Acacia Research Corporation (NASDAQ:ACTG)
Next generation genomic sequencing at a bargain price
Note by Quintessential Capital Management
Friday, February 12, 2021
IMPORTANT: The following text contains important hyperlinks and footnotes
By Quintessential Capital Management
Usually market operators are left with the painful choice of being either “value” or “growth” investors. Acacia is instead one of those rare opportunities to gain exposure to some extremely popular segments, genomic sequencing and cancer immunotherapy, for pennies on the dollar.
Acacia Research Corporation is a $350m company investing in intellectual property (a so-called “patent troll”) with a strong relationship with Starboard Value, a well-known activist investor. The Company is trading at $8, 1.5x book value, but this is a misleading measure: Acacia may be worth north of $15/share and most of this additional value is easily identifiable, nearly certain, highly liquid and on its way to be unlocked by upcoming catalysts.
The not-so-hidden treasure hiding on Acacia’s balance sheet is a distressed portfolio acquired last year from UK fund Woodford for $284m: Acacia bought itself a stake in the “crown jewels” of the UK biotech industry at bargain prices. This portfolio is now carried on Acacia’s books either at cost or at valuations far below market value.
Acacia’s assets are simple: they consist of a portfolio of public companies, some minority stakes in a number of private companies and cash. Since its last earnings report, Acacia’s holdings in public companies have doubled in value and are now worth around $100m. In its private portfolio, composed of four distinct assets, the situation is more extreme: investments are currently booked at costs or at inadequate valuations.
Three private investments, Immunocore, AMO Pharma and Viamet, are booked at a combined $31m on Acacia’s balance sheet, while their true market value may exceed $277m, let’s see why:
First, Immunocore
