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.