Entering text into the input field will update the search result below

What's the real value of VHC?

Apr. 09, 2011 10:42 AM ET1 Comment
John H. Ford profile picture
John H. Ford's Blog
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Deep Value, Special Situations

Seeking Alpha Analyst Since 2010

For the past 30 years, I have been involved in startups, as a founder, and active investor. My first company was purchased by Johnson & Johnson, which set the foundation for future investments. By focusing on startups I learned the advantage of investing in promising companies before they became household names. My interest in startups has never waned, and has become my primary focus today.

If a buyout is in order, what is a fair price?.  Here's what we know.

One: the current patent infringement lawsuits are estimated at $1 billion.

Two: the estimated annual licensing revenue for VHC is $1 billion annually.

Three: the price tag that I am hearing on the street for a buyout is $50 per share.

Four: Siemens, Apple, and Cisco are sitting on about $75 billion in cash (about $25 billion each).

Many longtime shareholders believe, a $50 price tag is too low.  That puts the value of the company at about $2.5 billion, or one half times potential annual licensing revenue.

We have to keep in mind that right now we are only looking at potential revenue.  If VHC were earning $1 billion annually now, the price tag would probably be closer to $100 per share. But the good news is that the companies that they are negotiating with now, do have the cash to buy VHC, and if that happens, shareholders will definitely benefit.

On a side note, take a look at today's options, particularly May calls.  Very aggressive buying!  If this is the result of an information leak, it looks like there could be an announcement before May expiration.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.