There are many variables to consider in constructing the suitors ROI.
First, it’s a matter of at what price per share?
Using the approximate 300 million shares at the following:
$2.00 = $600 million
$3.00 = $900 million
Anything above these amounts is a dream in my opinion, doesn't compute financially.
Rp has stated that the sum total of income from the approx. 175 infringers equals hundreds of millions net income after the split with DM. Let’s use $600 million for this purpose, which may be on the high side.
In addition DM would receive an amount for current expenses, possibly triple that amount, plus 15% of a fair value of the patents. For this purpose let’s use 15% in total of the buy out amount, $90 or $135 million payable to DM
Since there are accumulated net losses to date, approx. 80 million dollars, there would be tax savings on a portion of this amount if the acquisition was maintained as a wholly owned subsidiary.
Critical to the equation is the suitor’s ability to initiate and win the remaining law suits and collect the approx. $600 million. A break even at $2.00 a share, but then add the cost to DM and the time it would take to collect from the lawsuits as well as the time value of money, then add an unknown plus amount for enhanced product sales and/or new product development. All
difficult variables to the analysis.
In terms of new product revenue you would have to use a gross margin and net income of perhaps $40% and 20% respectively, less tax.
At $3.00 per share, add the amount of $300 million to the above and re-calculate.
The acid test, why not settle with edig for X dollars and go from there. I cannot think of why it would be beneficial for any company to initiate a buyout versus a settlement. In the long run the economics are simply not there.
I suppose one could develop a formula for the above and develop several scenarios with a risk or success factor for each.
There are other considerations to include depending on the ultimate company structure. Its management, long term goals and strategies, produce development, marketing and manufacturing capabilities, research direction and decisions concerning partnerships, joint ventures, etc.
