Spherix Inc. (NASDAQ:SPEX) is a shell that has sold off most of its core operations and now is in the process of purchasing over 222 patents and converting to a business model that to me is very similar to Acacia Research Corporation (ACTG), which has a billion dollar market cap.
SPEX and ACTG have several things in common. They both started as reverse splits with floats under one million shares. They then both devoted resources to purchasing and monetizing patents. They both have invested in a broad portfolio of patents, not just focusing on one patent or industry. ACTG did this years and years ago and has been very successful. SPEX is at the phase ACTG was at in its inception.
Spherix previously announced an agreement to acquire 222 patents from North South Holdings, Inc. principally developed by inventors at Harris Corp. (NYSE:HRS), a 118 year old pioneer in wireless communications and equipment and a $6 billion defense contractor. The Harris portfolio has applicability in law enforcement communications, military and homeland security, satellite communications, portable electronics, Wi-Fi, microwave and cellular transmission, and solar concentrator technologies. Additional North South patents cover automated pharmacy ordering practices.
Additionally, SPEX recently signed a further letter of intent with a major private patent ownership collaboration covering additional areas of telephony and telecommunications technology which they expect to close in the third quarter.
What I like about the patent portfolio they are acquiring is that it was developed at Harris Corp., and covers multiple growing industries. SPEX has stated in presentations that their goal is to monetize these patents by defense and licensing deals, much like the strategy of ACTG.
Several other companies have entered the patent field and have yet to monetize their patents but have grown to have large market caps.
- Vringo Inc. (NASDAQ:VRNG) has a market cap of $253 million.
- Parkervision Inc. (NASDAQ:PRKR) has a market cap of $424 million.
- VirnetX Holding Co. has a market cap of $993 million.
Accounting for the shares to be issued to purchase the patents:
If SPEX were to be valued with the same market cap as VRNG or PRKR, their shares would be worth approximately $19.46 to $32.60.
Risks include the inability to monetize the patents or the need for more funding to mount legal defenses. However, with VRNG and PRKR they both significantly appreciated in market cap despite the fact they have yet to be successful in monetization.
Given the fact that SPEX's portfolio was developed at a multi-billion dollar company such as HRS and that they cover multiple high-growth billion dollar industries, SPEX should be a stock to watch for significant appreciation from current levels as VRNG and PRKR made large moves as they converted to patent monetization companies.
Lastly, in my opinion, given its small public float of 650,000 shares, SPEX could be a big mover once these comparisons are made. Shares initially moved to $14.99 when the transformation to a patent company was initially announced back in March of 2013. Now that they have given a timeframe to close and defined the 222 patents more clearly, the stock could be ready to renew its move higher.