Shares of Spherix Inc. (SPEX), the patent licensing company run by CEO Anthony Hayes, plunged after its warned that it may have to take a material impairment charge related to its collaboration agreement with Dean Becker’s Equitable IP Corp., and priced a $2.5 million underwritten public offering priced at a 25% discount to the closing price on Tuesday, Aug. 2.
The Bethesda, Maryland-based company said Tuesday in a filing with the Securities and Exchange Commission that the collaborative agreement it signed in March with Equitable IP may require Spherix to take a material loss on sale or transfer of patents or an impairment charge.
“Spherix, like many other IP companies, has experienced bumps in the road with its assets so an impairment charge shouldn’t be a surprise to anyone,” said Mark Gober, a senior director at 3LP Advisors in Silicon Valley.
Gober said the value of patents is driven by the ability to enforce and “enforcement has become more risky, time-consuming, and expensive as the legal and regulatory tides have shifted.
Therefore, asset values are necessarily decreasing.”
He also noted that many small IP companies including Inventergy Global (INVT) and ParkerVision (PRKR) have raised money recently. “Their business models aren’t playing out the way they had hoped because patent enforcement isn’t leading to substantial settlements in a timely manner.”
Spherix, on Wednesday, said it is issuing up to 1,592,357 shares of its common stock at a fixed price to the public of $1.57. The gross proceeds to Spherix from this offering are expected to be
$2.5 million, before deducting the underwriting discount and other estimated offering expenses payable by the company.
Shares of Spherix closed at $2.10 on Monday and plunged plunged 56 cents or 26.67% to $1.54 on Tuesday. They ended the week down at $1.43. They’ve traded between $1.37 and $13.11 over the past year.
“Management wanted to raise the funds to look for acquisition candidates,” said Brett Maas, a spokesman for Spherix in an email. “Not for salaries or corporate expenses but purely for targeting acquisitions that might make sense that have revenue and positive cash flow / net income.”
Maas declined to comment on the possibility of an impairment charge.
The agreement with Equitable IP, run by Dean Becker, has already enabled Spherix to file enforcement actions against Level 3 Communications (LVLT), TW Telecom and FairPoint Communications (FRP).
The company said the offering was expected to close on or about August 8, subject to customary closing conditions. In addition, Spherix has granted the representative of the underwriters, Laidlaw & Co. (UK) Ltd., a 30-day option to purchase up to 231,350 additional shares of its common stock at the public offering price, less the underwriting discounts and commissions.