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Bang... The Safe Harbor regs. apply to acquirers as well as acquirees and yes it could be acquired with the Nokia litigation ongoing.
Also, as I have stated before on this board, if a potential acquirer bid a 100% premium to the current stock price, the Board would have to think long and hard about instituing the rights distribution, lest they open themselves up to litigation. IMO
Dclarke...I agree that something big is imminent. If memory serves, the company has ceased buying back since last September. I recall that, back in the mid-90's, a company that I owned got bought out by Computer Associates and it happened shortly after the company had suspended its buyback for a period of six months. It had something to do with the provisions of the Safe Harbor regs. Since that time I know that these provisions have changed. Perhaps someone on the board is familiar with the current status of Safe Harbor and could elaborate for us.
Also, it is curious that a short interest of up to 25% of the float, ostensibly effected to put a lid on the stock, persists. I am unable to develop a coherent theory, but I have a nagging feeling that it has something to do with the suspension of the buyback. JMO
To All..IMO, it's about time for some "news" (hatchet job) from Bangalore! A squeeze is looking very likely at this point.
DC,,,I stand corrected. I was merely underscoring NJ's point of knowledgeable investors taking advantage of mispricing in the market. To whom the undervalued, purchased stock is sold was not the point of my post. But, I apreciate for the correction.
Nuke... That used to be called "greemail". Carl Icahn made an art out of it.
JS..yes eom.
OD... My original post was intended as a possible reason why there is such disparity between the current stock price and the real value of the company. It was also intended to illustrate a method by which an entity could potentially steal the company.
You have no idea what the price would go to in the event of a deal with Nokia. If history was any guide, everyone on this board would be ruing the fact that it only went up $1 or 3, or whatever. I know you have been around this board a long time. Surely, you have learned by now that IDCC is not a poster child for "efficient market" theory.
Also, I hope we never find out, but it would be interesting to see if the Board would implement the rights offering in response to a $50 bid. I still believe they would opt to not put themselves in that position of risk. AMO
Ellix... Yeah, that's pretty much it. The last I checked IDCC's poison pill is in the form of a rights offering. Usually, rights offerings are triggered by some threshhold amount of stock having been acquired by an entity. So, the poison pill would not necessarily come into play under the scenario I laid out.
If an offer of $50 (or even $40) was made today, the Board of Director's would be taking a very serious risk in recommending against the tender. If the BOD were successful ( and that is a big "if") in convincing shareholders not to tender and the company's fortunes changed to the downside for any reason, they would be sued, no doubt. More likely, since insider's own so little stock, sadly the company would probably be sold at this low-ball price.
I would say the shorts are no smarter than the longs. IMO, whoever is short knows the true value of IDCC. Consider this possible scenario:
Suppose you were an entity that knew IDCC, on a discounted cash flow basis, was worth multiples of the current market cap. Let's say 3 times the current value, or $3B (about $70 per share). With the ability to manipulate the stock with down-tick sales, short term naked selling and the abetting of certain market makers, you could keep the stock within a certain range, say $25.
When a major event happens, like Nokia caving or a major new relationship occurring, and it is no longer feasible to keep the pressure on, this entity then bids $50 for the company. They will be paying $2.1B (50 x 42m shares) plus $125M to cover ( 5m share at a $25 per shares "loss"). They can get the entire company for $2.25B.
At an offer of twice the current share price, poison pill or not, the board would not be able spurn an offer of a 100% premium.
Do I think this a possible explanation for the current pricing of the stock? Absolutely!
Nuke...I can't believe there are 5.2M short as it is. The float(using the traditional definition of shares issued and outstanding minus insider shares minus institional holdings) is on the order of 20M. So, around 25% is short.
Hard to imagine that this company is trading at 3 to 4 times this year's earnings! (X-cash). But then again, I never thought I'd be waiting for 15 years to learn whether I was a fool or a genius!
AMC..Yes it is amazing, but not unexpected. I hate to beat a dead horse, but will anyway: Until and unless hedge funds and other entities are absolutely prevented from using short-term manipulative tactics, this will go on. I am, and have been for a while, outraged. Anybody that isn't, obviously doesn't get it.
OT...I was not aware that Jeffrey is a money manager. If he is, then I would have to agree with you. Posting on a public chat board is not something he should be doing. I was a broker for 20 years. Just retired a little over a year ago. I would never have dared to post on a board as a broker because of the liability. I don't believe it is that different for a money manager.
You actually helped make my point with regard to the uptick rule. When it was in effect, yes IDCC was "pummeled" routinely, but the ultimate price was paid in December 1999 when it went to 80+. Same thing happened in a few stocks I have owned over the years. I am just saying it is more unlikely now due to a skewed playing field. Incidentally, I do believe that, albeit slowly, we will return to a level playing field.
dmiller.. When you say "actual SI numbers", I'm curious, do you really believe them to be actual? As I have explained on this board before, the reported short interest is a fictitious number and should not be relied upon. That said, even though I believe the real shares sold short (borrowed or not) are higher, it sort of is irrelevant, since those who employ various strategies to benefit from their control of a stock price do so with impunity. The absence of an uptick rule, the willingness of certain brokers to let them naked-short and the ability to buy and pay for market makers (equity and option) to abet their scheme, allow this travesty to continue. It is happening right now, as we speak, with IDCC.
No, Jeffrey is not over the top. If anything, he is naive as to the potential of a short squeeze. A lot of things would have to go wrong for "the enemy" for that to happen. JMO.
Gungrey.. Sounds like you have a level-headed approach. The long haul has always worked for me. Some hauls have been longer than anticipated or desired! Good fortune.
Gungrey....I caution against putting too much faith in the short interest numbers. The reported short interest represents legitimate shorts (actual shares borrowed and sold). It does not include FTDs (fails-to-deliver) and other transactions facilitated by non-law abiding brokers.
As far as hoping for a 1999-style squeeze, let me remind all that the uptick rule was still in effect then and naked short-selling was not that prevalent. I am not saying it cannot happen; just that those who might appear to be trapped have more tools of manipulation at their disposal.
Jimmy... Good find. If most of these changes are implemented, I think we can look forward to a more level playing field. The 10% circuit breaker is nonsense and that's why most of the brokers are in favor. The biggest impediment for the manipulators will be the price test with an offer having to be at least .01 above the last trade.
It has been a long haul. I know people who have been fighting the battle on the front line, for years, to stop these inequities. Can't come soon enough, IMO. Thanks.
Badge...I agree with everthing you say regarding demanding more from the company in the ways you have enumerated. However, my points speak to the workings of the system that have failed the average investor. It is possible that the company could do all you recommend and still the share price could be unaffected. Even with the company's lack of promotion and wall street communication, the stock price, in a market with a level-playing field, would be in the $50-60 range based on valuation metrics that are traditionally used given growth rate, price-to-sales, prevailing interest rates, debt, etc.
In general, I am bemoaning the sorry state of affairs that surround the US markets and the impossibility of actual investors getting a fair shake.
All IMO.
Yeah. I was hoping for that also. But, not to be (so far). The bigger issue and what rankles me is that well-intentioned, long investors who have faith in markets, instead of being rewarded by the success of the company in which they are invested, are reduced to hoping that the manipulators, one day, will miscalculate or get blind-sided by a significant company development. Sad, but true. My hope is that 2010 will be the year that this BS is stopped, once and for all.
Tri....As long as the ability to short on downticks exists and the rules about naked shorting are not tightened up, these hedge fund "investors" will continue to manipulate stocks like IDCC with impunity, even in the face of obvious, fundamentals that, at a different time, would dictate much higher stock prices.
DN... I apologize. I don't know what happened, but go to deepcapture.com and I'm sure you will be able to navigate from there. Sorry about that.
hock
dc....There is no question that the "short interest" is higher than reported and there is no question that much of the volume in the stock is created by the machinations of hedge funds and other manipulators. Therefore, it stands to reason that true days to cover are considerably higher than reported.
I am not going to go into the mechanics of this financial crime that has been perpetrated on the average investor for many years now. But, I encourage everyone who has not done so to read this:
http://www.deepcapture.com/category/4-the-crime-naked-shorts-other-insincere-ious/e
And to spend time reading other informative "modules" on Deepcapture.com.
If you really wnat to know what is going on, you have to be willing to spend the time.
Reuters and Nokia are joined at the hip. How about all those Reuters' "news" reports that misrepresented IDC's public disclosures and then were followed up with corrections after the damage was done!?
http://news.cnet.com/8301-13577_3-9802587-36.html
http://mobileactive.org/reuters-nokia-collaboration
It is disgraceful.
Jeff.. I'm with you there, but it's unlikely. As I said in prior post, this tactic is becoming increasingly rare. So, to be this brazen, IMO, tells us that they have dug a huge hole. (Maybe all the way to Espoo!)
As you have alluded to, the combination of the large increase in short interest, piled on in the move from low 30's to high teens plus the recent failed attempt to cap the stock last week have put their collective teat in the wringer. Ouch!
Right on cue... It wasn't even 30 minutes ago that I said to myself: "A hatchet job is way overdue"! The incidentce of this tactic, IMO, is actually on the wane. There are many in this country that won't attempt it anymore, because some authorities (not the SEC) are onto it. I guess they feel safe in Portugal. Good luck to them.
OD.. I thought I had replied to your informative post, but apparently it didn't post. Anyway, thanks.
Sloane... You are right. Naked shorting is not as widespread as it was just a year or two ago. Avenues to this practice are (too) slowly being closed. Incidentally, how or why would you know that one can "almost always borrow shares"?
Jeff... I do not consider myself an expert in the mechanics of trading. However, I do agree with your points about short interest not being reduced and the concept of MMs having the luxury of being short indefinitely to "effect an orderly market". I was just saying that it is impossible to determine what the net effect of these arbitrages is. My understanding is that buy-ins, for non-MMs, is T+4.
Sloane... I am not going to get in an argument with you. I know what the "rules" are. So, do you believe that "phantom" shares or FTDs (fails-to deliver) do not exist?
Follow up on previous post....So, there are some obvious and not-so-obvious ramifications of this practice of short-term naked shorting.
The obvious ones (although they do take some thought to comprehend) are: 1) The average, legitimate investor who has been merrily going along thinking that the market for any particular stock is a zero-sum game (i.e. there is a finite number of shares)is wrong. 2) The market value of any issuer is necessarily going to be skewed as more shares have been sold than exist. 3) Not borrowing and delivering actual shares within T+3 is akin to "free-riding" (I assume board members know what this is, but I would be happy to explain to anyone).
Not so obvious (and I would like any board accountants to correct me if I am wrong) are the complications arising if IDC were to issue a dividend. If you are the unlucky owner of naked-shorted shares, you will receive a "payment-in-lieu-of" dividend (which the short will have to come up with) that is not a true dividend and is taxed at your income tax rate, not at the reduced (I believe it is 5%) dividend rate.
So, as a legit investor you have not only suffered from the suppression of the value of your investment, but even when your company has been successful enough to pay a dividend, you have a dilemma: do I pay the income tax rate, or do I defraud the IRS and claim it is a legit dividend? What a country!
sloane....I agree, one cannot assume that all shares involved in options arbitrage end up either short or long. There are too many permutations available to the short-term "investor" to draw any meaningful conclusions.
However, it is worth noting that if naked shorting is used at all, it creates some problems for those long investors who assume they are buying legitimate shares. For example, right now the use of naked shorting is allowed as long as the trades are settled in T+3. So in the process of trying to peg a stock at options expiration, manipulators (I use this word a lot, but I can't think of any other term for them), create phantom, or conterfeit shares that may or may not get washed out. Say you are a long term investor and bought 1000 shares (not legitimately borrowed by the seller) last Thursday from one who is trying to cap the share price. You actually are the owner of the "right" to own the shares. When the naked-shorter is done having their way with the stock, they buy shares to close out their position. There is no way of knowing whether the shares they bought back (within T+3) are real shares or phantom shares. In this case, being a long term investor, you are unlikely to sell the "shares" that you just bought. (I'll follow this up later)
Jeff.... Don't know about the TA, but, IMO, the action of the last 2 days is most likely the manipulators unwinding their failed attempt at pegging 25 last Friday. In the near term, the magnitude of the upside is a function of how many "bullets" they used in this effort at the end of last week.
Mickey.. I assume your questions are more or less rhetorical, but I do believe a substantial portion of Alston and Bird's legal team, assigned to putting the screws to IDCC, will be out of work. As they say: :nuff said".
This afternoon Dorsey Wright put out a breakout alert on IDCC ($25.00)
No question about it. IMO.
Dog... Thanks for that information. You have done a great job for this board over the years.
While I still believe there are certain scenarios that could be happening with IDCC that may bring safe-harbor into play, I don't want to debate that point.
The essence of my speculation has to do with the fact that IDCC had only bought back 1M shares at an average price of $25.00 through the end of October. (When the buyback was announced, I believe the price was around $26) The last time the price was $25.00 was when it was on its way from the low 30,s to roughly $23 after the "no violation" announcement.
So, it appears that little or no stock has been bought back after the loss at the ITC. In addtion to the glaring undervalued metrics posed by BN during the conference call, let's throw in the fact that, with little earnings growth, IDCC is trading at 4-5 times next year's earnings.(ex-cash) And next year is upon us.
IMO, even if one thnks that management is inept, it is a no-brained to buy stock at these depressed values. Hence my belief that something extraordinary is in the works. While I would like to believe that IDCC is being acquired, (wouldn't be surprising at this valuation), it is more likely that an acquisition is being negotiated. My hope is that it is an accretive one.
I trust that this all makes sense and thanks again for your valuable contributios.
DC..IMO you will not see any purchase of stock by the company. As I believe Loophole pointed out,there are certain "safe-harbor" gudelines that prevent a company from repurchasing stock if there is an acquisiton on the horizon, whether IDCC is doing the acquiring or the alternative. Think about it: the company does not want to be liable for potentially boosting the price of their shares in either case.
If the company starts to repurchase, in my mind, it means that whatever was in the works has fallen apart. JMO
OT wasat I misspoke. I didn't realize you have to be a premium member to send private messages. I am not.
Please believe that I am not trying to start a pizzing match with you. I also do not intend to take up other people's time by giving you the long explanation.
I have managed money for over 30 years, privately and as a broker. I know first hand about the games that hedgies and others have played with targeted stocks. Through naked short sales, hatchet jobs, "renting" of options market makers and other tactics, they have pulled off the largest financial theft of all time.
That will change in time and, in fact, we are beginning to see some signs that it is coming to end. Small and mid-cap stocks have been their targets as it is easier to manipulate stocks with market caps of, say, $2B or less. IDCC is a prime example and a persistent target.
All I was saying is that if you don't think these tactics are real, you are not as astute as I originally believed you were.
Good luck in your investing.
OT.. Sure i will. Have to go out now, but will respond later via PM.
Talk about living in a dream world!eom
Mickey...although I have never responded to your posts, I rarely agree with them. But I think you are right on. The unsuccessful bear raid is going to come back to bite the shorts. If real shares were borrowed, then they are digging themselves a bigger(long-term)hole. If they were not located and borrowed and just thrown at the market, they have a short term problem: they will need to buy back those shares by Friday. BTW, I also agree something large is about to happen.