Despite their increased size and capital most small public companies that rely significantly on patent licensing have yet to prove they can compete with other equity investments.
A recent report by, “PIPX Intellectual Property Sector Index,” from Dr. Kevin Klein of Freescale Semiconductors, a provider of embedded procession solutions, shows that the stock of most PIPCOs have under-performed the benchmark S&P 50 equity index over the past 11 quarters.
(For a more in-depth analysis see “Let the Shake-Out Begin” in the July IAM magazine, out this month. My piece can be found under The Intangible Investor (for subscribers), here. For a comparative listing of public IP companies, including news and performance data, visit the IP CloseUp 30, here.)
The PIPX IP Sector Index is designed to provide a measure of the general health of the PIPCO sector by comparing the relative value of key companies over time.
| PIPX IP Sector Companies | Market Cap (5/1/14) |
| Acacia Research (ACTG) | 775M |
| InterDigital (IDCC) | 1.40B |
| Neonode (NEON) | 203M |
| Parkervision (PRKR) | 439M |
| Pendrell (PCO) | 429M |
| Rambus (RMBS) | 1.37B |
| RPX (RPXC) | 866M |
| Tessera (TSRA) | 1.16B |
| Unwired Planet (UPIP) | 250M |
| Vringo (VRNG) | 351M |
| VirnetX (VHC) | 807M |
| Wi‐LAN (WILN) | 371M |
Bigger Question
The bigger question is how many IP monetization models do we need, and which ones are best adapted for long-term success?
As much as half of the 30 or so public IP licensing companies are likely to merge, be taken private or otherwise disappear over the next few years. That’s bad news for some investors, good for others.
Says Dr. Klein: “The lower returns and higher volatility of the PIPX as compared to the broad market imply that there are challenges facing investment in intellectual property licensing as the business evolves and matures.
“This of course could be due to short-term factors over the 33 months the PIPX Index is tracked, such as a deflating patent bubble. However, it may also be a sign that there are some underlying characteristics of this business that may need to be addressed or better understood to help make intellectual property licensing a more comfortable investment for the broader market.”
The value of companies in the IP space like Tessera and Rambus increased, while Acacia and RPX declined (see below).
The entire PIPX IP Sector Index can be viewed here.
Illustration sources: The PIPX IP Sector Index; Seeking Alpha.
