Titan Medical Inc (TMDIF)

[pontiacg6]

What if I told you that more than 80% of your company’s wealth was invisible — literally invisible to managers and shareholders? You might think I was nuts, right? But it’s true.

According to experts, the average company’s intangible assets — most especially its intellectual property and technological know-how — now account for 84% of its market value. That’s quite a change from just 40 years ago, when 84% of firm value resided in tangible assets like plant and equipment. The cause of this dramatic value shift, of course, is the emergence of a new Knowledge Economy in which know-how and innovation rather than factories and raw materials have become the main factors driving productivity growth and profitability.

Yet surprisingly, little if any of this enormous wealth in technology innovation and intellectual property shows up on corporate balance sheets, thanks to a 500-year-old accounting system designed for a world in which tangible assets were the chief forms of wealth. Nor is it visible to managers. And rarely if ever is it the topic of C-suite or board-level analysis and planning.

Take Microsoft as an example. You could liquidate the entire company — sell all its real estate, buildings, equipment, inventory, and other tangible assets — for about $72 billion (its book value). But the actual value of Microsoft’s shares on the open market (its market cap) is $444 billion. That $372 billion difference between Microsoft’s market cap and its book value is composed of the firm’s intangible assets — i.e., its technology know-how and its patents, trademarks, and other intellectual property (IP). Yet it doesn’t show up on the balance sheet, even though it accounts for 84% of the company’s total market value.


The same is true at most other companies, especially those leading the modern high-tech markets. The bulk of their wealth today is invisible to shareholders and to managers. And since you can’t manage what you can’t measure, executives are forced to navigate the technological innovation and intellectual property landscape blind.

To be sure, there are IP “analytical” tools that enable you to identify all the patents you own, note their cost in maintenance fees, and provide a rough “scorecard” of each patent’s presumed quality based on intrinsic factors, in most cases based on the raw number of other patents that cite it. Some tools can also tell you which other firms have patents in similar technology fields and markets, providing you with some bare bones competitive intelligence that you must manage and interpret for yourself as best you can.


But simply looking at a patent’s intrinsic qualities does not tell you its value — either its market value as a financial asset, its commercial value in buttressing your products’ market share and margins, or its strategic value in ensuring your company’s future competitive success. That’s because today’s IP tools for the most part ignore the extrinsic factors that ultimately determine not only what a patent is worth — these include comps for similar patents that have been licensed, sold, or have won judgments after litigation — but also what the most profitable ways are to deploy that patent to generate an appropriate ROI on the innovation embodied in the patent.


https://www.google.com/amp/s/www.forbes.com/sites/davidpridham/2016/09/23/how-to-tap-your-companys-hidden-wealth/amp/