Why Universal Display Shares Plunged

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 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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The article Why Universal Display Shares Plunged originally appeared on Fool.com.

Fool contributor Steve Symington owns shares of Universal Display. The Motley Fool recommends Universal Display. The Motley Fool owns shares of Universal Display. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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