I'll be honest... I would have thought by now that the Vringo, Inc. (NASDAQ:VRNG) saga - the patent lawsuit brought against Google (NASDAQ:GOOG) and some of its partners - would have fallen off the radar by now as the market lost interest. On the other hand, I also would have thought by now that the trial would have been completed in its entirety by now. We're close to an end (less the appeal, if Vringo decides it needs to go through with it, or if Google decides to make an appeal of its own); we learned in mid-August the court intends to accept responsive/rebuttal briefs through November 10th, and may after that schedule any evidentiary hearings. But, those hearings will only be held if needed. Soon after that, we'll hear what most have been waiting for nearly two years now ... the actual size of the check that Google will need to write to Vringo Inc.
I'm not going to get into the merits of each side's legal battle. The parties on both sides of that table are entrenched, and not interested in being open minded to - or even hearing - opposing arguments, so explaining my stance would be a waste. I will, however, point out a couple of things about where and how these arguments (mostly the supportive, 'pro' arguments in support of VRNG) are being made ... they're all from Seeking Alpha.
For those not familiar, Seeking Alpha is an open platform for professional and amateur stock-market writers. As such, some of the commentaries there are very good, and some are bad, and many are somewhere in between. Likewise, though the site's editors work to ensure what's being said by all its contributors is accurate and documented, when the debate is as complex and confusing as much as the Google/Vringo battle has been, most anything can be posted as the site.
Now, I don't say that to be critical of Seeking Alpha. I say that mostly to point out that no other media source outside of the occasional mention at the Motley Fool's similar blogging platform (with slightly more-vetted contributors) are even talking about it' the mainstream media sources like AP or Reuters aren't even touching the story any longer. The fact that it's nothing but individual amateur investors banging the drum should be worrisome, just because most investors end up being proven wrong most of the time especially when they're most sure they're right.
There's quantitative evidence to add to the qualitative evidence that only a small number of Vringo fans (and presumably shareholders) are creating a very loud noise here... a noise that's loud enough to make it seem like the bullish Vringo arguments actually make a lot of sense. That is, even with all the convincing arguments in place saying the company is assured a nine-figure a payout from Google, only about 10% of the stock's float is held by institutions. The rest are held by individual investors. Normally, about 2/3 of a company is owned by institutional investors. Why the disparity? Because the risk here is too great.
While the knee-jerk response might be to say that the reward still justifies a risk that institutions can't take, it wouldn't be an accurate response. There are plenty of hedge funds and money managers that take greater risks all the time, for a lot less reward. The lack of institutional participation here seems to be saying there's just not a lot of upsode to look forward to.
Finally, if nothing else, this may be a case where we want to trust what the chart of VRNG is telling us. And what its gradual deterioration is telling us (as the proverbial D-Day approaches) is that more and more of the very same individual investors who've been buying it since April have been selling it since August despite the fact that we've now got more clarity on the trial's end-date (and completion) than we've ever had. If it's such a slam dunk, why have Vringo shares slumped from a high of $3.90 two months ago to the current price of $2.73, and why are they knocking on the door of a HUGE technical support level at $2.65
It's possible the final ruling from the court could surprise everyone, and send the stock to the stratosphere. It's certainly happened before with other stocks. But, with those other stocks, the back-stories were poorly understood, and largely unknown. The Vringo/Google was has been under everyone's microscope and in everyone's face for nearly two years now, so it's not like we haven't had time to fully handicap the odds here. The chart's clues and the fact that nobody but the bulls over at Seeking Alpha (the amateur investor's only real public "voice") should be seen as something of a red flag.
In other words, there's an uneasy "do as I say, not as I do" quality about the whole thing. Just sayin'.
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