Patent aggregators, like Acacia Research Corp (NASDAQ:ACTG), create liquidity, transparency and pricing signals to all participants. Acacia Research is a Non-Practicing-Entity – which basically means it buys, sells,and licenses patents, but doesn’t actually use its patents directly by manufacturing products / services.
Acacia Research Corp (NASDAQ:ACTG)’s goal is to add value through the management of a portfolio of assets through fundamental research, due-diligence, and deal-making in an effort to deliver good risk-adjusted returns in an inefficient market that is complex, illiquid, misunderstood, and ever-changing.
Acacia Research Corp (NASDAQ:ACTG) gets paid by monetizing IP for its clients and its owned portfolios. It coordinates campaigns and licensing programs and uses litigation as a backdrop to future agreements; however, as market matures and becomes more fluid there is less friction and less litigation.
Business: A leader in patent licensing
- Has 274 IP portfolios that have led to thousands and controls tens of thousands of patents
- Only 154 of their portfolios are licensed (most just partially with plenty of runway), creating a strong pipeline for revenue growth
- Selectively increasing AUM through structured partnership deals and focusing on +NPV portfolios drive excellent returns on capital
- Acacia Research Corp (NASDAQ:ACTG) is one of the most active active dealers in secondary markets
- Investments / partnerships in mobile, location-based-services, computer power management, flash memory, telematics, data storage has yielded great returns on capital
- Recent diversification into medical technology, automobile technologies and energy has huge potential
Investment philosophy: Value
- They think like asset managers with an ROI mindset
- Not looking for home-runs; mainly singles and doubles
- Better information, brokers and market makers are emerging creating efficiencies in market.
- Acacia seeks portfolios that will provide predictable licensing revenues over uncertain litigation – which can be costly, time-consuming and incredibly unpredictable
- Look to deploy capital, ink-deals and approach settlements taking into account timing of monetization / cashflows and magnitude (build DCF’s for portfolios)
- IRR and NPV focused
- Eat risk-adjusted returns