Could Someone Research This Angle

[David Sklansky]

You guys are not exactly getting the point. Firstly it doesn't matter much whether the outcome is a surprise. Because I am talking about the performance of the stock AFTER the verdict. Secondly that performance need not be directly related to the product under litigation. Rather it is related to the fact that they no longer have to concentrate lots of time and energy on the lawsuit. (Which might mean that the losing side is not a good short.) I'm wondering whether the market would, on average, underestimate the positive effect this freeing up of resources has on a company. They certainly did when it came to Shufflemaster winning the suit that Mikohn brought against it.

[hawk59]

One of the reasons spinoffs can be very good investments is because they used to be a small part of a big organization and probably not a very important part; once they are spun off that unimportant business becomes the most important thing in the world to the people running it and the business will often perform much better than it has historically.

Wouldn't be surprised if there is a similar affect when talking about managements that are previously distracted by big lawsuits.

[BradleyT]

[ QUOTE ]
You guys are not exactly getting the point. Firstly it doesn't matter much whether the outcome is a surprise. Because I am talking about the performance of the stock AFTER the verdict. Secondly that performance need not be directly related to the product under litigation. Rather it is related to the fact that they no longer have to concentrate lots of time and energy on the lawsuit. (Which might mean that the losing side is not a good short.) I'm wondering whether the market would, on average, underestimate the positive effect this freeing up of resources has on a company. They certainly did when it came to Shufflemaster winning the suit that Mikohn brought against it.

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In a lawsuit is the CEO of shufflemaster devoting serious time to the lawsuit rather than the company? I wouldn't think he would be.

I would say for small companies it may have an impact. For large companies it would have zero impact.

[pig4bill]

[ QUOTE ]
[ QUOTE ]
You guys are not exactly getting the point. Firstly it doesn't matter much whether the outcome is a surprise. Because I am talking about the performance of the stock AFTER the verdict. Secondly that performance need not be directly related to the product under litigation. Rather it is related to the fact that they no longer have to concentrate lots of time and energy on the lawsuit. (Which might mean that the losing side is not a good short.) I'm wondering whether the market would, on average, underestimate the positive effect this freeing up of resources has on a company. They certainly did when it came to Shufflemaster winning the suit that Mikohn brought against it.

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In a lawsuit is the CEO of shufflemaster devoting serious time to the lawsuit rather than the company? I wouldn't think he would be.

I would say for small companies it may have an impact. For large companies it would have zero impact.

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Exactly. Maybe if it's a little pissant company with 8 people in it, it's a big deal. Otherwise, not. Researching patent lawsuit results on companies like that would probably be a waste of time, because there won't be very many.

[ahnuld]

There are alot of informational effects that the market appears to not correctly value immediately. I came across a study that in the past 30 years one could have made abnormal returns by buying companies which gave positive signals to the market such as dividend increases or stock buyback and shorting the opposite signals. Your example is pretty similar to those types of actions. But the thing is just because those trends occured in the past is no indication that those trends will continue in the future, especially since it is widely known by the time you know.

[David Sklansky]

All I know so far is that you guys are guessing and are as lazy as I am.

[Evan]

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All I know so far is that you guys are guessing and are as lazy as I am.

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Can I just clarify that you want someone here to research historical correlation between stock price and something as varied and esoteric as patent lawsuit decisions?

[David Sklansky]

yes

[pig4bill]

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All I know so far is that you guys are guessing and are as lazy as I am.

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Wrong again. What I posted is a result of trading and following patent lawsuit plays like RMBS and RIMM and others. Simply finding lawsuit plays and finding what the stocks did afterwards is useless for the reasons I stated above. There are far too many variables surrounding lawsuits for anyone to conclude that the stock action is based on the lawsuit ending alone. So then you'd have to filter out the companies that were of any size to meet your criteria. The resulting sample size would be tiny. Then you'd have to research the circumstances around the lawsuit. After all that, I doubt you'd have more than a few examples, and making a conclusion that their stock action was due to "freeing up" of resources would be ridiculous.

[David Sklansky]

[ QUOTE ]
[ QUOTE ]
All I know so far is that you guys are guessing and are as lazy as I am.

[/ QUOTE ]

Wrong again. What I posted is a result of trading and following patent lawsuit plays like RMBS and RIMM and others. Simply finding lawsuit plays and finding what the stocks did afterwards is useless for the reasons I stated above. There are far too many variables surrounding lawsuits for anyone to conclude that the stock action is based on the lawsuit ending alone. So then you'd have to filter out the companies that were of any size to meet your criteria. The resulting sample size would be tiny. Then you'd have to research the circumstances around the lawsuit. After all that, I doubt you'd have more than a few examples, and making a conclusion that their stock action was due to "freeing up" of resources would be ridiculous.

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Why are you using the term "stock action"? Did you realize that my hypothesis involves the actual earnings of the company a couple of years down the road?