Replies to post #32149 on InterDigital Inc (IDCC)

[Danny Detail]

ciciagt .. but won't I make more if IDCC stays independent?

It is likely but the question is how much more and when.

The buyer of your stock in the open market, when deciding what he is willing to pay you for it, does not factor in what you paid for the stock, how long you have held it, how many shares you own, your age, where you live, your marital status, etc., A share of a given stock at a given point in time is only worth what someone else is willing to pay for it.

What an investor is willing to pay for it is typically directly related to that investor's forecast of the future earnings prospects of the company. As time goes on the earnings forecasts are based more and more on fact and less and less on speculation. That is what you see happening with IDCC. What is also happening with IDCC is that the institutional ownership is now very significant and rising quite rapidly. These professional money managers, along with the sell-side and buy-side analysts who provide them with much of their DD, pretty much use the same methods to arrive at a fair market price for a stock. Since they are such a large factor now, we can get a fairly good clue as to what our stock might be worth in the open market and how they arrived at that figure by looking at the evaluation sections in the latest reports by Mr. Carpenter and Mr. Marsala as well as any that may come from new analysts when they initiate coverage. As something they speculated about in terms of future earnings becomes a known fact they will rerun their pricing models and publish a new 12 month target price if necessary. Sometimes they will have speculated too high and sometimes too low but the effect of speculation errors on the pricing will become less and less over time.

The other reason that we should be monitoring closely what the analysts are saying about pricing and how they arrived at it is that it can give us an insight as to whether or not a bid for the company is fair and acceptable. Any potential buyer of the company is certain to use similar methods to value the company. But the good news for holders of the stock is that the potential bidder is highly likely to place additional value on the stock to account for the strategic advantages and/or operational efficiencies they would obtain through the acquisition. Sometimes they are considerable in which case the holder of the stock can get a price for a stock today that he would have had to wait two or more years for in the open market. Given that he could take the proceeds and make another investment he will be further ahead in two years, given positive returns on his investment, than he would have been if the takeover bid had not been successful.