Tag Archives: IAM blog

RPX buyout rumors set share price at a 27% premium, or $800M

Shares of RPX (RPXC) opened today at $13.88, up 2.81%, after rising 5.6% last Wednesday on rumors from two sources that the defensive patent aggregator is a takeover target.

Richard Lloyd of the IAM blog broke the story on December 12, saying the a private group had offered $16.25 per share for the company, or $800 million, a 27% premium.

But some observers doubt whether RPX can fetch that high of a premium. Don Lonkevetch writing in this morning’s Patent Investor said:

“That’s because San Francisco-based RPX’s business has been hurt by its own past success in combatting non-practicing entities and the overall decline in patent litigation since the American Invents Act of 2011 made it cheaper and easier for companies to invalidate patents…

“As a result, big tech companies who have been among RPX’s biggest clients have grown increasingly reluctant to rely on RPX to put together syndicates to keep patents out of the hands of NPEs.”

The Patent Investor cites an anonymous source familiar with RPX (short for Rational Patent Exchange) who suggests  the company is worth about $12 per share.

Below IPO Price

RPX is already up about 24% this year, but is still trading well below its 2011 IPO price of $19 per share. Founding CEO John Amster left the company earlier this year after his suggestion to take the company private at $11 per share were nixed.

Baird analyst Jeffrey Meuler reiterated his Outperform rating last week and $15 price target on RPX Corp.

Earlier in the year, on March 8, CNA Finance reported that “Early this morning, stories started breaking that RPX Corp may soon be acquired. In fact, according to some of the reports, the company has received several offers from private equity companies to take it out of the public sector.”

On that day RPX shares rose 15%. Thus far, the RPX board has not commented.

If RPX were to be acquired at a significant premium to its current $668 million market capitalization, it would be a boost of confidence not only for the company’s shares and public IP companies (PIPCOs), but for patent holders in general. It could be a signal that patent values are headed higher.

On Thursday, USPTO Director Nominee Andrei Iancu was unanimously approved by Senate Judiciary Committee, signaling a further distance from the Michelle Lee-led USPTO that saw a dramatic rise in invalidations before the Patent Trial and Appeal Board.

Image source: rpxcorp.com; laborcosting.com

 

1Q + 2Q 2015 = downer for most PIPCOs; a few bright spots shine

Shares of public IP companies (PIPCOs) continued to fare poorly in the 2Q of 2015. The stock of companies with larger market capitalization tended to do better, and there were even a few whose shares were up significantly.

Just how bad was the first half of 2015 for PIPCOs? Pretty bad.

Through July 6 the S&P 500 Index was virtually flat, down just .51%. Patent licensing company losers YTD, however, include Spherix (SPEX), $.43, down 60.28%; Inventergy Global (INVT), $.39, off 50.29%; Marathon (MARA), $2.89, down 65.68%; Finjan (FNJN), $1.35, down 46.64%; Document Security Systems (DSS), $.29, off 35.51%; Unwired Planet (UPIP), $.61, off 38.8%; and VirnetX Holding Corp. (VHC), $4.22, off 23.13%.

CopyTele (now Itus, stock symbol ITUS), $.14 was up 27.27%. (Could a name change make a difference? I guess maybe if the stock barely trades and has a market value of $1M.)

Pendrell (PCO), which was down as much as 30% and up 5% since May, finished the first half of the year just a shade under flat.

[For a snapshot of individual PIPCO performance, including recent news, and a look at how they compare to each other, visit the recently updated IP CloseUp 30, here.]

Bigger Players

Of the bigger players Acacia (ACTG), $8.11, was down 52.13%; and WiLAN (WILN), $2.23, was down 25.42%. WiLAN with $93M in annual stock-market-predictions-2-300x199revenues and $118M in cash, appeared to stand a good chance of weathering the storm. Its shares pay a 7.1% dividend.

On the plus side: RPX Corporation (RPXC), $22.57, was up 22.57% year to date; InterDigital at $56.30 gained 6.43%; Tessera (TSRA), $37.75 was up 5.56%; and Rambus (RMBS) at $13.89, advanced 25.25%.

Perhaps the most outstanding performer of the group is licensing/ operating company Universal Display Corporation (OLED). It stood at $51.17, up an amazing 81.84% YTD. The flat panel display and solid state lighting company has 3,500 worldwide patents and applications and licenses to many leading electronics sellers, including Apple. It was founded by Sherwin Seligsohn, who was founder and Chairman of InterDigital 

Deals in the Works?

In a quarter-ending column by Richard Lloyd that ran on the IAM blog he speculated that there could be some deals in works as some of these licensing business wind down. “This blog and others in the market have been predicting for a while that there will be some sort of shake-up of the PIPCO sector,” Lloyd wrote, “be it consolidation through mergers or asset sales. But so far any signs of that shake-up have been limited to an approach by Marathon to Spherix (which was rebuffed) and the merger between Internet Patents Corporation and Prism Technologies. But, thanks to the continuing tough conditions, are we now approaching the point where we will start to see heightened activity?”

Inventergy could be delisted from Nasdaq as its share price has remained below $1. It has applied for an extension to remain on the exchange for a further six months. Vringo, ParkerVision and Spherix have all been granted extensions to remain on the NASDAQ in the first half of 2015.

Challenges Ahead

It will not be easy for PIPCOs to be acquired or otherwise merged with stronger players, nor will it be easy for them to sell off assets. One prominent CEO told me that he has been approached by several PIPCOs but that he does not see much value in merging or in acquiring potentially undervalued public licensing companies, even for stock. “Numerous encumbrances involving the patents and relationships with capital providers would need to be sorted out, and, frankly,” he said, “few of the assets are worth it.”

Image source: mt5.com; onlinesharetradingtips.in

Does Google’s patent buying experiment put it in competition w/ Intellectual Ventures and RPX?

On Friday May 8 Google will launch a two week experiment in acquiring patents from mainly small businesses and inventors.

Directly, or indirectly, the Patent Purchase Promotion (PPP) will be competing with NPEs and other operating companies for patent ownership.

The announcement raises questions: Is Google taking a page the play book written by IV and RPX (NASAQ: RPXC)? Is it aggregating patents for its own defensive use, the good of all operating businesses, or for potential investors/partners?

Has the company conceded that because it could not beat the patent-buying trolls it needs to kind of “join them,” or at least, compete with them?

It’s difficult to say what Google (NASDAQ: GOOG) is trying to accomplish. By its own admission, there is a lot of fine print in its agreement. The company’s LoT (License on Transfer) agreement, originally launched about 18 months ago, has generated mixed results, and PPP may be merely another arrow in Google’s IP quiver.

The company may be relying on inexperienced sellers to mis-price their assets, as did IV early in its buying cycle. No doubt some will ask for far too much. But, as IV learned ten years ago, there is no shortage of desperate sellers who will accept little or nothing in a down market for patents that could be quite valuable. With the market depressed and IV not buying the way it used to, the timing could be good for PPP to step 303170893_idu9a-m-300x199in. If Google can secured patents at a good price before NPEs do, it can improve its and other businesses’ defense against patent assertion.

Ars Technica wrote:

“As a way to combat the pernicious effects of patent trolls, Google announced Monday that it would be buying up patents from any inventor or entrepreneur who wants to sell.”

Google’s Patent Purchase Promotion is a radical change for a company that traditionally has been suspicious of patent buyers and sellers. For FAQs go here. The purchase program ends May 22. Decisions will be made no later than July 22.

Beginning on May 8 a copy of the actual PPP agreement can be found here.

Maturing IP Strategy

Google appears to be growing as an IP holder and user, and it is not surprising that it would want to take advantage of its formidable brand and cash position to strategically acquire patents that may be harmful to it and others at below market prices.

Whether or not Google will use acquired patents for defensive purposes only is unclear. (The company reserves the right to use the patents it acquires however it sees fit.)

Richard Lloyd wrote in a thoughtful piece about Google’s possible motivation in the IAM blog last week:

“The more you think about it,” he said, “the more it raises questions around why a patent owner with a high-quality asset who understands the IP market would consider this option, even under current tough conditions.

“Instead, the likelihood is that if Google does come across something interesting it will be offered by a party that may not fully appreciate what it owns and needs some money quickly; and that probably means a smaller, cash-strapped business with little access to specialist IP knowledge.”

A page torn from IV’s playbook?

This sounds very much like IV’s M.O. back eight or ten years ago: Gobble up decent (if not good) patents for others to pay access to or for the company to enforce, if necessary. It will certainly expand Google’s rapidly growing patent portfolio and provide access to IP rights out of its core search technology.

PPP may be nothing more than getting a leg up on the competition, whether they be opcos or NPEs. We will have to wait and see.

Image source: allthingsd.com; apexbeats.com

Bold Patent Moves Bolster Facebook, MSFT

Cash Rich, IP-Savvy MSFT Embraces Role of Patent Dealmaker

After acquiring 800 patents and scores of applications and licenses from AOL for $1.1B just two weeks ago, Microsoft has said that it has flipped the bulk of the portfolio, 650 patents, to Facebook for $550M, securing the IP assets and licensing MSFT needs while recouping almost half of its original potentially bargain cost.

It was reported today in Venture Beat that MSFT wanted to partner with FB all along, but that AOL put the cabash on it. IP CloseUp is not buying that.

In a pre-IPO buying frenzy that has to concern some shareholders, FB has a costly portfolio of quality patents to its $1B acquisition of Instagram two weeks ago. You have to wonder if investors believe that despite FB’s lofty market valuation whether it has the firepower to succeed as a major growth company. These recent moves are sure to help. In March, Yahoo sued Facebook, alleging Facebook violated ten Yahoo patents related to online advertising and web communications.

“Stinking Mad”

Sources have told IP CloseUp that Facebook was “stinking mad” that it did not land the AOL patents when they went up for bid several weeks ago, confiding that the failure had more to do with process than cost. MSFT emerges a huge winner, with patents its needs for far less than their true market value (see “Could AOL Patent Sale Have Netted More Than $1B?”) and cash in hand.

You have to wonder how the AOL deal got done. With investor pressure from Starboard Value the company may have been spooked into taking what appeared to a best offer before others were on the table.

“The market was talking about $300M,” speculated one observer. “MSFT may have offered a billion plus if the deal got done immediately.” It did, much to Facebook’s chagrin (and Google’s and Apple’s) and others who may have wanted a shot at controlling AOL’s excellent portfolio, which included original Netscape Internet patents.

A post on the IAM Blog today raised good a question. Will a Department of Justice anti-trust team soon be mobilized to see how recent patent sales are being orchestrated given that some appear to be barely marketed?

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For the patent wars this marks new territory. Smart combatants with cash and guts are well-equipped to play. 

Illustration sources: hubspot.com; heavy-downloads.blogspot.com


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