Joff Wild

Acacia shares lost over 27% of their value yesterday as the markets reacted negatively to the publicly-quoted NPE’s first quarter figures, which were released on Thursday. The firm reported a drop in operating revenues to $76,861,000 and a decline in net income to $5.11M or $0.11 a share compared to Q1 2012’s $49.93M or $1.09 a share; with adjusted earnings of $22.71M or $0.47 a share. However, Acacia actually beat market expectations, which had been for revenues of just under $59 million and an EPS of $0.42.

In the press release announcing the results, President and CEO Paul Ryan was upbeat: “Acacia generated the second highest revenue quarter in company history in the 1st Quarter of 2013, providing a great start to the year … These results reflect Acacia's growing industry leadership in patent licensing and are accelerating new opportunities to partner with patent owners.” The earnings call that took place on the day the results came out was also positive, with several analysts congratulating Ryan and his team on Acacia’s performance. But clearly the markets were not listening. After heavy trading, at close of business on Friday, the firm’s value had fallen by hundreds of millions of dollars to $1.057 billion. Less than a year ago it was worth $2 billion.

While it is always important to note that share movements can be volatile, will always go up and down, should not be the measure by which to judge a company’s success, and so on, what happened yesterday is just the latest example of the wild fluctuations we so often see when it comes to the stock movements of publicly-traded IP companies (PIPCO). It’s not the first time it has happened to Acacia, VirnetX’s share price has also dropped markedly this year, while Vringo (which yesterday announced it is moving its listing from the NYSE to NASDAQ) has also seen some big falls over recent months.

As I have written on here before, what that says to me is that generally speaking mainstream investors struggle with the IP market, what drives it, how money is made in it, the timescales over which this is done, valuations, and so on. There seems to be absolutely no logic to the way in which the markets react to PIPCO news This makes building a portfolio that includes a level of exposure to them a huge risk. That said, it also offers huge opportunities for those who do have nerves of steel. For example, doesn’t Acacia itself look quite an attractive buy after Friday's sell-off?

DISCLAIMER: none of the above is investment advice. You would be mad to listen to me. I don’t. I have no PIPCO shares and do not intend to buy any. If this is a sector that interests you speak to someone who does know what they are talking about. You’ll find that there are not many such people around; which probably says something about where the PIPCO market is right now.