at Silicon Investor and Yahoo Finance from time to time in large part to glean what information I can for further due diligence and analysis. For example, I learned of the Mauldin piece from an SI poster (see here).

Lurkey Turkey recently wrote about institutional holdings of Provectus shares on the SI board (see here), noting that such holdings were a very small portion of the total number of outstanding shares. Several blog readers asked for my comments on this topic.

I do not believe the amount of institutional holding is one-quarter of one percent (of outstanding shares).

Lurkey's inherent comment or question in the post was a good one: the lack of visible institutional investors in Provectus stock. I'll come back to this topic in a later post.

Using the website to which Lurkey linked provides a partial picture picture of institutional ownership, because the site only draws information from 13F filers. For your information, per the SEC website (among other places for information on this topic):
  • "Institutional investment managers that use the U.S. mail (or other means or instrumentality of interstate commerce) in the course of its business, and exercise investment discretion over $100 million or more in Section 13(f) securities."
  • "Institutional investment managers can include investment advisers, banks, insurance companies, broker-dealers, pension funds, and corporations." In the industry, institutional investment, asset or money managers means professional managers, whose money may come from other institutions (like pension funds) and high net worth individuals.
Using this broader definition of institutional investor -- not the SEC definition, which also has a geographic filter and an asset under management threshold -- there are many such folks who own Provectus shares. A simple definition from Wikipedia, for example, suggests "types of typical investors include banks, insurance companies, retirement or pension funds, hedge funds, investment advisors and mutual funds."

Small hedge funds, investors in Europe, family offices or private investment firms, mutual funds, etc. would fall under the institutional investor category in a broad manner of speaking. Their holdings, however, would not necessarily be picked up by tracing 13F filings.

In addition to tracking 13F filings, you also should track N-Q filings (where you'll see Provectus holdings for Advanced Series Trust and AQR Funds reported as of 9/30/11) and 13D/G filings (where you'll see holdings for Osmium/Revelation Capital Management as of this February; Revelation may have sold some, all or none of its shares since then).

For example, from N-Q filings, AST and AQR (as of 9/30/11) hold 81,290 and 706,665 shares, respectively. Neither of these figures include un-exercised Series A and C warrants.

13D/G filings for Revelation Capital Management (formerly Osmium) are sparse, and the latest information one has for Revelation of 2.15MM shares, which is quite dated (February 2011). We also can't prove the negative of this firm having sold shares (we can prove the positive of increasing their holdings should they file a revised 13G). This figure does not include un-converted preferred shares and un-exercised warrants.

As a result of the NOBO-OBO rules adopted by the SEC in the mid-1980s, an issuer (like Provectus) "may obtain a list of its “street name” shareholders who have not objected to such disclosure. These shareholders are “non-objecting beneficial owners,” or “NOBOs,” while "OBOs" are shareholders who have objected to the disclosure of their identities and share positions. A shareholder is a NOBO by default, unless he or she has taken affirmative steps to object. Street name” holders are those shareholders who hold their shares through a broker or bank custodian. Under this form of ownership, the shares are technically “owned” by the broker, bank or other intermediary, so that only the broker or bank knows the identity of its client, the true beneficial holder. The other type of shareholder is a “registered” shareholder, who holds shares directly on the books of the issuer or its transfer agent. In the case of “registered” holders, the issuer either has a list or can obtain one from its transfer agent." See here.

So, typically, an issuer like Provectus has a very good sense of retail investor ownership. Tracking institutional ownership not reported in 13F (or G or D), N-Q and other public SEC-based filings is very difficult.

Based primarily on my historical discussions with management (and, secondarily, my own experience and knowledge), institutional investors could number in the several dozens, if not more. Their cumulative ownership could in the 20 to 30 percent range.

Lurkey's post also raises a good follow-up item: As institutional investor interest in the stock grows, particularly under the narrower SEC definition, look to Turkey's website link, among others to track what big and small whales are buying company shares.

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