PIPEX patent company index falls 15.4% for 3Q, double the S&P 500

The PIPEX intellectual property sector stock index fell more than twice as much as the S&P 500 as the effects of the Alice and IPRs, in combination with a correcting stock market, came into play.

Rambus, while loosing 18.6% in the quarter, still has gained 6.4% Year-to-Date, largely as a result of excellent 1Q and 2Q performance. Tessera and InterDigital stock which performed well in 4Q 2014, has less steep YTD declines (see YTD graph below).

The PIPEX index was down 15.4% vs. the S&P 500 which was lost 6.9%, its biggest quarterly drop since 2011. Unwired Planet was up 17.7 % for the quarter and Acacia 3.5%. For the previous 12 months, Surprisingly, InterDigital and Tessera were the leaders for 12 months, up 27.1% and 21.9% respectively because of a strong 2014 4Q.

The PIPEX, provided exclusively to IP CloseUp by Dr. Kevin Klein, VP of Licensing for Freescale Semiconductor, is a “capitalization‐weighted price‐return measure of the change in value of this segment
of publicly traded companies.” The Index is designed to provide a measure of the market value and health of the intellectual property licensing business as a whole, while making it easier to identify individual performance. The stock performance of larger companies have a much more significant impact on the Index than those of the less highly valued. (See Fig. 4 weighting graph.)

The thirteen companies in the index are all publicly traded and at one time had a market capitalization of $100M or higher. Private companies such as Intellectual Ventures, Conversant and IPNav are not included, nor are struggling micro-caps like Inventergy. Fortress, which provides loans to patent holders and is part of a large financial organization, also is excluded.

Year-to-Date

Parkervision and Marathon shares are down the most YTD, 79.1% and 78% respectively. Marathon announced a merger with Uniloc on August 14, which current shareholders may see as a mixed blessing. Eight of the thirteen companies that make up the index saw 12 month declines >40%; four did YTD, indicating a possibly improving trend for shares of some companies.

Conclusion

It is difficult to say if PIPCOs have hit bottom yet and are ready to rise. Certainly, as they adapt to changes in patent law, recent court decisions and the PTAB, those with larger, well-vetted portfolios, cash and patience are in the best position to prosper. For better or worse IPRs and the PTAB are a fact of patent licensing life which these businesses must learn to contend.

For the full PIPEX 3Q 2015 report go here.