VirnetX Holding Corporation (NYSEMKT: VHC)
VirnetX Holding is having an incredible day in the market today after an East Texas court made a ruling with regard to patent infringement, ordering Apple to pay. Today, we’ll talk about the details of the ruling, how the market reacted to the news, and what we can expect to see from VHC moving forward. So, let’s get right to it…
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Texas Court Says Apple Must Pay VHC
Early this morning, it was announced that a lawsuit announced by VirnetX last month has come to an end. When the suit was filed, VHC was seeking $532 million in damages from Apple. The company stated that Apple took and used intellectual property without permission. The patented property included technology that is designed for creating virtual private networks, also known as VPNs. According to the suit, Apple’s VPN technology, iMessage and FaceTime services infringe upon VHC patents. Today, it was announced that the court has made its ruling. The East Texas Federal District Court unanimously ruled that Apple must pay VHC $625 million in damages.
Will VHC Actually Receive Payment?
Considering historic movements, this is a bit of a toss up. Apple has a history of appealing court decisions, and winning. In fact, Apple was ordered to pay VHC $368.2 million in damages in 2012. The company quickly filed an appeal, and that appeal led to the judgment being thrown out of court. So, while VHC has won the first ruling and Apple has yet to comment, it’s almost a guarantee that Apple will appeal the decision.
How The Market Reacted To The News
Ultimately, the news moves the market. When we see positive news with regard to a publicly traded company, we tend to see gains in the stock associated with that company. The ruling that was made today is a big one for VHC, so naturally, the stock is climbing in the market. Currently (9:39), VHC is trading at $8.18 per share after a gain of $3.39 per share or 70.77% so far today.
What We Can Expect To See Moving Forward
First and foremost, it’s important to remember that price movement in the market generally happens through a series of overreactions. Today’s movement is huge, and while there is fundamental backing for growth, growth of more than 70% is a bit far fetched. So, I believe that this is a bit of an overreaction. As a result, I’m expecting for VHC to see a correction either later today or tomorrow that will bring the stock’s price down to a more sustainable rate. With that said, the future of VHC’s stock price is a bit of a toss up. Sure, we are likely to see growth in the short term as a result of the decision. However, as mentioned above, it’s almost a guarantee that Apple will appeal the decision. Given Apple’s history with regard to appeals, there’s a strong possibility that they will win the appeal and that the court order to pay could be thrown out! If this were to happen, we would likely see a sharp sell off on VHC, bringing the stock back down to the point at which it started. So, while there’s opportunity for strong gains today, that opportunity may not stick around too long.
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What Do You Think?
Where do you think VHC is headed moving forward and why? Let us know your opinion in the comments below!
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