It got heated today at Marathon Patent Group ($MARA) after the company released a press release announcing a ruling in the matter Bridgestone Americas Tire Operations LLC v. Schrader-Bridgeport in the United States District Court for the District of Delaware. Shares were down 35% at midday, perhaps largely due to the ruling in this case. Investors were only just recently made aware of the case, wherein Marathon ironically wasn’t even the plaintiff, despite the company already having won an infringement trial in Germany wherein they are pursuing an injunction. Investors saw fit to act on their perceptions and shed shares in a hurry.
After a trading halt for 20 minutes at 11:30ET resuming at 11:50 ET, the shares found support in the $3.50 range, a price the company’s shares hadn’t seen since April of 2014, and shares looked to be very exaggerated after spending most of 2015 hovering between $5 and $7. This comes on the heels of both Roth and Northland initiated coverage, with $12 targets citing the company’s diversification as a key differentiator from other names in the space. Despite 19 subsidiaries, 12 in active litigation and a growing arsenal of 413 diversified patents covering a myriad of different areas, investors today painted the company with the same brush they painted much more speculative patent companies.
Some I’ve spoke to pointed to a rumored large original legacy shareholder selling a considerable position in recent months, which would explain the selling pressure for the quarter, depressing the shares to a point where investor psychology had become fragile. Ironically, all the while, the company has continued to announce at least half a dozen settlements over recent months, with many favorable rulings to boot. As is often the case, despite all the good, investors today have focused solely on the bad news, which contributed to the selloff.
Wildly Successful Patent Monetization
Marathon is in the business of patent monetization, which involves evaluating patent risk. They’ve done this incredibly well in year-over-year growth up 500% in their first full year of operations, no company in the space can claim the same. Despite this, shares retraced quickly to $3.00 support levels and are holding as we go into the close of trading. I think it best to watch the price action as the seller is cleaned up and look at the company’s diversification, which should negate the type of volatility seen today. It will be worth paying attention to MARA trade tomorrow as we close out the week, and pay attention to volume to identify if bargain hunters have cleaned up the seller.
On May 2, 2013, Schrader-Bridgeport International Inc. was sued by Bridgestone Americas Tire Operations LLC for patent infringement in Delaware District Court, case number 1:13-cv-00763. Marathon has advised the plaintiff and provided substantially all of the financing of this litigation.
Marathon Patent Group's wholly owned subsidiary, IP Liquidity, owns contract rights to the revenue associated with the outcome of this case and today an eight-person jury ruled that the asserted patents, while valid, were not infringed by the defendant. Doug Croxall, Founder & Chief Executive Officer of Marathon, stated, "We are clearly disappointed by the jury's ruling. It is a decision Bridgestone will promptly appeal as we believe the jury erred in their verdict. This outcome has no bearing on our German case and we remain confident in the validity and infringement of our European patent."
"Since there always exists the potential for an adverse ruling in an individual case, Marathon has invested in a diversified portfolio consisting of 413 patents across 19 different subsidiaries, 12 of which are in active litigation with approximately 50 defendants."
Croxall continued, "We built our model predicated upon diversification of assets. Today, we see the true underlying value of that model. While disappointed, the case represents only one of many. We continue to have an extremely busy calendar of both Markman hearings and trials going forward."
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