Vringo: Should You Follow Mark Cuban? An Examination Of His Past Deals

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On Monday, shares of Vringo Inc. (VRNG), best known for its Facetones app, and a provider of range of software products for mobile video entertainment, personalization, and mobile social applications, surged 31.9%. The surge happened after it was disclosed in a Friday SEC Form SC 13G filing after the market-close that famed American business magnate and billionaire investor Mark Cuban held 1.03 million or 7.4% of outstanding shares. Mr. Cuban, perhaps better known to the general public as the owner of the Dallas Mavericks and a "shark" investor from the television series "Shark Tank", is renowned for his business acumen. In 2011, he wrote an e-book titled, "How to Win at the Sport of Business" that chronicles his life experiences in business and sports.

Monday's surge in VRNG shares, based solely on news of his new ownership, is perhaps another testament to his reputation as an astute investor. VRNG shares have, in fact, been surging ever since the beginning of April, and were already up about 70% during the month prior to the news about Mark Cuban's investment in the company. The surge was based on a TechCrunch news story by famed investor and blogger James Altucher, suggesting that VRNG is in line for a huge settlement from a lawsuit against search engine giant Google Inc. (GOOG) regarding patents related to monetizing of the search business. For those interested, the larger story is an interesting read, titled, "Why Google Might be Going to $0", and also makes a strong bullish case for VRNG.

While the relative merits of the subject litigation and its impact on VRNG's share price going forward can be the subject of another article, in this one we examine Mr. Cuban's recent deals in the public equities markets, via his SC 13D/G filings. The intent is to evaluate his track record as an investor in this space, which can inform us on how this deal could do on average. Overall, as you will see, Mr. Cuban has shown a knack for buying public equities when they are trading at their lows, and very often prior to a meteoric rise. The following is our evaluation of his latest five investments in public equities:

  • Reading International Inc (RDI): RDI is engaged primarily in the ownership and management of commercial and residential property in the U.S., Australia and New Zealand. Mr. Cuban filed his initial SC 13G in June, 2009, revealing a 0.16 million share position in Class B Voting Common Stock, and his latest SC 13G/A filed in February revealed his owning 0.21 million shares of Class B Voting Common Stock, and an additional 72,164 shares of Class A Nonvoting Common Stock. RDI shares traded in the $4 range at the time of his initial filing, and closed Monday at $4.73 for an annual return rate in the 6% range.
  • Lodgenet Interactive Corp. (OTC:LNET): LNET provides interactive media and connectivity services to the hospitality industry in the U.S., Canada, and Mexico. Mr. Cuban filed his initial SC 13D in October, 2008, revealing a 2.24 million share position, and currently via his latest SC 13D/A filed last December revealed a 2.40 million shares position (not including convertible stock). LNET shares traded at the lows, in the $1 range, at the time of his initial investment, and closed Monday at $4.10 for an outstanding annual return rate in the 51% range.
  • Rentrak Corp. (RENT): RENT is an information management company, providing content measurement and analytical services to companies operating in the entertainment industry in the U.S. and Canada. Mr. Cuban filed his initial SC 13D, which is also his latest filing, in September 2011, when the stock traded in the $13-$14 range, revealing that he owned 0.97 million shares. RENT shares closed Monday at $18.67, for an outstanding annual return rate in the 74% range.
  • Carmike Cinemas Inc. (CKEC): CKEC operates over 230 movie theaters with over 2,200 screens located in 36 states targeting small to mid-size non-urban markets. Mr. Cuban filed his initial SC 13D in December, 2008, revealing a 1.20 million share position, and currently via his latest SC 13D/A in February of 2011 revealed that he had completed exited from his position in CKEC. CKEC traded at the lows in the $2 range at the time of his initial filing, and traded in the $7 range in February of 2011, for an outstanding annual return rate in the 75% range.
  • Lions Gate Entertainment (LGF): LGF is an entertainment company, engaged in the motion picture production and distribution, TV programming and syndication, home entertainment, family entertainment, new channel platforms, and digital distribution activities. Mr. Cuban filed his initial SC 13D in April of 2010, revealing a 6.37 million share position, and in the latest SC 13D/A filing in June of 2010, he revealed completely exiting out of his LGF position. LGF traded in the $6.30s at the time of his initial investment, and traded in the $7.00 range at the time of his latest filing, two months later, for an outstanding annual return rate in the 83% range.

Overall, we conclude that Mr. Cuban has an impressive track record, and that an investor may benefit by riding his coat-tails. However, as a measure of caution, VRNG shares are already up sharply this month, including prior to Mr. Cuban's filing, and it would be prudent to wait for a dip to at least the $3 range before gradually scaling in, buying more if it drops any lower.

Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.