Posts Tagged: "Initial Public Offering"

IP Lessons Learned from WeWork: A Unicorn in Pursuit of Technology

In an article we published on this blog in November 2015, we documented the findings of a study of Unicorns (startups with valuations of over $1 billion) and their patent holdings. In that study, we discovered that over 60% of Unicorns held immaterial patent portfolios (10 assets or less). We have subsequently concluded that these Unicorns are likely to fill the gap in their patent holdings through organic filing and patent acquisitions, as they approach an exit event or as they enter a major new market. Fast forward to October 2019, and WeWork, a member of our Unicorn “Class of 2015”, has been in the news under very unpleasant circumstances. The WeWork planned IPO was called off in October 2019, after questions emerged related to, among other things, the viability of the company’s business model following financial and operating disclosures included in its S-1 filing with the SEC. This led to a series of events where, eventually, SoftBank acquired a controlling interest in the company at a valuation of $8 billion, a fraction of its most recent valuation of $47 billion, while in the process removing Adam Neumann, the company’s co-founder and CEO, and buying out his shares.

Tech Giants Maintain Dominance By Copying Technologies

Although it’s not illegal to earn a profit, unfair business practices in the pursuit of holding a monopoly over an entire industry led to the breakup of Standard Oil, especially the rebates from railroad companies for oil shipments which substantially lowered Standard Oil’s transportation costs relative to its much smaller competitors. Recent academic research has suggested that, while the U.S. government acted appropriately to stop the cartelization of an industry, Standard Oil was engaging in typical capitalist activity in securing better deals which optimized oil shipments. This would seem somewhat less nefarious than an outright copying technologies from smaller competitors in an effort to stave off competition.

Does an Uncertain Patentability Climate Explain the Stormy Environment for IPOs?

If Snap cannot protect its ability to differentiate its platform, how is it going to compete with a rival that has more resources and a larger base of distribution? If Facebook and Snap compete on user experience, and that experience is essentially the same between both, there’s no way for Snap, the smaller player, to gain any sort of competitive advantage… An analysis of U.S. capital markets published last May by Ernst & Young noted that the decline of IPO activity over the past 20 years has been so significant that it has warranted conversations on policy action to reverse the trend. A restoration of patent rights, which gives a patent owner a reasonable ability to obtain and enforce patents, could very well have the positive impact desired to improve the business climate for IPOs.

Snap stock to be listed on NYSE, company to seek reported $25 billion in IPO

Although it seems likely that Snap will seek to secure around $25 billion during its IPO, the company itself doesn’t engage in a great deal of patent filing activity compared to other tech companies. According to analysis of Snap’s patenting activities published last November by CB Insights, a total of 46 U.S. patent applications filed by Snap between 2012 and 2016 were identified; this total is likely short of actual Snap patent application filing numbers during those four years because of the 18-month period it takes before the U.S. Patent and Trademark Office publishes filed patent applications. Snap filed a total of 18 U.S. patent applications during both 2014 and 2015. 22 of Snap’s patent applications identified by CB Insights were directed at user interface and user experience inventions but other areas covered by Snap patent applications include automated content curation, network, spectacles as well as object, facial and audio recognition.

Looking at the Zynga IPO, A Patent and Business Perspective

The question remains in the mind of many, however, whether Zynga is a company worth investing in given its near complete dependence on Facebook for revenue. If you actually read the Zynga S-1 filed with the Securities and Exchange Commission you will likely be scared out of your wits by the risk the company lays out in exceptional detail. Facebook is the primary distribution, marketing, promotion and payment platform for Zynga games, and the company generates substantially all of its revenue and players through the Facebook platform. Not exactly the kind of diversification that one would wish for, making Zynga completely dependent upon existing Facebook agreements and the extension thereof. You will likely also be underwhelmed by their IP portfolio, particularly their patent portfolio.