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ChaPaVe Partners looks for opportunity in securities of companies that have a controlling shareholder who may be hampering value for non controlling shareholders. In this effort, we created the Tactical Tender Offer (TTO) to align minority shareholders’ interests with controlling shareholders’... More
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  • FB Lockup Doosy Coming 11/14/2012

    There are many articles written about the lockup expirations at Facebook (NASDAQ:FB) and we authored many ourselves. But the biggest of the bunch is around the corner and it seems to be the driver in the direction of FB stock. We think FB is a falling knife and agree with the latest value by Realdealstocks of $14.43 as a near term target.

    We have many new catalysts to predict the direction of FB such as:

    1. Sherly Sandberg is selling shares ahead of Nov 14th lockup expiration.

    2. Twitter being the new media powerhouse in the Presidential election.

    3. Coming tax increase incentivizing holders with gains to sell this year.

    4. Fat Fingers fudging numbers on mobile ad click through.

    5. Zuckerberg never entered a new lockup, only informally said he had no intention of selling until next year. This is not a firm commitment.

    Our advice here for investors is to avoid FB until 2013. For aggressive non risk averse traders, sell FB short at these levels.

    All of these points have been covered in our previously published articles:

     PUBLISHED  
    Facebook's Halloween: 'The Rocky Horror Picture Show'Oct 22, 5:27 AM  
        
    Wiretapping Suit Could Be 'KO' For FacebookOct 12, 3:53 AM  
    Facebook Flings Spaghetti As Lock-Up Expirations Ap...Oct 5, 3:46 PM  
    Facebook: 'What's The Rush?' Meets 'Don't Worry, We...Sep 21, 11:16 AM  
    Facebook: 'Hotel California' 2012Sep 16, 2:25 AM  
    Facebook: 'Hey 19' Are You 'The Wall'Sep 10, 1:28 PM  
        
    Facebook Holders Facing Share TsunamiAug 17, 2:12 PM  
    Facebook Hits The Street: Act IIAug 12, 9:50 AM  
        
    Facebook Fully Diluted - In Search Of EquilibriumAug 7, 3:00 PM 

    Disclosure: I am short FB.

    Nov 09 10:27 PM | Link | 4 Comments
  • Vringo's Fundamental Value

    Vringo (NASDAQ:VRNG) recently announced its victory against Google (NASDAQ:GOOG) and affiliated customers of Google in a patent infringement. The news of the initial awards seemed to disappoint investors at first blush. However, after further review, the win is certainly a major positive for VRNG shareholders. Here are VRNG's achievements from yesterday:

    1. Vringo's case against AOL, Inc. ("AOL"), Google, Inc. ("Google"), IAC Search & Media, Inc. ("IAC"), Gannett Company, Inc. ("Gannett"), and Target Corporation ("Target") (collectively, "Defendants") with respect to the Defendants' infringement of the asserted claims of U.S. Patent Nos. 6,314,420 (the "'420 Patent") and 6,775,664 (the "'664 Patent") (collectively, the "Patents") was a victory in terms of the Patents validity and subsequent infringement by the Defendants. This victory could pave the way for licensing arrangements which would avoid new litigation against other infringers and quickly develop cash flow.

    2. This win in court gives VRNG the credibility in terms of their legal teams' capabilities and the soundness of their intellectual property "IP".

    3. Through this litigation process, Vringo also demonstrated their ability to seize an opportunity to strengthen their balance with a direct stock sale without any extraordinary dilutive terms such as additional warrant coverage that are seen in other small companies that need cash.

    4. The process has also created a lot of volume in the name which has its advantages in further financings if VRNG should need it.

    5. VRNG can use its stock as currency to acquire new IP to bolster their portfolio. A veteran of the IP litigation world, Interdigital (NASDAQ:IDCC) has done this successfully and built a fundamentally strong cash flow earnings driven business around it.

    Ultimately the question for Vringo is how many shares are in existence and how do we calculate Vringo's fundamental value.

    First we need to look at the VRNG's SEC filings to see how many shares there are on a fully diluted basis. We think the larger share count on this basis is why the short sellers are comfortable selling this stock short right now. The most current filing is the prospectus supplement filed with the SEC in conjunction with the company's last direct equity sale described above. We copied this excerpt from the offering prospectus to show the cap chart for VRNG as follows:

    "

    The Offering

    Common stock offered by us 10,344,998 shares
       
    Common stock to be outstanding after this offering 75,756,269 shares
       
    Price per share of common stock $4.35
       
    Use of proceeds We intend to use the proceeds from this offering for general corporate working capital purposes. See "Use of Proceeds" on page S-6 of this prospectus supplement.
       
    Risk factors Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page S-5 and page 7 of the accompanying prospectus.
       
    NYSE MKT VRNG

    The number of shares to be outstanding after this offering is based on 65,411,271 shares of common stock outstanding as of October 4, 2012. It does not include:

     9,434,660 shares of our common stock issuable upon exercise of stock options outstanding as of October 4, 2012 under our equity incentive plan as of that date, at a weighted average exercise price of $3.23 per share;
     3,123,334 shares of our common stock underlying restricted stock units outstanding as of October 4, 2012 pursuant to our equity incentive plan for employees, directors and consultants;
     6,998,333 shares of our common stock are available as of October 4, 2012 for future grant or issuance pursuant to our 2012 stock-based plan for employees, directors and consultants; and
     21,538,440 shares of common stock issuable upon the exercise of warrants outstanding as of October 4, 2012 at a weighted-average exercise price of $2.48 per share.

    "

    Lets take the 75,756,269 shares and add in the 9,434,660 shares options which are above the strike price and we can assume they will be exercised described in the first bullet point above. Then we add the shares from the second and fourth bullets for employee restricted stock units or "RSU" and the warrants with the exercise price of $2.48. The grand total of the fully diluted shares comes to 109,852,703. also important to note here is the warrants and option being exercised will bring $53,415,331 and $30,473,951 or $83,889,282 to the company adding to it value and market cap at least dollar for dollar.

    So lets do a few more calculations to see what VRNG might be worth given a $500 million win yesterday as reported by several media outlet articles. Lets assume that VRNG has $50 million in cash today then add in the $500 million win then add the $83.9 million from warrant and option exercise and we have over $663 million. Dividing this by the fully diluted shares, we get a $5.77 per share number. This of course does not account for taxes or for future earnings which will come in licensing and litigation activities. If we take 30% off the $500 million win for taxes and divide the cash, it works out to $4.40 per share, which we believe is a base value for the stock as it sits today.

    We do think that there may be some adjustments to the jury's monetary calculations after VRNG makes their post trial filings with Judge Jackson. VRNG said it is reviewing the formulas they provided at trial which the jury may have incorrectly used in their calculations. This may add present and future royalties to the total award to Vringo. We believe this may add to the many positive developments from this litigation.

    Disclosure: I am long VRNG.

    Tags: VRNG, GOOG, IDCC
    Nov 08 10:50 AM | Link | 8 Comments
  • Buy Vringo While Jury Is Deliberating

    As we write this article, the jury in the Vringo Vs Google case is deciding on whether the Vringo patents were infringed and if they were, what the damages will be. We believe the longer it takes the jury to decide, the higher the likelihood for Vringo success.

    If you are looking to go long a tech stock and have a speculative frame of mind, we think the shares of Vringo (VRNG), which we have written about twice , are certainly worth the risk-reward ratio now that the trial with Google (GOOG) is at its midpoint.

    Moreover, Facebook certainly can be potentially viewed as an infringer of the same Vringo patents that Google is accused of violating. In fact, if Claim 1 of Vringo's U.S. Patent 6,314,420 applies to Google search and related ads, we feel it highly likely that Facebook's (NASDAQ:FB) desktop advertising would also be affected. If Vringo wins, a Facebook case is likely to follow.

    Moreover, the combination of the above claim and Claim 1 in Vringo's U.S. Patent 6,775,664 seems to be what Facebook is practicing in its retargeting advertising program. Retargeting tracks users travels using cookies on the web and redirect advertising based on what the user previously clicked. Certain cookie programs deployed by FB maybe considered wiretapping and is the subject of litigation which we have outlined in a previous article.

    Disclosure: I am long VRNG.

    Additional disclosure: This is a trade only for investors with a high tolerance for risk.I am short FB.

    Tags: VRNG, GOOG, FB
    Nov 06 10:54 AM | Link | 4 Comments
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  • FB looking very weak.VRNG looking strong. Pair trade oppy:buy VRNG short FB
    Nov 9, 2012
  • FB is sprinkling thru media reports,here is another one looks like they are pumping as hard as they can http://bit.ly/QS0voH
    Oct 23, 2012
  • MLNX , great call Akram, short at will, but tough to borrow, so you must have strong will to withstand any short covering squeeze attempts!
    Oct 23, 2012
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