SiliconBeat

Phronesis Partners, an Ohio-based hedge fund that takes its name from a Greek term used by the philosopher Aristotle to denote “”practical wisdom,” or “”prudence,” disclosed Tuesday in an SEC filing that it is now the largest owner of of a company that has yet to show a profit and has accumulated losses to the tune of $218 million since its founding in 1993.

The company formerly known as Ciphergen Biosystems (a medical diagnostics company that changed its name last week to Vermillion, a color more in keeping with its balance sheet) closed an equity financing last Wednesday in which it said it raised $20.6 million selling 24.5 million shares along with warrants to buy 19.6 million additional shares of Vermillion with an exercise price of $0.925 each.

Phronesis reported Tuesday in a Form 3 filing that it had acquired 6.7 million shares of Vermillion and warrants to purchase 3.9 million more in the August 29 offering, giving it a 15.6 percent stake in the company.

In a Form 4 filing Friday, Falcon Technology Partners, a fund affiliated with Vermillion’s board chairman James Rathmann, disclosed buying another 1.8 million shares for 74 cents each, (Vermillion shares closed at 86 cents the day before) and warrants to buy 1.4 shares for 12.5 cents each. The fund wasn’t mentioned in an Aug. 24 press release put out by Vermillion first announcing the proposed private placement.

Assuming the same terms were in effect for Phronesis, it paid $5.4 million for its stake.

Prior to the private placement, Vermillion was told by the the Nasdaq Stock Market that it’s shares risked being delisted because the company did not have a minimum of $2.5 million in stockholders’ equity (it has a deficit instead); a minimum market value of $35 million (prior to the offering its value stood at $33.7 million; at today’s close its value was $37.9 million); or $500,000 of net income from continuing operations (uh, nope).

Vermillion shares have risen 12 percent since last Tuesday, giving Phronesis a paper profit already of $1.5 million, and its warrant are now in the money. However, none of the shares issued last week are yet registered with the SEC, meaning they can’t be sold on the open market. Vermillion has agreed to file the necessary paper work within the next 30 months to allow them to be sold.