Nantahala Capital Discloses New Positions in Regional Management (RM) & Pinnacle Airlines (PNCLQ) ~ market folly

Monday, April 16, 2012

Nantahala Capital Discloses New Positions in Regional Management (RM) & Pinnacle Airlines (PNCLQ)

Wilmot Harkey's hedge fund Nantahala Capital Management recently filed a slew of 13G's with the SEC. We recently also disclosed their new stake in Scientific Learning.

From the new batch of filings, Harkey's firm has revealed a brand new position in Regional Management (RM). They now own 5.275% of the company with 649,465 shares and the filing was made due to portfolio activity on April 5th.

Per Yahoo Finance, Regional Management is "a diversified specialty consumer finance company, provides loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other traditional lenders."

Second, Nantahala Capital has also revealed a new stake in Pinnacle Airlines (PNCL now trading as PNCLQ). The company recently filed for bankruptcy protection to tackle its debt and costs. Shares were delisted due to failure to satisfy a continued listing rule and now trade on the pink sheets.

Harkey's fund disclosed a 9.825% ownership stake in Pinnacle with 1,879,232 shares. The 13G was filed with the SEC due to trading activity on April 4th. Just last week we highlighted how Mohnish Pabrai sold Pinnacle shares.

Per Google Finance, Pinnacle Airlines is "an airline holding company based in Memphis, Tennessee. It is a parent company of three wholly owned subsidiaries: Pinnacle Airlines, Inc., Colgan Air, Inc. and Mesaba Airlines."

About Nantahala Capital

The hedge fund runs a fundamental strategy with a primary focus on small cap stocks. They have a market-neutral discipline as they take a balanced risk management approach (their long book resembles their short book). They focus on expected return on capital. Though we haven't seen more recent numbers, as of mid-year 2010, Nantahala had seen a 19.2% net annualized return over 5 years.

Wil Harkey founded the firm in 2004. Prior to founding Nantahala, he worked at Sagamore Hill Capital where he focused on capital structure arbitrage. He earned his BA in Mathematics and Economics from Williams College. Dan Mack joined as co-portfolio manager in 2007. Prior to that, he also worked at Sagamore Hill Capital focusing on event-driven and convertible arbitrage strategies. He earned is BS in Economics and a BSE in Computer Science and Engineering from the University of Pennsylvania.

See some of Nantahala's other recent portfolio activity here.

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