New Patent Sector Index: PIPCOs Trail the S&P 500 over 3-Yr Period

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.

pic3   pic2   pic1 (1)

 

 

Illustration sources: The PIPX IP Sector Index; Seeking Alpha.

About Bruce Berman

IP trend spotter, consultant and author.

No comments yet... Be the first to leave a reply!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: