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I've really enjoyed posting on this board but I've been disappointed at how it's developed over the past week, so I want to give my final thoughts on how this will turn out, and I won't post again until (or if) we have the final agreement.
I anticipate a lot of people will attack what I have to say below, but even if you disagree with it I hope you will not doubt my sincerity. I am not here to ramp and am not going to sell my shares before we know what happens. If I turn out to be wrong then I will be the first to hold my hands up and admit my error, and if it gives anyone false hope I apologise in advance.
This is my view on how much money we will get. At this point I should say that there is a difference between what my heart says and what my head says. My heart says we will get a low figure and the share price won't bounce. That's what I am emotionally preparing for.
My head, however says different. Having researched patent settlements a bit more, I believe it is correct to say that the standard procedure is for the parties to agree a royalty rate, and to apply that rate to all historic and future sales, no matter where in the world. A royalty rate is a percentage amount.
The intellectual basis for this is that the parties agree on how much the IP contributes to the product and agree the royalty rate to that end. So if the parties agree it contributes a 1% royalty rate, then there is no reasonable basis for arguing that it contributes e.g. 1% for sales in the US, but 0.5% for sales elsewhere or in the future.
Applying this principle, what numbers do we end up with? Well, the US settlement offer was towards the low end range. My estimate would be that the royalty rate gives a per unit $ figure anywhere between $8-15. That gives us $120-225m based on 15m historic US sales.
Now, based on the principle above, we triple that for historic global sales, giving us $360-675m.
What about future sales? This is where, I believe, negotiations will be fiercest. I expect Samsung will say "We're not going to use the QD much more/the tech will become obsolete/we're going to halve the price of QD TVs going forward/our next gen product doesn't use it etc etc". To which Nanoco will say "Pull the other one, your sales are growing exponentially/your next gen product does use our IP/you're probably going to apply the IP to loads more products." My very much finger in the air estimate is that this will multiply the historic sales amount by 2-2.5 times. Giving a final amount of $760m-$1.65b.
Then we convert to £ and take off the funder's cut. Now, contrary to everyone's assumption up until now, I don't think the 20% cut will be applied to the *global* settlement, but to that part of the settlement relating to the US litigation. References by Nanoco to the funder's cut, I believe, have only been in the context of a trial award, not in the context of a settlement. (Cont)
For the 1,000th time, that final sentence in the Edison report is about Nanoco retaining some of the money they will receive rather than distributing it or doing a buyback.
How can people not understand this?!!
I'm asking this question because it seems unfair to me that the funder would get 20% of any settlement that incorporates future royalties, whereas it wouldn't receive any of that if it we did have royalties. Nanoco would therefore be strongly incentivised push for a royalty rather than one-off payment if this were the case.
I also ask because for the funder to potentially receive over $100m on potentially $5m of fees seems a ridiculously good return, even for non-recourse funding.
I've looked at the annual reports and the fees the funder will receive are mentioned in the context of a trial award only. A settlement payment isn't mentioned.
Personally, I reckon the 20-25% cut relates only to the value of the US historic sales (and possibly also Germany and China given we launched actions there too). If so, that would give us a higher net amount, which would be helpful. I doubt we'll ever find out though as we'll probably only be told what we received after net fees and expenses.
Gigawitt/NigWitt, I don't know if you're trolling (if you are you're doing great) but you consistently show yourself to have minimal legal knowledge, even if you have experience of going to court.
Your view that a settlement was off the cards is one example. You also state in your last post that:
"All these calculations are worthless since the basis will be on lost earnings and Nanoco can't show that there would have been any earnings without Samsung."
...which is just complete and utter nonsense. The idea that Samsung could defend themselves on that basis is completely contrary to the concept of civil damages, which you would know if you had studied damages in any shape or form.
I hope if Brian Tenner is reading these posts he ignores all the morons who are slandering him when they have no idea what the final agreement holds.
And to the idiot who set up an account solely to attack BT, you seriously need to look at yourself in the mirror and ask yourself what kind of person you are.
My only regret if we get a good final agreement is that some of the people on here will benefit from it. Sadly the board has gone from brilliant to toxic in a week.
Can I also make an argument about the Monday RNS supposedly being to "calm the market".
Firstly, we ended that day on 55p so the share price increase wasn't astronomical.
Second, the Monday RNS was probably the most difficult example of disclosure that a company can make, being about a commercially confidential, not yet agreed litigation settlement. It would have taken a huge amount of time (and quite likely significant weekend work) to draft, and given the case was stayed at midnight BST there is simply no realistic way it could have been done in 7 hours, that is even if you'd found lawyers prepared to do it at that time. So the Monday RNS would have been planned all along, regardless of investor speculation on here.
Here's the Edison note:
"For context, we have previously calculated that lost revenue in the US attributable to the patent infringement so far could be US$200–250m or more. This figure would increase if non-US sales and future shipments are included."
So if the settlement is global, as it will likely be, the low end range will increase.
The Edison note says the opposite. You start with the low end range, then you *add* global sales and future sales. You don't include them.
For someone who claims to know how to read legalese you don't have very good attention to detail.
Henry, I echo your sentiments entirely.
BT has always said they will agree to a settlement so long as it provides "fair value", which he describes as fair value *globally* and for the *full life* of the patents. See Q24 of the Investor Meets Q&A back in April 2022.
So let's see whether we do get fair value. Ultimately I think there's a good reason to trust BT, whilst recognising that having lots of cash dangled in front of a minnow like us could change things.
Let's also not forget the negotiating position we're in. The US case hasn't been dismissed, and despite the pre-trial belief of some on here that Samsung would be indifferent to it going to trial, they clearly are very keen it doesn't. So Nanoco have that leverage in any negotiation, which would suggest they don't need to sell out global and future sales for peanuts.
Finally, while this has been going on it just so happens that our biggest shareholder has been selling at 3 times the rate of your average investor. It does raise the question why (for me the most plausible answer is profit taking/de-risking) but if they had behaved like the average investor the share price would be significantly higher than it is now. Ultimately, today's share price is irrelevant as it will all come out in the wash of a final agreement, whatever that looks like. So my advice is be patient and trust BT.
The funder is putting all its money in no win no fee.
The funder is paying Mintz's fees at a discounted rate (top law firms very rarely do 100% no win no fee).
In the event of a win both will get payouts in proportion to the final amount. They therefore both have skin in the game and their interests are aligned with Nanoco's in obtaining the highest amount they can.
Practically I don't think there was time to draft the Monday RNS in time for Friday. The trial was only stayed at midnight which would have given them 7 hours, which were in the middle of the night. That RNS would have taken a long time to think about and draft correctly and it's not something to be rushed.
I was thinking more about Monday's RNS and this is what I think has happened.
On Thursday, Samsung made an offer to settle the US litigation by paying Nanoco $x or x% per US TV sale. The offer did not touch on global sales or future royalties/sales. The intention was to stay the US proceedings. Nanoco considered this offer was a fair outcome for the US litigation alone (that is US historic sales) and so accepted. This is why the RNS says the *settlement offer* provides a fair outcome and its gross settlement value is in the low range of damages expectations.
So, why the did settlement offer not include global sales and future sales? Firstly because those things are not strictly relevant to the settlement of the US litigation. The parties could, in theory, settle the US litigation following the term sheet and Nanoco would be free to carry on litigation elsewhere and also bring further US litigation for continued infringement.
However, the second point is that the parties know that the negotiation of the final settlement agreement will involve the settlement and compensation of all global past and future litigation. It is in both of their interests to do so. To that end, I think the third bullet point re: the one-off payment can actually be read as "We accepted the offer because going by historical precedent the final agreement will include a global and future settlement." That has been Nanoco's intention all along - to obtain fair value for their patents globally and over the life of the patents. Now they can achieve it. Unfortunately that message was lost in the "no forward royalties" reference which spooked people.
Where does this lead to? Well, there will now be negotiations over the global sales and future sales and assuming these are incorporated into the final agreement we will end up with considerably more than the low range US trial amount.
Unfortunately, I believe this nuance over what the settlement offer was in respect of (US sales) and what the final agreement is likely to include means lots of people now think we're only going to get the low range US trial damages come what may. Coupled with LOAM de-risking and we have the share price today.