Why Universal Display Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Universal Display (NASDAQ: OLED  ) dropped by more than 10% during intraday trading Thursday after noted short-seller Manuel Asensio took to Seeking Alpha to voice negative concerns about the organic LED specialist regarding a recent filing at the European Patent Office.

So what: Specifically, Asensio claimed the filing "shows that the most important claims of Universal Display Corporations 'key PHOLED technology patents' should be entirely revoked," something he goes on to say "could happen quickly and with finality" following an EPO Board of Appeal hearing in November. 

To be sure, a development of this magnitude could be devastating for Universal Display's ability to collect licensing payments from key customers including Samsung Display.

Now what: I won't argue that investors should tread carefully with companies like UDC, which rely on heavily on intellectual property to sustain their business, but it's worth noting that Seeking Alpha's disclosure policy shows Asensio currently holds a short position in Universal Display. What's more, this certainly isn't the first time Asensio has placed Universal Display in his sights. 

For example, way back in November, 2011, a group co-founded by Asensio made similar claims regarding the viability of Universal Display's patents, saying at the time that the European Patent Office had effectively "invalidated and revoked the majority of UDC's PHOLED patent claims."

Mere days later, in the company's quarterly earnings call, Universal Display management contested those claims, saying the EPO had actually maintained their fundamental patents in question, and that they were "extremely pleased" with the result.

This time around, while UDC management hasn't responded just yet, Oppenheimer analyst Andrew Uekwitz already chimed in to defend them, saying Asensio's latest article "contains nothing new or valuable" that wasn't already disclosed in its most recent quarterly report, and recommending investors buy shares on today's weakness.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 12, 2013, at 5:12 PM, sidneyleejohnson wrote:

    Its time to discuss whether this kind of short selling activism crosses over a legal line of Tortious Inteference.

    Can there really be any doubt as to who instigated this third party document filing in the EPO case? What privilege does Asensio claim in conduct that interferes with prospective business relations, expectations, or advantage or with prospective economic advantage of UDC?

  • Report this Comment On September 12, 2013, at 7:19 PM, ScottAtlanta wrote:

    Can't someone with deep pockets take guys like this to court....and tie them up in legal fees even if falling short of a criminal conviction? So they can hire lawyers instead of buying Porsches.

    Although the article was clearly meant to mislead and cause panic selling....I would bet that at least one or two sentences of the carefully crafted piece are in fact libelous. There must be some consequence for this.

    Further, Seeking Alpha should be aware that by running pieces like this they are destroying their credibility. The 30% confidence I had left in some of their articles is down to about 5% now, at best.

  • Report this Comment On September 12, 2013, at 7:33 PM, ScottAtlanta wrote:

    Also...Steve, thanks for the background info.!

  • Report this Comment On September 12, 2013, at 11:58 PM, showmethemonet wrote:

    Seeking Alpo is a bent pipe for short sellers. It should be closed down.

  • Report this Comment On September 13, 2013, at 10:12 AM, ElHombre55 wrote:

    "Buy" is what I did as soon as I read that disclosure, and now my profits are ready in under 24 hrs. Can't beat that! (Though I may wait to retrace the entire move).

    I say do NOT close down Seeking Alpha - some people believe everything they read - that's called Opportunity!

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