Tag Archives: Unwired Planet
Q2 2016 Figure 2

Shares of patent licensing cos were off in 2Q after a torrid start to year

After a record-breaking first quarter, public IP company shares (PIPCOs) under-performed most stocks versus the S&P 500 index in the second quarter.

Following a five-year leading return of 13.1%, vs. 0.8% for the S&P 500, the PIPX IP Sector Index of 13 patent licensing stocks fell in the second quarter -4.4% vs. a 1.9% gain the broader market index.

Bucking the trend was Marathon Patent Group (MARA), which was up 37.7% on settlement activity. Despite and increase in its shares of 16.1% in the second quarter, Acacia Research (ACTG) is rumored to be exploring combining with a pre-IPO business because of the difficult environment for patent licensing.

“Acacia may acquire a pre-IPO business, allow struggling IP business to wind down, former employees say.” reports the Patent Investor.

Q2 2016 Figure 2

“The value of $1 invested in the S&P 500 in Q3 2011 would now be $1.57 while the value of the same $1 invested in the PIPX would be $0.56,” says Dr. Kevin Klein, who compiles the PIPX for IP CloseUp,”

Q1 2016 Fig 2

Unwired Planet (UPIP) was the PIPX worst performer, down 32.3%. On April 7, UPIP announced that it was divesting its patent licensing business. 

The PIPX IP Sector Index is a capitalization-weighted, price-return measure of the change in value of this segment of publicly traded companies. This means that the performance of larger companies like InterDigital, Rambus and Tessera have a proportionately larger impact on overall index performance than swings in smaller public company shares followed.

For the full PIPX Index report for the 2Q, go here.

Q2 2016 Figure 3

Image source: PIPX IP Sector Index

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Patent licensing index significantly outperformed the S&P 500 in Q1

The eagerly sought bottom for publicly traded patent licensing companies may have been reached according to the data provided by an intellectual property index that tracks stock performance.

The PIPX public IP licensing index was up 13.1% vs. a barely positive 0.8% for the S&P 500 in the first quarter of 2016. This was the best quarter for the PIPX since it began tracking public IP licensing companies back in July 2011.

Rebound or Bounce?

Is this merely a “dead cat” bounce from PIPCOs (public IP licensing companies) having been beaten down over many quarters? Do the results reflect the relative strength of a few large players?

Or is the sector actually rebounding from over-correction which has devalued many good patents? From this observer’s perspective, it is too soon to tell.

The S&P has dramatically outperformed the PIPX since the IP index’s inception, almost five years ago, when patent values were at a record high. Exceptions have been the second and fourth quarters of 2014 (see graph below).

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“The change in value of the component companies (below), ranging from +78.6% for Virnetx to -34.4% for Vringo,” said Dr. Kevin Klein, Vice President and General Manager of Products and Licensing at Vorago Technologies, a semiconductor company. “Parkervision (1:10) and Unwired Planet (1:12) had reverse stock splits this quarter. Vringo effected a reverse 1:10 stock split in Q4. Prices and valuations are adjusted to reflect these splits.”

Market Cap Weighted

The PIPX is a capitalization-weighted, price-return measure of the change in value of a segment of publicly traded companies. The performance of more highly valued companies, such as InterDigital (IDCC), Rambus (RMBS) and WiLAN (WILN) in the first quarter had the greatest positive impact on the overall index. The PIPX was brought down less strongly by the poor performance of by Acacia, Neonode, Vringo and Unwired Planet, whose market cap have shrunk.

Many of those who follow PIPCOs do so in conjunction with the IP CloseUp 30®, a real-time index of individual company performance in this sector, which also provides up-to-the minute news and updates. Readers also can quickly find market capitalization information there. The URL can be copied and placed on your home screen or home page.

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The PIPX index is designed to provide a measure of the market value, and hence a reading of the relative health of the publicly traded intellectual property licensing sector. The index consists of 13 companies with a primary focus of licensing and enforcement of patent intellectual property.

In addition to a focus on intellectual property, the companies must be publicly traded and have a market capitalization greater than $100M. Since being added to the index, the market caps of many of the companies have shrunk below $100M. The index was initiated with a value of 100 on July 1, 2011.

For the full PIPX Intellectual Property Sector Index Q1 2016 update, go here.

Image source: PIPX Index

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Public patent licensing company index declined 24.4% in 2015

While the S&P 500 stock market index was up 6.5% for the 4Q 2015, the PIPX (public IP licensing company index) was down 11%. 

2015 results were worse with the PIPX down 24.4% vs. the S&P 500, which declined 0.7%. The poor performance is attributed to the weakening of patents and patent values, and the increase in uncertainty, as a result of the American Invents Act (AIA) and several major court cases, including Alice v. CLS Bank.

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Marathon (MARA) and Acacia (ACTG) performed particularly poorly in 2015, down 81% and 74.7% respectively. Rambus (RMBS) was the only gainer in the group, up 4.5% for the year.

For the fourth quarter, ParkerVision (PRKR) and Unwired Planet (UPIP), up 21.1% and 17.8%, both outperformed the solid S&P 500 results of 6.5%.

The PIPX is a capitalization-weighted, price-return measure of the change in value of this segment of publicly traded companies. The performance of more highly valued companies, such as InterDigital (IDCC), Universal Display (OLED), has a more significant impact on the overall index.

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Many of those who follow public IP licensing companies (PIPCOs) do so in conjunction with the IP CloseUp 30®, a real-time index of individual company performance in this sector, which also provides up-to-the minute news updates.

The PIPX index, created by Dr. Kevin Klein, former Director of IP Licensing at Freescale Semiconductor, is designed to provide a measure of the market value, and hence a reading of the relative health of the publicly traded intellectual property licensing sector. The index consists of 13 companies with a primary focus of licensing and enforcement of patent intellectual property.

In addition to a focus on intellectual property, the companies must be publicly traded and have a market capitalization greater than $100M. Since being added to the index the market caps of many of the companies have shrunk below $100M. The index was initiated with a value of 100 on July 1, 2011.

For the full PIPX Intellectual Property Sector Index Q4 2015 update, go here.

Image source: PIPX Index

3Q 2015 Fig 2 (labeled)

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.

3Q 2015 Fig 2 (labeled)

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.

3Q 2015 YTD (labeled)

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.

3Q 2015 Fig 4 (labeled)

Image source: The PIPEX Intellectual Property Sector Index 

Fig5

Leading IP stocks for 1Q include VRNG, RMBS, TSRA, VHC & RPXC

Despite a soft first quarter 2015 for the 13 IP licensing company stocks that comprise the PIPX IP Stock Index, versus the S&P 500, individual winners and losers that bucked the trend.

Vringo (VRNG), down 80.9% over the past 12 months, was up 18.2% in the quarter one, the most in the group. Also advancing were Rambus (RMBS) was up 13.4%, Tessera (TSRA) 12.6%, Virnetx (VHC)10.9% and RPX (RPXC) 4.4%.

Unwired Planet (UPIP), Acacia (ACTG) and Marathon (MARA) were down, 43.0%, 36.8% and 31.0% respectively for the quarter. For MARA it came after a stellar 2014 where it gained some 170%, so some profit-taking is not unexpected. InterDigital (IDC) also cooled off after a torrid 4Q 2014.

*****

PIPX under-performance relative to the S&P 500 was more muted in the first quarter. This appeared to be less a result of improving performance among PIPX sector companies as a group, than improved performance among a handful of larger Index leaders (Tessera and InderDigital), whose weighting impacted overall results (see final graph).  

Fig2
Vringo’s stock was beaten down significantly in the 2014 as the result of adverse decisions in court, so its gain is less impressive in relative terms. Its improved stock performance is either being considered by some investors as a positive harbinger, or the shares are enjoying a favorable bounce due more to traders than long-term investors.

The role of depressed patent values as a result of the American Invents Act, IPRs and proposed proposed additional anti-patent litigation legislation in poor PIPCO performance is difficult to determine. The likelihood is that investors are beginning to regard some companies as better capitalized and and more sufficiently equipped for the long hall, whatever the scenario.

Those larger players that appear to be in possession of sufficient numbers of good patents and licensing opportunities, appear to be the best position to perform over time.

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Fig3The PIPX Index, compiled exclusively for IP CloseUp by Dr. Kevin Klein, Director of IP Licensing at Freescale Semiconductor, is designed to provide a measure of the market value and health of the intellectual property licensing business. The index consists of 13 public companies all whose market capitalization exceeds $100M, whose primary focus of licensing and enforcement of patent intellectual property. The companies included in the index are listed in Table 1. Several of the companies’ market capitalization has fallen below $100M since being added to the index.

“The PIPX index starting from July 2011 through March 31, 2015,” says Dr. Klein. “Somewhat surprisingly, given the amount of interest and attention provided to IP licensing in recent years, the index trends down from July 2011 to about the middle of 2012 and from there has been relatively flat. This performance stands in contrast to that of the broader economy and of publicly traded companies in general.”

The 2015 1Q PIPX update can be found here.

Fig5

Image source: PIPX IP Sector Index, Q1 2015 Update

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Unwired Planet: Can Cash Position Cushion Long Sales Cycle?

With three recent Markman hearings and more than $100M in cash UPIP trading currently at $1.46 could be a good buy for those with patience and a strong stomach.

At an earnings call last Thursday Unwired Planet, Inc. (NASDAQ: UPIP)  CEO Philip Vachon reiterated his confidence in the future, and announced a renegotiated deal with Ericsson that will provide the company more flexibility going forward regarding patent transactions.

“With the modification of the Ericsson agreement during the [past] quarter, the company now has the option to acquire assets that are not subject to the Ericsson revenue share agreement,” Vachon told investors,”but that are subject to the $1.7 million of our NOL.”

Lake Street Capital senior equity analyst Mark Argento who has a “Buy” recommendation on UPIP, suggests that investors proceed with caution, but sees a $5.00 price target.logo

Sum of Parts Valuation – “Given the nature of its business model and the lack of revenue and operating profit predictability from a modeling perspective,” says Argento,” “we believe valuing UPIP on a project/IP portfolio sum of parts valuation basis is most appropriate. We take various scenarios: Low, Mid, and High range of outcomes for monetizing both its core UPIP portfolio and the wireless infrastructure portfolio acquired from Ericsson.”

Argento’s list of “Valuation” challenges and “Risks” in his report (linked above) provide useful guidance for anyone interested in public IP licensing sector.

Spend and Wait

Unwired Planet is typical of the frustrations faced by many PIPCOs that own good patents but have to spend time and money, and encounter risk, to monetize them.

Spending on legal fees and acquisition costs, without generating significant income, requires a strong constitution, even when there is cash on the balance sheet and burn rate that can be contained. Not every PIPCO is so lucky.

Image source: unwiredplanet.com; lakestreetcapital.com


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