As a preface, I have not reached out to either MARA or SPEX management about the following news. I am hopeful this blog will not burn any bridges with either company. I will try to speak with both parties about the development over the next few days. Disclosure: I am long MARA common stock and closed out my position in SPEX. I have no plans to buy or sell either MARA or SPEX over the next 72 hours.
This morning Spherix (SPEX) issued a press release announcing they turned down an unsolicited stock for stock + 15% premium above the recent market price of SPEX offered by Marathon Patent Group (MARA).
My take. I didn't like the deal from either side. The transaction would have diluted MARA shares by roughly 5M shares. I believe both companies could be worth more separately than combined. The market is willing to assign a premium to both companies and I would expect the SPEX patents would not receive the same premium in MARA. I believe any conversation between MARA and SPEX was at an informal preliminary level.
So why the PR this AM? RPX announced the closing of the Rockstar transaction this morning and filed an 8K indicating that the SPEX shares that Rockstar owned will be transferred to RPX:
The 1/30/2014 Rockstar 13G/A Filing reports that Rockstar owned:
376,981 common shares
4,590,430 Series H preferred shares
2,395,200 Series I preferred shares
The shares also have certain lockups and restrictions in place, which I need to further analyze.
I believe there are conflicts with RPX (a defensive patent entity) owning a significant stake in a publicly traded offensive patent entity perception wise and possibly representative wise. SPEX is also in litigation with RPX members Cisco, Verizon, Huawei, and Juniper. There would have to be issues in any discussion between RPX and SPEX in regards to the current litigation. As a result, I believe the shares will need to be sold in order to avoid these potential conflicts. I believe the release was to help generate volume and interest in order to help cushion the eventual 7M shares. I believe it to be a low probability that these events are a coincidence.
I am still bullish on both companies as I have written over the past 6 months. If the 7M shares are indeed sold there could be short term pressure on the SPEX stock price and I did not want to hold with that uncertainty. SPEX has a number of catalysts including a Markman opinion that should be issued in the near term in their cases with Uniden and V-tech. SPEX's case with Verizon is also moving forward with a Markman hearing in the middle of March and a trial set for May 18, 2015. I believe there is substantial future value with the SPEX owned Nortel patents and monetization campaigns.
All information and opinions in this blog post are my own. I have not been compensated by either company to write this post. Any corrections can be sent to firstname.lastname@example.org. I plan to provide an updated blog entry once I speak with both companies. Nothing in this blog post should be interpreted as an investment advice or an investment recommendation.