David Einhorn’s Greenlight Capital is the largest holder of Marvell Technology Group Ltd. (NASDAQ:MRVL), owning close to 10% of the outstanding shares. Early in April, Greenlight trimmed its position in Marvell Technology Group Ltd. (NASDAQ:MRVL). In three Form 4 SEC filings, the position was trimmed by 1.64 million shares from the 51.8 million in the Dec. 31, 2012 filing. There were no additional filings since but this could be a sign Einhorn plans to begin divesting the position, which would put pressure on the shares for sometime given its size. The shares are up 38% year-to-date, so the sale could mean the shares have approached full value in Greenlight’s view.
Einhorn’s Buy Thesis
In Einhorn’s 4Q12 letter to holders of Greenlight, issued on Jan. 22, he defended the position in Marvell Technology Group Ltd. (NASDAQ:MRVL) and believes their core thesis was still intact. He noted the shares were Greenlight’s biggest loser in 2012, declining by 48% due to earnings shortfalls in the first part of 2012 and a $1 billion jury verdict later in the year.
The defense of holding onto Marvell Technology Group Ltd. (NASDAQ:MRVL) was based on two things: one, the amount of the verdict getting reduced; and second, the upside from product transition at Marvell Technology Group Ltd. (NASDAQ:MRVL). The letter stated in regards to the reducing the size of the judgment,”There are many grounds, but one of the simplest is that most of the damages were awarded based on foreign sales that are generally not protected by U.S. patents. The jury found that since the product was “designed and tested” in the U.S., damages were payable even though the manufacturing and sales happened abroad.” On the second point of his investment thesis, he stated, “MRVL is on the cusp of a large product transition which, to put it mildly, is not in the valuation.”
Progress for Marvell YTD
There has not been an update on the appeal of lawsuit or news on a reduction to the $1 billion judgment. If there is a change it would present upside for the stock, but court rulings such as this one are very difficult to gauge. There is little downside risk from any negative rulings, so it is not a reason alone to own the shares, and it could result in upside at some future time.