John Griffin's Blue Ridge Capital Discloses MiddleBrook Pharmaceuticals Stake (MBRKQ) ~ market folly

Friday, December 3, 2010

John Griffin's Blue Ridge Capital Discloses MiddleBrook Pharmaceuticals Stake (MBRKQ)

John Griffin's hedge fund Blue Ridge Capital just filed a 13G with the SEC regarding MiddleBrook Pharmaceuticals (MBRKQ). Per portfolio activity on November 22nd, Blue Ridge has disclosed a 8.05% ownership stake in MBRKQ with 6,969,697 shares. You can see commentary and analysis of Blue Ridge's other investments in the just-released issue of our newsletter.

It's difficult to discern whether or not this is a brand new position for Griffin's hedge fund. Securities traded on the pink sheets (like MiddleBrook is) aren't deemed reportable assets on 13F filings. So in their most recent 13F, Blue Ridge doesn't show a position in MBRKQ. However, if an investment firm were to acquire over 5% of a company's shares outstanding, they would have to file the respective 13G/D with the SEC, even if it's traded on the pink sheets (just as Blue Ridge has done). Readers will recall a similar scenario in the past when Bill Ackman's Pershing Square did not disclose their General Growth Properties stake (GGWPQ back then) on their 13F filing, but did disclose it in a 13D.

So, while it's unclear as to when Blue Ridge originally purchased MBRKQ, they have quite a sizable stake now, with recent enough activity to force the disclosure of the position due to crossing the ownership threshold amount.

This transaction is intriguing for a few reasons. First, Blue Ridge files 13G's or 13D's on a much less frequent basis than many other hedge funds we track as they don't seem to take concentrated positions as frequently. Second, MiddleBrook Pharmaceuticals is a micro-cap company ($5 million market cap) and filed for Chapter 11 bankruptcy protection in April of this year. Their restructuring will be something to watch.

Griffin founded Blue Ridge after leaving Julian Robertson's Tiger Management and is known as one of the successful 'Tiger Cubs.' For more from his fund, check out Blue Ridge's recommended reading list.

Per Google Finance, MiddleBrook Pharmaceuticals is "a pharmaceutical company focused on commercializing anti-infective drug products that fulfill unmet medical needs. The Company has developed a delivery technology called PULSYS, which enables the pulsatile delivery, or delivery in rapid bursts, of certain drugs."

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