Company Recognizes Substantial Realized and
Unrealized Gain from Oxford Nanopore IPO
Acacia Research Corporation (Nasdaq: ACTG) today reported
results for the three- and nine-month periods ended September 30,
2021.
Clifford Press, Chief Executive Officer, stated, “This was a
milestone quarter highlighted by the IPO of Oxford Nanopore
Technologies Limited. Oxford Nanopore represented a nearly $120
million realized and unrealized gain in the quarter, between the
sale of a small portion of our stake and the increased value in our
remaining position. As a result, our pro forma book value at
September 30, 2021 increased to $6.31 per share. In addition,
subsequent to the end of the quarter, we completed our first
operating company acquisition, as we welcome Printronix to the
Acacia family.”
“Acacia’s recently completed and proposed M&A activity
represents our mature business model coming into focus,” continued
Mr. Press. “Over the past year, we have expanded our team,
bolstered our capital base and positioned Acacia as a corporate
acquirer, with the flexibility, capability and expertise to pursue
multiple public and private opportunities, including complex
transactions, avoiding large, competitive auctions, while
evaluating a diverse set of situations. Our highly collaborative
partnership with Starboard Value LP and our strong capital base,
comprised of cash, public and private investments, IP assets and
the addition of the profitable Printronix business, facilitates a
healthy pipeline of potential attractive operating company
investments.”
During the third quarter, Acacia recognized $101 million in
realized and unrealized gains in the value of the life sciences
portfolio acquired in June 2020. To date, based on the current
value of the remaining positions, Acacia has recovered $256 million
of the aggregate portfolio purchase price of $282 million. As of
September 30, 2021, Acacia holds the following positions in its
life sciences portfolio:
Public Securities Based on
Market Value (at September 30, 2021)
Company Ticker
Number of Shares Value Oxford Nanopore Technologies 1
LSE: ONT 35.1 mm $267.8 mm Arix Bioscience plc LSE: ARIX 25.8 mm
$52.8 mm Immunocore 2 IMCR 0.68 mm $25.2 mm Induction Healthcare
Group plc AIM: INHC 4.2 mm $2.9 mm
Total Public Holdings
3 $348.7 mm Private
Securities Carried at Cost (at September 30, 2021)
Company Ownership Percentage Value Viamet
Pharmaceuticals 26% AMO Pharma 24% } $25.7 mm NovaBiotics 4% /
Total Private Holdings $25.7 mm 1 Sold
3.9 mm shares in Q3, balance carried at discount due to lockup. 2
Sold 0.75 mm shares in Q3. 3 Remaining value following $44 mm of
sale proceeds.
Third Quarter 2021 Financial Summary:
- Cash, cash equivalents and equity investments at fair value
totaled $605.1 million at September 30, 2021, compared to $274.6
million at December 31, 2020.
- Equity securities without readily determinable fair value
totaled $5.8 million at September 30, 2021; compared to $143.3
million at December 31, 2020, which such reduction reflects the
initial public offerings of two previously private portfolio
companies in 2021.
- Investment securities representing equity method investments
totaled $31.8 million (before $11.9 million in noncontrolling
interests), compared to $30.7 million (before $11.0 million in
noncontrolling interests) at December 31, 2020.
- Debt, which represents the Senior Secured Notes issued to
Starboard Value LP, was $182.9 million at September 30, 2021.
- Book value totaled $235.9 million, or $4.82 per share, as of
September 30, 2021, compared to $292.5 million, or $5.94 per share,
at December 31, 2020. Acacia’s current book value reflects the
impact of the increase in the Company’s share price on its warrant
and embedded derivative liabilities. Assuming full exercise of all
issued derivatives, Acacia’s pro forma book value would rise to
$1.0 billion, or $6.31 per share, up from $882.5 million, or $5.39
per share, as of December 31, 2020.[1]
- Gross revenues were $1.6 million, compared to $19.5 million in
the third quarter of last year.
- General and administrative expenses were $10.3 million,
compared to $7.7 million in the third quarter of last year due to
increased business development and personnel expenses as we build
out our capacity to identify, evaluate and execute
acquisitions.
- Operating loss was $12.7 million, compared to a loss of $2.8
million in the third quarter of last year.
- GAAP net income to common stockholders was $80.2 million, or
$0.86 per diluted share, compared to net income of $29.2 million,
or $0.32 per diluted share, in the third quarter of last year.
Pro Forma Book Value and Changes to Derivative
Valuations
As of September 30, 2021, book value was $235.9 million and
there were 48.9 million weighted-average shares of common stock
outstanding in the third quarter of 2021, for a book value per
share of $4.82, up from $3.02 at June 30, 2021 and down from $5.94
at December 31, 2020. The decline since December 31, 2020 is due to
the impact of the increase in non-cash liabilities associated with
the warrants and preferred stock held by Starboard Value LP. This
was driven by the increase in Acacia’s share price from $3.94 at
December 31, 2020 to $6.79 at September 30, 2021. Total liabilities
for these warrants and preferred stock stood at $289.6 million at
September 30, 2021. All of these derivative liabilities would be
eliminated upon exercise or expiration of all such warrants and
preferred stock.
Book value at September 30, 2021 reflects the impact of the
following:
- $180 million of face value of Notes issued to Starboard Value
LP, $115 million of which may be used to exercise Series B warrants
at $3.65 per share;
- $35 million in face value of Series A preferred stock issued to
Starboard Value LP; and
- $289.6 million of warrants and embedded derivative liabilities
associated with all preferred stock and warrants held by Starboard
Value LP, to be eliminated upon exercise or expiration of all such
warrants and preferred stock.
Assuming Starboard Value LP converted all preferred stock and
exercised all warrants:
- $115 million of liabilities attributable to the Notes would be
eliminated, and 31.5 million shares of common stock would be
issued;
- $35 million in face value of preferred stock would be
eliminated, and 9.6 million shares of common stock would be
issued;
- $289.6 million embedded derivative liabilities attributed to
the warrants would be eliminated; and
- $378 million of cash would be added upon exercise of the
remaining Series B warrants and Series A warrants, and 73.5 million
shares of common stock would be issued
The expected impact of this would be an incremental $796.1
million in book value, and an incremental 114.6 million shares
outstanding. Assuming such conversion and exercise, pro forma book
value would be $1,032 million, and diluted shares outstanding would
be 163.5 million, for book value per share of $6.31, up from $5.77
at June 30, 2021 and from $5.39 at December 31, 2020.
_____________________
[1] Under generally accepted accounting principles, or GAAP,
book value reflects the impact of the liabilities associated with
potential issuance of shares related to the Company’s warrants and
convertible preferred stock. As the value of those liabilities
varies with fluctuations in our share price, we believe a
presentation of book value assuming full exercise of all warrants
and preferred presents a useful measure of book value for
investors. This non-GAAP measure does have its limitations as an
analytical tool and should not be considered in isolation or as a
substitute for an analysis of our results under GAAP.
Investor Conference Call:
The Company will host a conference call today, November 15, 2021
at 4:30 p.m. ET/ 1:30 p.m. PT.
To access the live call, please dial 888-506-0062 (U.S. and
Canada) or 973-528-0011 (international). The conference call will
also be simultaneously webcasted on the investor relations section
of the Company’s website at http://acaciaresearch.com under Events
& Presentations. Following the conclusion of the live call, a
replay of the webcast will be available on the Company's website
for at least 30 days.
About Acacia Research Corporation
Acacia Research (NASDAQ: ACTG) seeks to acquire undervalued
businesses and pursues opportunities for value creation. We
leverage our (i) access to flexible capital that can be deployed
unconditionally, (ii) expertise in corporate governance and
operational restructuring, (iii) willingness to invest in out of
favor industries and businesses that suffer from a complexity
discount and untangle complex, multi-factor situations, and (iv)
expertise and relationships in certain sectors, to complete
strategic acquisitions of businesses, divisions, and/or assets with
a focus on mature technology, healthcare, industrial and certain
financial segments. We seek to identify opportunities where we
believe we are advantaged buyers, where we can avoid structured
sale processes and create the opportunity to purchase businesses,
divisions and/or assets of companies at an attractive price due to
our unique capabilities, relationships, or expertise, or where we
believe the target would be worth more to us than to other buyers.
Information about Acacia Research Corporation and its subsidiaries
is available at www.acaciaresearch.com.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
This news release contains forward-looking statements within the
meaning of the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995. These statements are based upon our
current expectations and speak only as of the date hereof. Our
actual results may differ materially and adversely from those
expressed in any forward-looking statements as a result of various
factors and uncertainties, including the ability to successfully
implement our strategic plan, the ability to successfully identify
and complete strategic acquisitions of businesses, divisions,
and/or assets, the ability to successfully develop licensing
programs and attract new business, changes in demand for current
and future intellectual property rights, legislative, regulatory
and competitive developments addressing licensing and enforcement
of patents and/or intellectual property in general, general
economic conditions, including the impact of the COVID-19 pandemic
and the success of our investments. Our Annual Report on Form 10-K,
recent and forthcoming Quarterly Reports on Form 10-Q, recent
Current Reports on Form 8-K, and any amendments to the foregoing,
and other SEC filings discuss some of the important risk factors
that may affect our business, results of operations and financial
condition. We undertake no obligation to revise or update publicly
any forward-looking statements for any reason.
The results achieved in the most recent quarter are not
necessarily indicative of the results to be achieved by us in any
subsequent quarters, as it is currently anticipated that Acacia
Research Corporation’s financial results will vary, and may vary
significantly, from quarter to quarter. This variance is expected
to result from a number of factors, including risk factors
affecting our results of operations and financial condition
referenced above, and the particular structure of our licensing
transactions, which may impact the amount of inventor royalties and
contingent legal fees expenses we incur from period to period.
ACACIA RESEARCH CORPORATION UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands, except share and
per share data) September 30, December 31,
2021
2020
ASSETS Current assets: Cash and cash equivalents
$
217,957
$
165,546
Restricted cash
761
-
Equity securities at fair value
387,120
109,103
Equity securities without readily determinable fair value
5,816
143,257
Investment securities - equity method investments
31,840
30,673
Investment at fair value
-
2,752
Accounts receivable
412
506
Other receivable
21,539
-
Prepaid expenses and other current assets
3,986
5,832
Total current assets
669,431
457,669
Long-term restricted cash
35,424
35,000
Patents, net of accumulated
amortization
39,826
16,912
Leased right-of-use assets
671
951
Other non-current assets
4,482
4,988
Total assets
$
749,834
$
515,520
LIABILITIES, REDEEMABLE
CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable
$
2,196
$
1,019
Accrued expenses and other current liabilities
5,586
3,707
Accrued compensation
4,019
2,265
Royalties and contingent legal fees payable
1,793
2,162
Accrued patent investment costs
8,000
-
Senior Secured Notes Payable
182,855
115,663
Total current liabilities
204,449
124,816
Series A warrant liabilities
18,527
6,640
Series A embedded derivative liabilities
41,411
26,728
Series B warrant liabilities
229,637
52,341
Long-term lease liabilities
671
951
Other long-term liabilities
5,591
591
Total liabilities
500,286
212,067
Commitments and contingencies Series A redeemable
convertible preferred stock, par value $0.001 per share; stated
value $100 per share; 350,000 shares authorized, issued and
outstanding as of September 30, 2021 and December 31, 2020;
aggregate liquidation preference of $35,000 as of September 30,
2021 and December 31, 2020
13,686
10,924
Stockholders' equity: Common stock, par value $0.001 per
share; 300,000,000 shares authorized; 49,591,852 and 49,279,453
shares issued and outstanding as of September 30, 2021 and December
31, 2020, respectively
50
49
Treasury stock, at cost, 4,604,365 shares as of September 30, 2021
and December 31, 2020
(43,270
)
(43,270
)
Additional paid-in capital
649,349
651,416
Accumulated deficit
(382,215
)
(326,708
)
Total Acacia Research Corporation stockholders' equity
223,914
281,487
Noncontrolling interests
11,948
11,042
Total stockholders' equity
235,862
292,529
Total liabilities, redeemable convertible preferred stock,
and stockholders' equity
$
749,834
$
515,520
ACACIA RESEARCH CORPORATION UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except
share and per share data) Three Months Ended
Nine Months Ended September 30, September 30,
2021
2020
2021
2020
Revenues
$
1,582
$
19,466
$
24,785
$
25,399
Patent portfolio operations: Inventor royalties
280
5,772
823
6,843
Contingent legal fees
285
6,609
5,735
6,855
Litigation and licensing expenses - patents
782
1,001
4,881
3,497
Amortization of patents
2,612
1,174
7,086
3,522
Other patent portfolio income
-
-
-
(308
)
Patent portfolio expenses
3,959
14,556
18,525
20,409
Net patent portfolio (loss) income
(2,377
)
4,910
6,260
4,990
General and administrative
expenses
10,345
7,692
23,014
18,089
Operating loss
(12,722
)
(2,782
)
(16,754
)
(13,099
)
Other income (expense): Change in fair value of investment,
net
-
(3,081
)
(2,752
)
3,704
Gain (loss) on sale of investment
-
-
3,591
(2,762
)
Change in fair value of the Series A and B warrants and embedded
derivatives
619
20,672
(203,866
)
(46,612
)
Gain on sale of prepaid investment and derivative
-
2,845
-
2,845
Change in fair value of equity securities
66,502
20,488
115,509
99,449
Gain (loss) on sale of equity securities
37,688
2,737
53,124
(4,272
)
Earnings on equity investment in joint venture
-
-
2,737
-
Loss on foreign currency exchange
(17
)
(48
)
(193
)
(4,938
)
Interest expense on Senior Secured Notes
(2,531
)
(2,410
)
(5,601
)
(3,178
)
Interest income and other
76
10
135
811
Total other income (expense)
102,337
41,213
(37,316
)
45,047
Income (loss) before income taxes
89,615
38,431
(54,070
)
31,948
Income tax (expense) benefit
(11
)
(83
)
(531
)
1,257
Net income (loss) including
noncontrolling interests in subsidiaries
89,604
38,348
(54,601
)
33,205
Net income attributable to
noncontrolling interests in subsidiaries
-
-
(906
)
-
Net income (loss) attributable to
Acacia Research Corporation
$
89,604
$
38,348
$
(55,507
)
$
33,205
Net income (loss) attributable to
common stockholders - Basic
$
72,984
$
30,529
$
(59,054
)
$
24,838
Basic net income (loss) per common share
$
1.49
$
0.63
$
(1.21
)
$
0.51
Weighted average number of shares
outstanding - Basic
48,949,504
48,467,885
48,759,873
48,949,706
Net income (loss) attributable to
common stockholders - Diluted
$
80,171
$
29,204
$
(59,054
)
$
21,380
Diluted net income (loss) per common share
$
0.86
$
0.32
$
(1.21
)
$
0.36
Weighted average number of shares
outstanding - Diluted
93,081,502
90,624,702
48,759,873
60,153,773
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211115006210/en/
Investor Contact: Rob Fink FNK IR 646-809-4048
rob@fnkir.com
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