Intermolecular (IMI) Soars on Deal with Toshiba (TOSBF) and SanDisk (SNDK)

Joel Anderson |

Floundering tech small-cap Intermolecular ($IMI) got a shot in the arm on Monday when Toshiba ($TOSBF) and SanDisk ($SNDK) both agreed to take an exclusive license to intellectual property (IP) created under a collaborative development program (CDP). Intermolecular, which performs outsourced R&D services for the semiconductor and clean energy industries, makes its money through fee arrangements that follow the development of novel technologies for other companies and paid CPDs.

The technology in question is certain memory products, materials, processes and device technologies which were created in a CPD that concluded on March 15. SanDisk and Toshiba will now prepay non-refundable royalties on a quarterly basis for a predetermined set of time.

In response to the news, Intermolecular leadership spoke positively of the deal.

“We believe the memory technology developed within this Collaborative Development Program will result in a competitive advantage for SanDisk and Toshiba in the semiconductor memory market,” said Intermolecular President and CEO David Lazovsky. “The IP that has been licensed by these customers is the direct result of leveraging Intermolecular’s High Productivity Combinatorial (HPC™) technology platform to accelerate research and development. Beyond delivering value to our customers, this license further validates our unique business model for co-developing and licensing differentiated materials, process and device IP to leading integrated device manufacturers.”

The markets reacted very positively to the news, shooting Intermolecular’s stock up more than 30 percent. Shares opened up over 12 percent at $2.55 a share then took off in early trading on extremely heavy volume. The intraday high of $3.45 a share represented a nearly 52 percent gain. While shares backed off from those levels, they have stayed close to $3 apiece into the afternoon.

The big news on the deal means that the same source of news that tanked small-cap company Intermolecular’s stock at the start of the year. Intermolecular lost nearly 60 percent of its share value since the end of 2013 to yesterday, a brutal skid that was kicked off by the announcement of an amended agreement with First Solar ($FSLR) that took a bite out of Intermolecular’s 2014 fees and then picked up speed after the announcement of the end of the CDP with Toshiba and SanDisk on the last day of February. Adding to that were disappointing earnings reports for Q4 2013 and Q1 2014 that showed declining revenues.

However, Intermolecular appears to have been poised for a big jump with the right catalyst as the technical data on the stock pointed towards it being significantly oversold. The 14-day RSI for Intermolecular was below the critical level of 30.0 from May 6 to Thursday of last week, and the 14-day stochastic RSI was below 0.20 for that same period. What’s more, the dipped below its lower Bollinger Band on the 6th, stayed below that level for three days, and remained just above that level even after crossing back over it.

Now, it appears as though the technical factors could have signaled some pent-up demand for the stock waiting for the right catalyst, which appeared to come in the form of the news on the deal with Toshiba and SanDisk. The stock traded heavily, with nearly 8.5 million shares changing hands against an average daily volume of under 200,000 shares. And the spike carried the stock across its 20-day and 50-day SMA while also pushing its MACD line across its signal line, all very bullish indicators.

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Companies

Symbol Name Price Change % Volume
IMI Intermolecular Inc. 1.01 0.00 0.00 13,887
SNDK SanDisk Corp. n/a n/a n/a 0
FSLR First Solar Inc. 33.54 0.37 1.12 2,052,860
ERPRF European Reliance General Insurance 1.72 0.00 0.00 0

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