Birch Run is only buying more stock. The small hedge fund, co-founded by Daniel Beltzman and Gregory Smith, invested big in early 2012, buying nearly 5 million shares. It has doggedly stayed in Regis hoping for a turnaround, and Beltzman even became a director in 2012. Beltzman and the firm have steadily bought more stock over the last two years, helping support its price.
Birch Run—which managed about $500 million for wealthy families at the end of 2013—has a lot of incentive to make its play work.
It owns more than 10 million shares, amounting to about 19 percent of all Regis stock as of Oct. 24, making it the largest shareholder. Roughly 40 percent of the hedge fund's publicly reported portfolio is invested in Regis, according to June 30 filings. The stock is Birch Run's largest holding and is an unusually concentrated bet (about 30 percent of the book is in Walter Investment Management, which services and originates mortgage loans).
The New York-based hedge fund firm practices a so-called value strategy, meaning it takes long-term positions in companies it believes have potential to improve.
Like Starboard, the bet appears to be profitable for Birch Run—but not a home run. The stock is up about 8.4 percent since its first big publicly disclosed position was taken on Jan. 27, 2012.
A spokesman for Birch Run declined to comment. But Daniel Hanrahan, Regis' CEO since 2012, complimented Beltzman's involvement with the company.
"He adds a lot of value as a board member," Hanrahan said in an interview. "He's a very long-term thinker and is focused on how he can help us build the right strategy to make this a very successful company."
Hanrahan said Beltzman's voice is helpful but he's not driving board decisions. He acknowledged declining sales but was confident that investments in salon operations and staffing would eventually pay off.
"We know that we still have a lot of work to do but believe strongly that the strategy is the right one and we're heading in the right direction," Hanrahan said.
Hanrahan and the relatively new board are focused on three things to improve the business: "Asset protection" to prevent theft; helping improve salon leadership; and technical training to help attract and retain hairstylists.