May was a profitable month for us. We hit a 3mth 60% Gain on the $342 Million takeover of Merus Labs (MSL:TSX $1.62). And the last week of May was takeover number two as a NASDAQ company announced the takeover of ViXS (VXS:TSX 34 cents) – which I introduced to MicroCap subscribers (and social media / Linkedin followers) early May near 20 cents.
ViXS produced a great gain… but at a valuation I am not the least bit happy with.
Pixelworks is offering only USD $20M and it appears VXS management are happy with this – they must have impressive golden parachutes built into the deal ! Techs of this size should be valued at 1 to 2 times annual revenue. So this offer appears close to 1 times their revenue over the next year. Seems low, but reasonable.
However, in ALL the ViXS corporate presentations, they have emphasized their HUGE patent portfolio and the fact it is independently valued at (an estimated) USD $50M to $80M.
Are they just GIVING the patent portfolio away?? If this deal is allowed to go through under the current terms, then ViXS shareholders are NOT getting fair value for their investment.
I personally have no intention of selling as I will hold out for a renegotiated deal OR a competing offer.
For Reference, below is my Introduction of VXS from April 23rd
VXS has seen two sellers from Canaccord and BMO dumping this past week near the 52wk low. I am convinced this is setting up a great mid to long term opportunity in the junior tech sector.
ViXS Systems (VXS.T 20 cents)
Shares Outstanding: 73M / Market Cap: $15M
Estimated Revenue for the Upcoming Year $20 to $30 Million *
Revenue for the year ending Jan 31/17: $29.5 Million
Huge (Unrecognized) Patent Portfolio [>500] potentially worth $50 to $100M
Strong growth potential in UHD / HDR TV and Internet Video
Toronto HQ / Hong Kong R&D / Sales in Asia, Europe, N. America / > 85% of employees are engineers
* April 12th it was announced that VXS would sell a high cost, non-core division for $5M USD
Note that the Graphics below were taken from their Jan/17 Corporate Presentation
“Current infrastructure is built on 20 year old technology that is not optimized to handle today’s video traffic”
The ViXS market cap is only $15M yet there are two specific factors that should make this a very strong speculation from 17 to 20 cents (excellent liquidity lately in the 18 to 20 cent range).
1) They specialize in technology for Internet Video and displays needing 4K UHD and HDR. These are notable areas of strong growth in the coming years.
2) Most important – and incredibly overlooked – is their enormous patent portfolio. They own more than 500 Patents (40% approved and 60% pending). This should be extremely valuable. Possibly in the range of $50M to $100 million or 70 cents to $1.50 per share. The market is completely overlooking this value.
Over the next month, if you continue to see sellers in the teens or near 20 cents, I am convinced this is worth tucking away.