Jeffrey Smith’s Starboard Value has sold 9.0 million shares of Unwired Planet Inc. (NASDAQ:UPIP) to David Steinberg’s MAST Capital Management at a price of $0.80 per unit, according to an amended 13D filing with the Securities and Exchange Commission. Following the transaction, Starboard Value owns 1.37 million shares in the intellectual property licensing company, which represent 1.2% of the outstanding common stock.
Starboard Value is an activist hedge fund co-established by Jeffrey Smith in 2002, with its headquarters based in New York. The investment firm primarily invests in undervalued small-cap companies and pushes for changes by actively working with the management teams and board of directors in order to unlock shareholder value. Reportedly, Starboard Value has added or replaced approximately 115 corporate directors on roughly 40 corporate boards through the course of its existence. In addition to that, the hedge fund has been quite successful in delivering strong returns on the majority of its investments, earning money on 88% of its activist investments. Moreover, Starboard Vale has greatly outperformed the S&P 500 thus far, generating an annualized return of 22% since the fund’s inception in 2002. Interestingly, Jeffrey Smith was titled as “the most feared man in corporate America” at the end of the last year, according to Fortune magazine. Meanwhile, Starboard Value manages a public equity portfolio worth $4.81 billion as of March 31, while the top ten holdings of the fund account for 84.70% of the value.
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But why do we track the hedge fund activities? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect the hedge funds’ activities. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small cap stock picks among hedge funds also bested passive index funds by around 66 percentage points over the 35-month period beginning with September 2012 (read more details here).
Unwired Planet Inc. (NASDAQ:UPIP) is the inventor of the Mobile Internet and a premier intellectual property company that is primarily focused on the mobile industry. The company currently holds a patent portfolio of approximately 2,500 issued and pending United States and foreign patents, which include technologies that enable mobile devices to connect to the Internet and allow mobile communications. The shares of Unwired Planet have dropped by 34% since the beginning of the current year amid a slow business of licensing technology.
The patent licensing company has had numerous executives in charge over the last four years and is now hoping that its freshly-appointed CEO, Boris Teksler, will be the one to increase shareholder value. It is believed that Boris Teksler, who had previously served as head of Apple Inc. (NASDAQ:AAPL)’s Patent Licensing and Strategy, will bring more dynamism in the company. Considering that the newly-appointed CEO is to be paid an annual salary of $1 million and receive options that represent 4.5% of the company’s equity if exercised, it is quite clear that Boris Teksler is expected to deliver significant results. Unwired Planet struck a major deal with Ericsson in 2013 through which the patent licensing company acquired a few thousand patents from the Swedish telecoms giant in exchange for a portion of future royalties. Therefore, Unwired Planet owns a massive amount of assets that could potentially generate substantial licensing revenues in the future. However, there is a high number of pending court cases in the United States and abroad, which hinder the revenue potential of the company. As a result, everyone expects that Boris Teksler will inject new energy and will come up with new approaches of how to realize the value of the company’s intellectual property assets.
Interestingly, MAST Capital has been building a stake in Unwired Planet for the last couple of months and its transaction with Starboard is not the first one. In May, Derek C. Schrier’s Indaba Capital Management agreed to sell to MAST a total of 5.50 million shares at a price of $0.88 per unit. Following the sale, Indaba owns an activist stake that contains 6.57 million shares of Unwired Planet, which represent 5.85% of the company. Indaba has engaged in communication with the company’s management and the board of directors in the past and last year appointed a director to the Board. Another shareholder of Unwired Planet is Mark Kingdon’s Kingdon Capital, which owns 6.54 million shares as of the end of March.
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