19 March
2024
Third Point Provides Update on R2
Semiconductor
Third Point, the Investment Manager of
London-listed Third Point
Investors Limited (“TPIL” or the “Company”) provides the following update on one of the
Company’s private portfolio companies, R2 Semiconductor, Inc.,
following recent press commentary. The R2 positions currently comprise less than 1%
of Company NAV, but as further described below have the potential
to represent a material contribution at a later date.
Third Point first partnered with David Fisher, R2’s CEO and Founder, in 2000,
incubating and funding his first company, Radia Communications,
until it was acquired by Texas Instruments in 2003. After
incubating R2 Semiconductor at Third Point Ventures’ offices in
2008, Third Point was one of its founding investors and today,
Third Point’s flagship funds own approximately 75% of the Company’s
equity.
Robert
Schwartz of Third Point Ventures has been on R2’s Board of
Directors for fifteen years. With this long history, the Investment
Manager had no doubts about supporting the Company through the
litigation discussed in the press.
At R2, David Fisher
developed and patented new technology related to integrated voltage
regulation, which plays an essential part in reducing power
consumption by microchips, receiving multiple patents in the
area. In 2016, R2 realized that Intel had been using the
IP expressed in R2’s foundational patents — from public papers
published by Intel. R2 has been seeking to enforce its patent
rights since 2017, when it sued Intel in the United States. Unfortunately, that case
was unsuccessful.
In 2020, R2 was granted a European new patent for
its inventions. In Europe, there
is a centralized patent office, but enforcement must be prosecuted
country-by-country (39 countries participate in the European Patent
Organisation). In 2021, R2 filed suits to enforce its new European
patent in both Germany and the
U.K.
Recent
Developments
In early February of this year, the Düsseldorf
Regional Court ruled that Intel had infringed R2’s patent, and
awarded R2 an injunction that would prohibit Intel and two of its
most important customers, HP and Dell, from selling, importing, or
manufacturing chips with the infringing technology in Germany. These chips are used in data center servers, PC’s,
and laptops, and most likely in almost every processor product
Intel produces. Intel has
publicly stated its intention to pursue further appeals of the
German court’s decision, but in Germany, courts do not typically stay an
injunction during an appeal. The ultimate outcome from any appeal
is uncertain, but what is certain is that if R2 decides to enforce
its injunction in Germany, the
injunction will apply at least until the end of
2024. If R2 prevails on the appeal, it can continue to
enforce the injunction until the patent expires in December 2030. It should be noted that Third
Point believes Intel’s approximate annual sales with respect to
affected chips in the impacted European countries are in the
multiple billions of U.S. dollars.
Last Friday, R2 took the next step to enforce its
rights, by filing actions in Germany against Amazon Web Services
(Germany) and Fujitsu
(Germany) to prevent them from
using the patented technology that they have exposure to as Intel
customers. Third Point believes that Intel indemnifies all its
customers from such claims.
The trial in the U.K. litigation is slated for
next month. The ultimate outcome of that case, and even the German
proceedings, as well as cases yet to be filed in other European
countries, remains uncertain. Moreover, a settlement in these
situations is always a possibility. While the amount of any
potential recovery, either through settlement or otherwise, cannot
possibly be estimated at this time, it could end up being material
to the NAV of the Company.
Valuation
Policy
As a reminder, TPIL is a feeder fund into the
Master Fund and the valuation of this position for the Company will
reflect Third Point’s valuation policy. Third Point’s valuation
policy generally requires that private assets be valued in
accordance with GAAP based on quarterly valuations conducted by
independent valuation agents. GAAP requires the Investment Manager
to consider the impact of changes in facts and circumstances, such
as the recent developments with R2, and their impact on potential
outcomes in valuing our positions. After consideration of the
relevant guidance and based on feedback from both Third Point’s
outside valuation agent and its auditors, the Investment Manager
expects that there will be changes to the value of the R2 positions
for March 31, 2024, but these changes
will not have a meaningful impact to the NAV of the
Company. If
circumstances change to such point where gains are probable and
estimable in accordance with GAAP, Third Point will update the
valuation of the positions appropriately. Such future updates could have a material impact
to the NAV of the Company.
The Investment Manager will continue to keep
shareholders apprised of these developments.
Press Enquiries
Third Point
Elissa Doyle, Chief Communications Officer and
Head of ESG Engagement
edoyle@thirdpoint.com
Tel: +1 212-715-4907
|
Buchanan
Charles Ryland
charlesr@buchanan.uk.com
Tel: +44 (0)20 7466 5107
Henry Wilson
henryw@buchanan.uk.com
Tel: +44 (0)20 7466 5111
|
Notes to
Editors
About Third Point Investors
Limited
www.thirdpointlimited.com
Third Point Investors Limited (LSE: TPOU) was
listed on the London Stock Exchange in 2007 and is a feeder fund
that invests in the Third Point Offshore Fund (the Master Fund),
offering investors a unique opportunity to gain direct exposure to
founder Daniel S. Loeb’s investment strategy. The Master Fund
employs an event-driven, opportunistic strategy to invest globally
across the capital structure and in diversified asset classes to
optimize risk-reward through a market cycle. TPIL’s portfolio is
100% aligned with the Master Fund, which is Third Point’s largest
investment strategy. TPIL’s assets under management are currently
$600 million.
About Third Point
LLC
Third Point LLC is an institutional investment
manager that actively engages with companies across their
lifecycle, using dynamic asset allocation and an ethos of
continuous learning to drive long-term shareholder return. Led by
Daniel S. Loeb since its inception
in 1995, the Firm has a 44-person investment team, a robust
quantitative data and analytics team, and a deep, tenured business
team. Third Point manages approximately $11.0 billion in assets for sovereign wealth
funds, endowments, foundations, corporate & public pensions,
high-net-worth individuals, and employees.