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A serial internet entrepreneur and tech enthusiast with a background in mechanical engineering. Partially retired at the moment and have found interest in the stock market before probable retirement. Holder of multiple patents and former pro se litigant.
  • Vringo Baseline Analysis 10 comments
    May 1, 2014 2:17 PM | about stocks: VRNG

    Vringo, Inc. (NASDAQ:VRNG), a company engaged in the development and monetization of intellectual property and mobile technologies, is continually becoming a diamond in the rough. In a industry where insults such as 'patent troll' and 'technology stealer' are repeatedly thrown back and forth Vringo has thus far shown a superior ability to navigate the volatile and often misunderstood business of technology acquisition, development, and licensing.

    Considering the copious amounts of discussion regarding Vringo's business and potential valuation I have chosen to write this article to analyze the market sentiment, business developments, upcoming catalysts, and the potential of a short squeeze.

    Sentiment and Fundamentals:

    As can be surmised from previous articles such as: (1) Why Google Might Be Going to $0; (2) David Slays Goliath: Vringo Awarded Billion-Dollar Victory Over Google; and (3) GOOG)+Ruling,+Royalty+Rate+Set+at+6.5%25/9099793.html" target="_blank" rel="nofollow">Vringo (VRNG) Affirms Google (GOOG) Ruling; an enormous amount of emphasis has been put on Vringo's billion dollar victory over Google (GOOG).

    However, as an individual who holds patents and got interested in Vringo due to their stellar patent enforcement activities and seasoned legal team it is my belief that the market is overly focused on the Google case and has not fully valued the numerous opportunities for additional and independent revenue.

    As of writing this article, Vringo has over 500 patents, business agreement with Nokia and Microsoft, as well as numerous undisclosed licensing deals. It is expected that information regarding these licensing deals may be gleaned from the upcoming earnings release in early May. However, thus far the market has appeared to discount all of the deals and business developments that have not resulted in concrete and disclosed cash changing hands.

    Current Undisclosed and Or Unvalued Business Developments:

    Consolidating the past months of proceedings the following list is a consolidation of Vringo's business deals.

    • Infomedia Services Deal: Vringo reached a deal with Infomedia Services. Under the terms of the deal Vringo was able to sell many of its older and unused assets for a 8.25% stake in Infomedia Services which is on an impressive growth path. In 2013 Infomedia Services generated revenues of approximately US $20 million and boasted the management of over 750 million mobile engagements, 300 million portal sessions, 75 million billing transactions and over 5 million downloads.
    • ADT Settlement: On January 28th, 2014, Vringo reached a confidential agreement with ADT Corporation and its subsidiary, ADT LLC doing business as ADT Security Services. The agreement resolves litigation that was pending in the United States District Court for the Southern District of Florida.
    • TYCO Settlement: On April 28, 2014, Vringo Infrastructure, Inc., a wholly-owned subsidiary of Vringo, Inc., entered into a confidential agreement with Tyco Integrated Security, LLC to resolve litigation on mutually acceptable terms that was pending.
    • ZTE Developments: On April 28, 2014, Vringo and ZTE Corporation reached a mutual agreement to postpone pending litigation regarding the German part of European patent 1,212,919, which was previously scheduled to take place on April 30, 2014. This is in addition to the other ZTE proceedings in Australia as well as the injuction currentlybeing enforced in India against a reseller of ZTE products.

    Upcoming Catalysts:

    Currently, there are a number of very important catalysts coming within the next month as well as a laundry list of additional events scheduled for years to come.

    Google Appeals

    On May 6th, 2014, Vringo is scheduled to argue in front of the CAFC in order to resolve a number of appellate issues within the Google case.

    During this appeal Google is arguing infringement, patent validity, claim construction, and everything that went against them during Pre-trial. Vringo is expected to defend against Google's appeals as well as cross-appeal issues on laches and past damages.

    While many people have quite diligently researched the timeframes for a formal CAFC order in the range of 30-180 days I do believe that the oral arguments as well as questions from the judges will shed invaluable light on the mindsets and opinions of the tenured justices.

    In addition to the oral arguments in front of the CAFC, there are separate appeals within the works for: (1) Supplemental damages; (2) Pre-and-Post-Judgment interest; (3) Royalty rate; and (4) The alleged work around. With regards to these proceedings Vringo's consolidated brief is due on May 8th and Google's response will be due 14 days following Vringo's submission.

    If history has proven anything it is that these court proceeding can be very volatile. Throughout the last two years simple court proceedings and even words from Judge Jackson has caused Vringo stock to swing up and down almost 50%. Due to Google's perceived arrogance I believe the CAFC will be inclined to quickly make up their minds on the more trivial decisions such as the work around, laches, and interest. Whether or not this can be decoded from the justices comments will remain to be seen.

    ZTE Corporation

    Throughout the litigation against ZTE Corporation Vringo has been quite resilient in putting enormous pressure on ZTE Corporation across multiple jurisdictions. To those of you who have been following Vringo has initiated suit against ZTE within Europe, India, and Australia.

    While many of the international court documents have yet to be seen Vringo won a key victory by being granted an injunction against a global seller of ZTE products. I believe the decision of the High Court of New Delhi to grant a injunction against ZTE as well as police protection has given rise to more serious negotiations. It transpires from these proceedings that ZTE is being seriously damages by the injunction and this may or may not have led to the mutual agreement to postpone trial proceedings within Europe.

    Considering the ambiguity of the postponement that has appeared to be conducted by bilateral discussions rather than court continuance proceedings I belief this is an indication that Vringo and ZTE are in discussions to resolve all of the pending litigation.

    Should it be true, it also bears to reason that any additional proceedings, news, or settlement agreements could be derived on how other court deadlines are handled. For example. on May 6, 2014, there is a hearing in India against ZTE Corporation for their failure to comply with prior court orders given by the High Court of New Delhi as well as the injunction orders. If this court proceeding is also postponed or withdrawn it would give significant support to the theories that good faith and probable settlement discussions are taking place.

    Short Interest:

    Another particular topic of interest with regards to Vringo's stock on a more technical point of view is the current short interest.

    For those of you who are new to short interest, according to Investopedia "Short interest is a market-sentiment indicator that tells whether investors think a stock's price is likely to fall." Within the last two day, according to ShortAnalytics Vringo's short interest has been steadily decreasing on unusual volume. This decrease give the indication that investors expect a continued rise of the stock.

    According to NASDAQ short interest data as of the settlement on 04/15/2014 the total number of shares sold short is 20,171,992.

    Furthermore, according to Vringo's 14A filing as of April 21st, 2014 there were 86,515,529 shares of common stock outstanding.

    By way of some simple math, using both the number of shares outstanding and short interest one can calculate the following information:

    1. 23.31% of the current shares are sold short. (20,171,992 / 86,515,529)
    2. At the current share price of 4.07 the total monetary value of the short shares is $82,100,007.
    3. It will take roughly 13 days for all of the shorts to cover their current liabilities.

    Due to the relatively high number of short shares, any positive news would probably lead to a rapid increase in share price which would likely lead to a short squeeze. Short squeezes result when short sellers cover their positions on a stock and generally results in an even larger increase in stock price.


    While patent plays as well as Vringo stock have historically proven to be volatile and unexpected it is my belief that at the current stock price and in specific consideration with the recent business developments Vringo offers superior risk reward potential.

    Disclosure: I am long VRNG.

    Themes: catalyst, Vringo, Google, IP, short, squeeze, VHC Stocks: VRNG
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Comments (10)
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  • Patent Plays
    , contributor
    Comments (966) | Send Message
    Well done!
    1 May 2014, 04:23 PM Reply Like
  • Billu674
    , contributor
    Comments (49) | Send Message
    why instablog not article?
    1 May 2014, 05:02 PM Reply Like
  • mdh157
    , contributor
    Comments (6) | Send Message
    I agree with PP.........excellent article highlighting all of the ongoing concerns/possibilities for VRNG.
    1 May 2014, 05:22 PM Reply Like
  • Robert K. Stuart
    , contributor
    Comments (162) | Send Message
    I enjoyed this blog and have to say that this could have been an article. You should have received compensation for this update.
    1 May 2014, 05:27 PM Reply Like
  • TechInvestor80
    , contributor
    Comments (353) | Send Message
    Short interest is actually higher when you consider the float (ie take out shares held by insiders, although they trade it like they own a hedge fund, so maybe not, and remove insitutions).


    Good summary of whats on the horizon but I fear many longs are getting into the trap of hype again and not understanding that it may very well play out that nothing happens for many months yet and they we see the usual pump and dump we have seen for 2 years now.
    1 May 2014, 07:17 PM Reply Like
  • TechInvestor80
    , contributor
    Comments (353) | Send Message
    Good summary of what's on the horizon. Also, short interest is technically higher if you consider short interest as a percent of float (remove institutional holdings, and well I was going to say insiders but they trade this like a hedge fund, but I digress).


    While this is all fine and good, I would caution longs here, many of whom are exhausted after being in this for close to 2 years and seeing very little price appreciation (at least relative to the rulings/situation vs google), and whom are now back into that 'any day' mentality.


    This could very well be another number of months, even a year before we longs see money and this recent run, while moving more towards a realistic discount of expectations is still somewhat based on near term hype/expectations of something immanent vs actual dollars.


    As we all know by know, without news of material dollars coming in, this stock will trade off again. We've all been here before so I caution investors not to get high on expectations again, only to be disappointed if nothing happens in the next month or so.


    Best of luck to all longs!
    1 May 2014, 07:28 PM Reply Like
  • Redangus
    , contributor
    Comments (66) | Send Message
    I have no objections to what you say, as I, too, am long Vrng. I do note, though, that you make references to “the market” discounting the stock, and “the market” being overly focused on the Google case, etc. I know I sound like a broken record on the point I’m about to make, but I’m gonna make it again. There IS no "market" in the ordinary sense for this stock with its huge 20%-plus short interest. There is no valid price discovery for this stock. The shorts can at will move this low-priced stock in any direction with barely a wag of their fingers. There is at this point no active counterforce to the shorts. Things will change, but at this point the shorts hold sway.


    One reason I make the above point is to assuage the disappointment that investors will feel when the shorts again walk the price down, as they have done dozens of times in the past. Same ol’ same ol’. Our time will definitely, surely, absolutely come, though.
    1 May 2014, 08:23 PM Reply Like
  • LaFiere
    , contributor
    Comments (136) | Send Message
    Yes, as Redangus states, "the shorts have always come and spoiled the party". However, I have a gut feeling that this time, we will see "the surprise" on 9 May. And I believe that we will see many surprises with Vringo. They are circling the globe and using all their resources to get what is theirs. When this company starts earning cash, things could happen. Will they reward shareholders with dividends? Or will the stock skyrocket? These are the unknowns. But one thing I will say, "if I was a short, I would feel that I could possibly be an endangered specie". You don't want to fight with David when he has a good slingshot in his hand.
    1 May 2014, 09:05 PM Reply Like
  • Vet67to82
    , contributor
    Comments (649) | Send Message
    Nice article, thanks.


    I believe the shorts, with Vringo having two confidential agreements locked in with ADT, and TYC, are on shakier ground than they think they are, have to rethink their tactical position. The shorts no longer have any time frame left. Vringo is in control with the potential of a trading halt at anytime for news, even if Vringo only opts to say licensing revenues have been received.


    2 May 2014, 09:35 AM Reply Like
  • AdrianBH
    , contributor
    Comments (21) | Send Message
    The fact VRNG has chosen to make their settlements to date "Confidential", eliminates the measurement of any financial rewards, thus adding zero value to their stock price. If VRNG negotiates a similar arrangement with ZTE forthcoming, then all stockholders, whether individual, institutional, or internal will see no rewards in their stock value. Justified by any means, this still results in a stock price having little opportunity for significant upward movement within any reasonable timeframe. Witness the current price which contains knowledge of recent wins against Microsoft, ADT, and Tyco. Critics and proponents of VRNG may agree, the stock appears undervalued, but how can one place a value on a Confidential Settlement? And, we have never been enlightened as to their financial value published any of the Earnings Reports by VRNG to date. I am long the stock, but my planned long wait for rewards made nearly two years ago is now running very thin on patience. I planned for VRNG to win their cases publically, not in clouds of secrecy. How about you?
    2 May 2014, 10:32 AM Reply Like
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