Jimlur re pressure from investors you said:
“Management needs the heat put on them by investors not the markets or the shorts,”
I’m not sure if heat from investors does much good with this company’s management. Espy, myself, some other individual shareholders, and several large institutional investors did try to forewarn IDCC’s top leadership about certain issues, especially excessive stock options and ongoing insider selling. They didn’t heed our warnings, and even requested significantly more stock options and continued their discretionary insider selling unabated. The sound defeat of more options by the shareholders, and the use of insider selling against them by Nokia and the investment community could and should have been avoided.
Excerpts from one of Espy’s emails to the directors at the end of January re stock options and insider selling as follows:
“Many of my concerns expressed above have to do with the question of these stock options. .. In the last few years - principally 2000 and 2001, I believe - shareholders provided the Board the ability to issue an extravagant amount of common stock options. .. In January 2002, the company had outstanding warrants and options representing 12 million common shares which to issue; this represents a possible dilution in excess of 22% to the outstanding shares-- no objective person can deny that this fact is offensive and shameful. This potential option cost to shareholders is enormous, even if, in the hypothetical, the company's performance had warranted high praise.
Excessive options violate the spirit of partnership investing--it is simply a one way street. I acknowledge, of course, that our shareholders approved the Board's request in recent history for these options, but I would predict that if the shareholders had the opportunity to vote again, the request would not be approved as presented.
In regards to the consistent and numerous occurrences of insider selling since November, this activity may be entirely coincidental in its occurrence just prior to the disappointing Samsung decision and the delay of the commencement of the Ericsson trial. I do know for a fact that in a number of cases this selling by so may of our senior executives has given the company a very negative prospective from the Wall Street Community.. At a minimum, this selling has given the appearance of an 'immaturity' by our management. Certainly you, your fellow Board Members and Mr. Goldberg can instill methods which will result in a more disciplined behavior by our management and certain Board Member(s).
My expressed concerns - options, total compensation, insider selling - have nothing to do with stock prices; they have everything to do with proper corporate governance. To many, and understandably so, these concerns are exasperated when this kind of option granting, compensation and insider selling occur when the operating performance of the audited reports has been so mediocre at best over the same time periods.”
Excerpts from one of my emails to the directors at the end of January re stock options and insider selling as follows:
“Fiduciary responsibility means that insiders should deny their own self-interests for the interests of others to whom you have a fiduciary responsibility. Many in corporate management seem to have forgotten their fiduciary responsibilities to their shareholders. Unreasonable compensation, excessive stock options, and now significant discretionary insider selling all fit here.
The affect of shareholder dilution by stock options is a matter of great concern. Stock options cost the outside shareholders tremendously by reducing the future market price of the stock. Outstanding shares get increased and earnings per share get decreased/diluted when these options are exercised. This dilutive affect of stock options is something that all shareholders need to know about as it will negatively impact the long-term stock price.
The exercise of stock options is also the triggering mechanism behind most all of the ongoing insider selling…The recent flood of discretionary insider selling activity at IDCC beginning in the middle of November is another of my concerns. I don't think that anyone can argue that insider selling is positive for the short-term price of the stock .The psychological impacts that all of these ongoing individual SEC form 4s are having upon the stockholders is unnerving to say the least. With almost every officer discretionally selling stock as the critical events rapidly approach, is definitely sending a bad signal to the investment community. My main point is that IDCC's insiders need to be more aware and cognizant of the possible negative impact of these insider sales to the investment community.”
BTW the insider selling at IDCC continued in full force after these January emails and warnings by others. They appeared to be bound and determined to continue their ongoing selling. Significant insider selling preceded the 10-K, with some of its previously undisclosed negative information, and the Nokia rate finalization/arbitration decision. Rather than selling before the critical events, IDCC insiders should have sold afterwards to avoid appearances of impropriety, just in case critical events or disclosures are perceived as adverse. Now IDCC’s top management is stuck with a much worse credibility issue. All of this insider selling has certainly damaged their credibility with the investment community, which will take time and positive results to undo.
