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MIPS Technologies (MIPS) selling for below projected cash?
Posted by: waterbucket (IP Logged)
Date: November 6, 2012 11:44AM

So according to a press release early this morning, MIPS Technologies will be selling 498 of 580 total patent assets to Bridge Crossing (an acquisition vehicle of Allied Security Trust, a patent aggregator) for $350 million. MIPs will retain 82 patent properties key to the MIPS architecture. The operating business of MIPS, the remaining 82 patents, and licensing rights to the remaining patent properties will go to Imagination for $60 million.

Currently, the stock is trading at $7.12, representing a $383.02 million market capitalization. Subtracting cash and other short term investments (no long term debt, etc), we arrive at a $251.69 enterprise value. MIPS shareholders are projected to get $250 of the $350 million selling price as there is a $100 million holdback to account for taxes and liabilities, though some portion of that holdback may still be distributed to shareholders in the future. In addition, $60 million will be distributed to shareholders as the value of the remaining business, without 498 patents.

So $250 million plus $60 million equals $310 million. This appears to be greater than what Mr. Market appears to value the entire enterprise value of the business at this point. Is it just me, or does there appear to be a margin of safety here? Is there some probability of the transaction actually getting approved by shareholders that is getting factored into the valuation?

Stocks Discussed: MIPS,
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