On May 29th 2014, ParkerVision (NASDAQ:PRKR) and Qualcomm (NASDAQ:QCOM) met to discuss pre-judgment interest, supplemental damages, and post-verdict damages. During this meeting, the parties agreed on a pre-judgment interest methodology and rate. Since the ParkerVision bulls are greatly overstating the amount of pre-judgment interest that was decided upon, this article will lay out what was actually approved by both parties.
Before going into what was decided on May 29th, let us first look at what both parties went into the negotiation requesting. ParkerVision's request can be seen below in Exhibit A of document 531. The fact that ParkerVision does not have a copy of document 531 on its website and Exhibit A has now been filed under seal on Pacer may be causing some of the confusion regarding what was decided on May 29th. Fortunately, we were able to obtain a copy of this document on Pacer before it was put under seal, and therefore, can show quite clearly that ParkerVision was requesting approximately $24.7 million heading into this meeting.
While ParkerVision's request for $24.7 million was clearly laid out in document 531, as far as we can tell, Qualcomm never publicly filed the amount it was willing to pay. What we do know is that ParkerVision modified Qualcomm's methodology to produce its request. The adjustment ParkerVision made to Qualcomm's methodology was that ParkerVision used Florida interest rates, while Qualcomm used the prime rate. Therefore, if we use ParkerVision's numbers from Exhibit A of document 531, but substitute in the prime rate for the Florida rate, we can ascertain Qualcomm's number. Doing this leads us to believe that Qualcomm offered approximately $15 million. Therefore, ParkerVision entered this negotiation requesting approximately $24.7 million, and Qualcomm was offering approximately $15 million.
Now that we know what both parties were hoping for, let's look at what was agreed upon.
Document 540 states:
The parties have agreed that (i) a pre-judgment interest award should be calculated in accordance with the methodology proposed by Dr. Leonard in his January 8, 2014 declaration; and (ii) that the rate to be used to calculate any pre-judgment interest should be a rate midway between the Florida statutory rate proposed by ParkerVision and the prime rate proposed by Qualcomm. Following Qualcomm's provision of actual sales figures from verdict to judgment for the products found to be infringing, the parties will provide to the court a calculation of pre-judgment interest based on the mid-point of prejudgment interest between the Florida statutory rate and the prime rate.
As a reminder, Dr. Leonard is Qualcomm's expert, and while his January 8, 2014 declaration, document 505-1, was filed under seal, as we stated earlier, ParkerVision's spreadsheet in Exhibit A of document 531 is a spreadsheet that, according to ParkerVision, replicates Leonard's methodology, but with ParkerVision using the Florida rate rather than the prime rate that Dr. Leonard had used.
Knowing what has been agreed upon allows us to calculate the pre-judgment interest rate agreed to by both parties. To calculate this rate, we duplicated ParkerVision's Exhibit A in Excel, and then created a new set of columns with the average of the prime interest and Florida interest as agreed to by document 540. Making this adjustment allowed us to derive a pre-judgment interest number of $20.5 million. Our work can be seen here.
To be clear, this $20.5 million number must be approved by Judge Dalton. However, it is the amount the parties have agreed to, and we feel it is unlikely the Judge will argue with terms the parties have agreed upon.
Based on the $20.5 million of agreed-upon interest, we need to revise down our best-case estimate of fair value for ParkerVision, which previously used the $24.7 million that ParkerVision requested. As a reminder, this valuation can be seen in our prior article. The net result is a decline in best-case value to only $2.07 per share, or approximately 57% below today's price. Accordingly, we reiterate our strong sell recommendation on ParkerVision's stock.
Disclosure: The author is short PRKR. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.