Seeking Alpha

asia24's  Instablog

asia24
Send Message
Full time Trader, Investor, Venture Capitalist, and Entrepreneur
  • Vringo Shares Will Quintuple From $5 And Eventually Hit $50 9 comments
    Oct 6, 2012 8:48 PM | about stocks: VRNG, GOOG, VHC, IDCC

    Vringo from a simple ring tone company has entered into a Billion dollar space here where there's $67 billion in revenue being made and gotten b/c of Patent infringement. Vringo came from a market cap of $6.7M in January to now nearing a market cap over $500M and millions in its coffers. If a settlement or multiple buyout offers came in, it would be Billions to the market cap and the stock price quintuple. Stout, Cohen, Shapiro, and Lang (the latter patiently waiting for his day to come and he's just about there to exact his coup de grâce on Brin and Page) know what they are sitting on and wouldn't settle for anything less.

    Google was trying to strike the willful infringement argument, but with no success and you can see a Virginia jury award a 3X multiple. The Court denied Google's motion to exclude evidence of its wealth and revenues. The Court found this evidence is relevant to the issue of calculation of royalties. Either way Google 2011 net revenue appx $9.7B. And growing over next 4 years and we can see another $400 million in future royalties. If i were going to look at the PPS a multiple must be factored in given the Nokia patents that will carry on the licensing and litigation revenue hence the shot over the bow of ZTE (which we should hear something soon).

    2% of $67B + Future Royalties for 4 years + 4 other defendants, possibly $1.5B divided by 100 mm shares will put it at $15 cash value and yes add a multiplier(future monetization of patents ZTE).3X/4X/5x??PPS $45,$60,$75 what will the market decide?
    Reasonable Royalty rate can be anywhere from.05%-5% so if you take 2% (for easy math calculations and Lang Prob wanting to rip Google apart) you get $1.34Billion plus 4 years left on patent equals appx another $50Billion based on 2011 Google10K the most you might see is $2.5 Billion that's plenty to send this stock to $30 IF there is a settlement don't be surprised to see it in the $1-$1.5 range.

    By the estimates below from 3 separate opinions we could be looking at $30, $34.80 and $64 mind you some dilution has taken place and calculations are off since they did their articles, but these are conservative numbers, why be conservative?
    James Altucher $30 PPS "When VHC settled with MSFT for $120mm, the market cap went to $1.2B. The market cap of the combined company will be many multiples above any settlement price. And the merger will occur well before any settlement so I do not consider this a big risk" Enhydris Equity 6X MULTIPLIER "Even so, the really fascinating part is the potential pay off for investors willing to take the inherent risk of such cases. Based on our analysis of the potential damages and a modest forward multiple of 6, our conservative estimate for year-end VRNG PPS is $64. With such a risk/reward ratio, we felt that VRNG was a must have for our portfolio." John H Ford 5X MULTIPLIER If Vringo prevails over Google, and receives $710 million, Vringo should net about $568 million (Vringo stated it would keep 80% of any settlement fees as pure profit.) With a value multiplier of 5, that would give Vringo a market cap of $2.84 billion (multiply $568 million times 5). With a market cap of $2.84 billion, using a total diluted share count of 81.5 million, the Vringo share price would be $34.8. Anyway you look at it a multiplier will be added to the damages or settlement. If a Jury awards damages the share price will be greatly higher, all depends how and "IF" Google wants to roll the dice.

    VHC and IDCC have an appx mkt cap of $1.3 billion take into account that VHC settled and received $220million... do take into account that when a company gets a settlement there's a multiplier added to that. I see a settlement of $1B-$1.5B add the multiplier and you may have a stock from $30 to $75 depending on the market. I for one will be happy with anything over $20. I'll let the market determine the price and not peoples predictions. The fact that they acquired 500 patents just opens the door for more possibilities through licensing and litigation in the future (ZTE) to add revenue to the company. 35% revenue of Nokia patents kicks in after the $22mm is achieved for what VRNG paid for the patents. With the Dream team of lawyers they have assembled avg $560M between them in their last several lawsuits, I'm sure they believe there's future value in the Nokia patents..

    $696M was an estimate of possible damages (not including interest + future royalties) from Vringo's EXPERT WITNESS who "SUGGESTED" possible damages. Google without any real calculations or formula relied on their "Expert" witness and suggested $200M less. Vringo is trying to get his deposition thrown out as there was no substance behind his calculations and shouldn't be considered an expert.

    All in all, I have no legal expertise what so ever and being in the financial markets for 20 years I'm simply a common investor, trader, husband and father who looked at the motion for Summary Judgment Google submitted and thought it was VERY weak. If Quinn Emanuel and Google are basing their fate in Trial with the evidence they put forth already in their motion for Summary Judgment, they will lose in trial and I welcome treble damages. I'm expecting a settlement before or during trial.

    Disclosure: I am Long Vringo, I have not been compensated for this article and these are my expressions and opinions

    Disclosure: I am long VRNG.

    Stocks: VRNG, GOOG, VHC, IDCC
Back To asia24's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (9)
Track new comments
  • Josh Turner
    , contributor
    Comments (30) | Send Message
     
    102 million shares x $50? Thats too funny
    6 Oct 2012, 08:57 PM Reply Like
  • asia24
    , contributor
    Comments (140) | Send Message
     
    Author’s reply » Guess my calculations are a bit off maybe I should have went higher?

     

    just read on Docket 719 pg 11 #12 "The reasonable royalty rate that is adequate to compensate I/P Engine for Defendants' infringement of the '420 and '664 patents is 3.5%"
    15 Oct 2012, 06:17 PM Reply Like
  • kimx
    , contributor
    Comments (50) | Send Message
     
    Thank you for your observations and your optimism. I hope you're right!
    6 Oct 2012, 09:42 PM Reply Like
  • Maria Auziliadora
    , contributor
    Comments (628) | Send Message
     
    I also believe they are going to settle before trial I happen to know someone who works for Google and all he said is that Google does not want any problems and they hate bad publicity
    7 Oct 2012, 06:48 AM Reply Like
  • jsmurlick
    , contributor
    Comments (11) | Send Message
     
    ASIA please re-do your calculations ....

     

    The fully-diluted break down is as follows:

     

    Outstanding common - 75,756,269
    Outstanding options/warrants - 34,096,434
    Outstanding preferred (as converted) - 18,672,645

     

    Total - 128,525,348
    7 Oct 2012, 01:55 PM Reply Like
  • RHD
    , contributor
    Comments (447) | Send Message
     
    Hello asia,
    1. 99mm shs o/s f/d plus 10mm in recent placement.
    2. Treble damages, IMO, are very much on the table as of now.
    3. Other named defendants, as of now, are probably a bit concerned.
    4. Bing!
    5. NOK patent actions as VRNG is an NPE and thus capable of a more aggressive posture.
    Best.
    8 Oct 2012, 10:10 AM Reply Like
  • asia24
    , contributor
    Comments (140) | Send Message
     
    Author’s reply » RHD I always welcome your comments. A powerful and rich NPE like Intellectual Ventures just become cash cows acquiring patents, monetization and keep the cycle turning. Vringo has that possibility as they can and have raised funds through the public markets to acquire patents and now go after some of the worlds biggest companies. I wrote this article on SA without a conservative approach like most of the other estimates out there. Yes I'm not scared to be wrong but the numbers just don't lie. $25 PPS is very attainable in a favorable settlement and especially a jury award of treble damages. MSFT and YHOO would be next to sign off as check writers to Vringo involving the search patents as infringers. From 2007 to present there's appx $75 billion made on infringed Nokia patents that Vringo has acquired, and yes Juniper, Lucent- alcatel, Cisco, huawei also possible defendants with ZTE. Monetization from these patents and a forward multiplier over time will bring Vringo over $50.
    8 Oct 2012, 11:41 PM Reply Like
  • asia24
    , contributor
    Comments (140) | Send Message
     
    Author’s reply » by the numbers presented is that Google's revenues in question from 2005 to present represent $150 Billion Globally and appx there's $67 billion Domestically in revenue being made and gotten b/c of Patent infringement

     

    Docket 719 pg 11 #12 "The reasonable royalty rate that is adequate to compensate I/P Engine for Defendants' infringement of the '420 and '664 patents is 3.5%" That is $493M is 3.5% royalty on 20% extra profit Vringo argues Google and other defendants made using patents not including Interest. Please remember these numbers were released by Dr. Becker after Google and Quinn Emanuel submitted their "Revised" numbers to the court and could not question the new amount, hence forth Q.E. fired off a volley of Emergency Motions just before the trial to have these numbers dismissed.

     

    We have to add the fact that Vringo is seeking a "Reasonable Royalty Rate" for past and future infringement. If we use a realistic number of 2% (possibly even 3.5% by whats been filled already) and not the conservative 1% Dr. Becker suggested we get

     

    2% of $67B + Future Royalties for 4 years + 4 other defendants, Google 2011 net revenue appx $9.7B. And growing over next 4 years and we can see another $400 million in future royalties, additional to the $493mm (3.5% on extra profit) we get a number close to $2.2Billion in infringement hence why Vringo didn't pursue the willful infringement argument. We can now actually see why Google has filed to keep this number under "SEAL"

     

    Jury's only awards past damages (if they find patents infringed+valid). Judge handles future (injunction or ongoing royalty) which will definitely be handed out since Judge Jackson strongly urged the parties to settle this matter.
    20 Oct 2012, 05:24 PM Reply Like
  • stockhawk
    , contributor
    Comments (257) | Send Message
     
    Hope you're calculations are still valid today, as the 3x number is not. Nevertheless, get the point. Lots of number crunching. For what it's worth: assuming a jury verdict in VRNG's favor, it wouldn't surprise me to see stock splits over the course of time. This would mask the actual performance of shares and increase their cash reserves for more litigation. Stock splits are kind of meaningless in some ways but tend to happen to successful companies, wouldn't you agree? Appreciate you're number crunching prowess as I don't have it.
    28 Oct 2012, 08:47 AM Reply Like
Full index of posts »
Latest Followers

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.