Friday, June 20, 2014

Thoughts on the Vringo (VRNG) Warrant Transaction

Vringo (VRNG) just announced a warrant transaction with 5.7M of their $1.76 warrants from three institutional investors.  VRNG issued the holders a 1 year warrant that expire on June 21, 2015.  VRNG immediately takes in $10M, which bolsters the cash reserves to $38M that should last through 2016.

Why this is important:

- VRNG now has operating cash on hand that should last through 2016 and a cash raise is likely not needed to see their case resolve against Google.  The only way I see a cash raise is if the company enters into a new transaction for additional high quality patent assets that management believes present a large opportunity.

- The aggressive shorting will probably slow down a little.  The holders of the warrants were likely short common stock against the warrants. 

- VRNG can file new cases in additional jurisdictions against ZTE and a new round of infrastructure targets, possibly some handset targets, or a combination of both.  With a road map already in place using ZTE as a benchmark, we should see new companies being filed against in the same jurisdictions that we are already seeing now (Brazil, Spain, India, Germany, UK, France, Australia).  The results have been very favorable so far for VRNG that is on the cutting edge of NPE global enforcement.  There are not many if any other NPEs obtaining standard essential patent injunctions throughout the world. 

- The new warrants have a $5.06 strike and a June 21, 2015 date.  VRNG could take in an additional $25M+ if the new warrants are exercised, which would probably require the CAFC to affirm the Google litigation to exceed the $5.06 strike price.  A eight or nine figure global settlement with ZTE should also get the share price over the $5.06 strike.  The new warrants do not have any registration rights or anti-dilution features.

Disclosure: I am long VRNG common stock.


  1. "The aggressive shorting will probably slow down a little. The holders of the warrants were likely short common stock against the warrants."

    the second half is true, but I don't know about the first half... exercise of the warrants, creating more common, eases borrow... which makes it "easier" (cheaper, certainly) for anyone who wants to to short the stock...

    ie: short interest should decrease, but that's not the same as "The aggressive shorting will probably slow down a little"

  2. That is very true. Just my quick thoughts on the development. Will not be 100% right in all situations. The CAFC decision is the catalyst everyone is focused on and will drive the next material move in the share price.