The patent mirage is fading fast
Wireless-security researcher VirnetX Holding Corporation (NYSEMKT:VHC) is another big loser in early 2013, its shares having fallen 35% in three months.
That loss was a major reversal of VirnetX’s legal fortunes. The company has won or settled two major cases in the past two years, pocketing $200 million in the process and awaiting another check for at least $368 million. The Cisco Systems, Inc. (NASDAQ:CSCO) case was supposed to cement VirnetX’s position as an essential patent holder in all things related to network security, but the not-guilty verdict throws cold water over the entire strategy.
Investors are still sitting on a massive 1,600% gain over the past four years, despite the recent drop. The company doesn’t collect any significant license royalties today, covering its daily costs from past courtroom victories. Take that income source away and you don’t have much of a company. The Cisco Systems, Inc. (NASDAQ:CSCO) decision could very well be a sign that this rickety strategy is about to fall apart.
I’d be very nervous owning this stock at valuations like 2,400 times sales and nonexistent earnings. If you rode VirnetX to massive gains in recent years, this would be a good time to take your profits and leave the blackjack table.
The article These 3 Stocks Are Off to a Terrible Start in 2013 originally appeared on Fool.com is written by Anders Bylund.
Fool contributor Anders Bylund holds no position in any company mentioned. Check out Anders’ bio and holdings or follow him on Twitter and Google+.The Motley Fool recommends Cisco Systems and owns shares of Cincinnati Bell.
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