Third Point Investors Ltd - Third Point Provides Update on R2 Semiconductor

 

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

 

 

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.