Deep Value Opportunity For Patient Investors

Written by Shadow Stock

Illiquid, closely held, de-registration (suspending SEC reporting), susceptible towards an unfriendly shareholder environment. The negatives are significant and is only suitable for patient long term investors.

But I’m embracing the words of Mohnish Pabrai’s, “Heads I Win, Tails I Don’t Lose Much“.

Here we go.

Deep Value Idea: Pendrell Corp (Nasdaq: PCO)

History of Pendrell

Founded in 1995 acquires and develops businesses with technologies protected by intellectual property rights. Over the past five years Pendrell (Nasdaq: PCO) acquired IP rights and continue to monetize these IP assets. During the first half of 2016 Pendrell entered licensing agreements with DirecTV and Toshiba. This agreement permitted use of Pendrell’s IP for the development, manufacturing and distribution of their products. These licenses and future negotiations with other possible licensees provide important cash flow for Pendrell’s next business venture. Before its current commercial focus, Pendrell operated as ICO Global Communications building satellite networks, providing voice and data communications services.

During the prior 5 years, Pendrell acquired and monetized IP (Intellectual Property) rights. The company continues to monetize existing IP assets but today’s main focus is on deploying and leveraging its cash, and NOL by acquiring new business opportunities.

To optimize its new business strategy, management aggressively reduced expenses, headcount and simplified operations.

Further, the board recommended and approved de-registration/de-listing as the next step in further reducing overhead expenses and improve strategic focus.

De-registration concentrates management’s efforts on purchasing and leveraging NOL assets with new acquisitions, continued IP monetization, and further license their existing patents.

Near $2.5 billion in NOL (net operating losses) created when PCO was ICO Global Communication. ICO Global filed for chapter 11 bankruptcy August 1999 after their satellite was destroyed during its launch attempt. Then telecom billionaire Craig McCaw’s steps forward to acquire in 2000. McCaw has controlled PCO ever since and is Executive Chairman. More importantly this large NOL creates advantages when competing to find a profitable company.

Print Friendly, PDF & Email

Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

Share This Post On

Submit a Comment

Your email address will not be published. Required fields are marked *