Exit strategy
For those nearing retirement age and/or that have a significant portion of their net worth in IDCC, this is a time to look at locking in profits. IDCC is no longer trading on fundamentals. It is an asset play. If things go crazy, ala Nortel auction, then IDCC could sell for 2-3 times the current price. However if there is no sale, we fall back to the prior trading range and these levels will not be seen again until IDCC successfully monetizes its IP. That has proved to be a long, slow process with some hits (LG) and misses (Apple, Nokia, Ericsson). Right now, the CAFC decision will have little effect on the price because its significance is related to IDCC monetizing the IP in the near future. That will only affect the downside risk if the sale does not happen.
You may want to look at selling some of your position or buying some puts to guarantee that you make some of these paper gains permanent. This is a crazy time in this stock. You have to ask yourself which will hurt more – missing out on potential additional gains if you sell/having your puts expire worthless, or seeing your portfolio sink back to last week’s levels. The decision is different for each individual. You have to look at your financial situation. What do you need to have the life style you want? For those heavily invested in IDCC (congratulations by the way), you now have a large amount of money invested in a very speculative and volatile stock. The stock could realistically fall by half or double in a matter of weeks. Is it prudent for you to keep that type of risk for so much of your wealth?
Look at your financial situation and determine the effect on your lifestyle of IDCC going up and going down. If you are set for life without IDCC, then it’s just probability and expected value. However for many, a $30 fall in the stock price would have a much more negative impact on thier future than the positive effect of a $50 rise. So even if you believe the chances of each is 50/50, it might be prudent to pare down your exposure at these levels, as IDCC has become a much larger percentage of your portfolio (except for the crazy all-in folks) and of your net worth.
I’m not saying that I don’t think IDCC is worth these prices or that the BOD won’t be able to structure a good deal. What I’m saying is I don’t know, and that there is significant risk at these levels. If you feel like you have a good grasp on what the outcome of this exploration of options by the board, then good for you. However if you are like me, and have a great deal of uncertainty about how this is going to play out, you should be looking at your investment in IDCC very closely. Hedging your bets will never give you the optimum result, so no matter what you may be nagged by “woulda, coulda, shoulda.” On the other hand, it will also protect you from the worst result. Buying some out of the money puts might be a worthwhile insurance policy, protecting you from the downside while allowing you to fully participate if the company is sold for mega bucks.
AI
