Joff Wild

Senior figures at RPX Corp look set for a pleasant end of the year following the announcement that three million shares in the defensive aggregator are to be sold at a price of $20.49 per share. According to a press release revealing the move: “RPX will sell 1,400,000 shares and selling stockholders will sell the remaining 1,600,000 shares in the offering”. In relation to this, an S1 filing submitted by the firm on 2nd September states: “RPX is offering shares of its common stock and the selling stockholders, which include our Chief Executive Officer, Chief Operating Officer, President and Chief Financial Officer, are offering shares of common stock. RPX will not receive any of the proceeds from the sale of shares by the selling stockholders.” RPX’s CEO is John Amster; its COO is Geoffrey Barker; the CFO is Adam Spiegel; while Eran Zur is president.

Although the S1 filing did not reveal the final number of shares being made available, it does clearly indicate that the money raised will go to those doing the selling. By my calculations, 1.6 million multiplied by $20.49 comes to $32,752,000. Even assuming that other RPX people will also be selling some of their shares, that leaves Amster, Barker, Spiegel and Zur to enjoy a pretty healthy payday. This will come on the back of a previous payday three of them experienced earlier this year, according to the MarketBrief website. It shows that back in May, just after RPX’s IPO, Amster, Zur and Barker all sold $3,710,700 worth of stock. That makes a total of $11,132,100, which if added to $32,752,000 gets you very to close to $44 million.

Last week this blog reported senior Acacia staff had sold over $60 million worth of the company’s stock over the last 12 months. Clearly, it is a good time to be a senior executive in a publicly-quoted company that operates on an IP-based business model. And that’s before you take into account annual compensation packages – the S1 filing shows that at RPX they are pretty decent and I imagine the same applies at Acacia (and elsewhere too).

That’s me being facaetious, of course. Like the people who run Acacia, RPX’s senior management has done an astonishing job over the last three years. This time in 2008, the firm had not officially launched and had a prospective client base of less than 10. Now, despite recent downward pressure on the share price, market capitalisation is in excess of $1 billion, while the S1 filing reports that as of 30th June 2011 RPX had 96 clients paying annual subscription fees of between $60,000 and $6.6 million. So far, $300 million has been spent on the acquisition of patents. No investor can argue with that kind of performance, nor with the right of those who delivered it to reap the rewards.

All that said, RPX has to keep on growing that client base. This may become increasingly difficult given that if a company is not already a member it is probably going to need a very, very good reason (as well as, perhaps, a pretty enticing offer) to get involved now. On top of that, RPX also has to retain the clients it has. Only by doing all of that can the firm keep on buying patent assets, build profits and generate shareholder returns.

Once the founders of a start-up have banked some decent money, the challenge is to maintain the drive that got them to the payday in the first place. In defensive patent aggregation – where success is so much based on personal contacts, knowledge and deal-making ability – that is even more the case. If I were an investor, I would be checking that new, hungry talent is being nurtured and incentivised within the company, as well as looking closely at diversification plans.

On both fronts the signs at RPX seem to be positive: individuals such as Mallun Yen, have been hired in senior positions, while good people lower down the scale have also been brought in; all have a huge stake in ensuring RPX continues to grow. In addition, the extensive contacts the firm has, as well as its ever-growing portfolio, give RPX a range of strategic options as it matures. My guess is that in five years time it will be a very different business to the one it is now. That’s pretty much what happened to Acacia too, of course.