Micro-cap intellectual property firm Spherix (SPEX) saw shares soar on Tuesday following the news that the chairman of the Senate Judiciary Committee, Patrick Leahy (D-Vermont), had killed a patent reform bill, claiming that it could be an excessive burden to "legitimate patent holders who employ thousands of Americans."
Spherix to Benefit from Senate Move
By removing the bill from the committee’s calendar, Leahy has essentially prevented it from coming to a vote. This is a clear benefit to a company like Spherix that relies heavily on the current legal framework.
"The removal of this bill from the Senate Judiciary Committee schedule should remove some of the uncertainty which has been clouding our industry,” said CEO Anthony Hayes in a statement. “Spherix is committed to responsibly protecting the patents it owns, and we remain eager to work with companies large and small to reach fair agreements."
The company’s stock has nearly doubled in a single day following the news that apparently took many close to the issue by surprise. The stock gapped up just under 12 percent to $1.69 a share, but it spiked to the $2.50 a share level in the first half-hour of trading.
Gains continued as the day wore on, ultimately peaking at an intraday high of $3.20 a share headed into the final hour of trading before pulling back to close just under $3 a share at $2.97 apiece. The day still must have left Spherix shareholders happy as it represented a 96.69 percent gain in the company’s value.
The gains also came on extremely heavy volume, with over 44 million shares changing hands on the day. That’s more than 40 times more than its average daily volume and more than 30 times the size of its entire float.
Controversial, Powerful Political Forces in Play
The news is not without controversy. The bill, a compromise effort that appeared to enjoy some bipartisan support, was part of broader efforts by tech sector lobbyists pushing to change patent laws to eliminate “patent trolls.” They are viewed by many as a force standing in the way of innovation in the industry.
However, several sources seem to identify the primary culprit for the bill’s death to be Senate Majority Leader Harry Reid. The bill was not popular with two powerful lobbies in the form of trial lawyers, whose opposition was likely rooted in its potential to take away business, and the pharmaceutical industry, which depend on patents to extract value from their drugs during the window prior to them becoming available as generics.
In the end, it shouldn’t be surprising that the lobbyists on either side of this issue appear to have their own perspectives. The criticisms from the tech industry could be viewed as being an effort by the pot to call the kettle an influence peddler. Both sides of this issue have entrenched business interests that stand to benefit, and both sides can voice legitimate arguments that their position will benefit the economy more in the long run.
Spherix Stock Poised for Turnaround
Regardless of one’s position on patent reform, it appears that the issue has been settled for at least the near future, and this should come as welcome news for a company built on the current laws regarding intellectual property.
And Spherix is in need of some good news. The company’s stock has been in a serious slump ever since hitting its 52-week high in early August of last year. Since that point, the stock has lost over 93 percent of its value to yesterday. The company’s balance sheet shows that it hasn’t had any real revenue since 2010, and the recent stock slump had pushed the value of the company down to under $20 million.
However, there may have been some signs of renewed momentum for the stock prior to the big news that sparked today’s rally. The company’s technical data seemed to clearly indicate the stock was oversold in recent months, with the 14-day RSI trading below for over 6-straight week from late March to mid-May. However, the stock had started to show some signs of life. Most notably the fact that the MACD line crossed the signal line in mid-April, a classic buy signal.
Today’s gains come after the stock appeared to have found a support level in its 9-day moving average. Since crossing the level from below on May 13, the stock traded just above it without falling past that level. Now, today’s big move has caused the stock to cross its 50-day SMA from below.
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