MIPS Protection

[NewbieD]

mipsprotection.com. Market cap ~130 MUSD. I had a to watch position in this entered at 59 which I've now increased quite a bit after decreasing prices.

 

This company has developed and patented a low friction layer used inside helmets to decrease damage due to rotational forces. Main market has been bike helmets but expanding to ski, MC and military/police helmets.

 

They are in litigation with Bauer Hockey and Canada and one swedish company called POC over patent infringement which was costly in lawyers fees and is causing uncertainty. Finished in court and verdict expected before mid march. They also stated production bottleneck in some factories as reason for somewhat lower than expected growth in Q3.

 

Thesis:

- growth seems likely to continue, judging from searches on amazon and other online stores > 50% of best selling Bike helmets has MIPS and it is becoming a 'hygiene-factor'

in Sweden two big insurance companies have done tests which they show their customers which all have MIPS helmets on top. wouldn't be surprising if some kind of regulation or standard is developed around the technology eventually.

- given above it seems cheap at my estimate of PE 20 or so this year given high gross margin and inflection point with cost base fairly stable no matter the growth.

- one german forbid POC to sell their copy-cat technology which seems to indicate that the patent has some validity

- I'm not confident you can win against Bauer Hockey in Canadian court, and a loss would certainly depress the price for a bit. But given how much awareness there is for this already in bike helmets I don't think this would be the end of the world.

 

I'll start at that and see if anyone is interested in looking at this further.

[beerbaron]

Not sure how to value this. If they lose their patent war you can pretty much expect the competitors to copy it and brand it differently. Margin would erode, sales would stagnate and EBIT would become negative faster then you can look at your stock chart.

 

BeerBaron

 

[NewbieD]

Forgot that I'd started a thread on this. It turns out they won the patent war last year. Seems to have a nice momentum now with expansion into riding, motor bike and security personnel helmets. The weak SEK is also good for margins.

 

One possible learning from the patent war might be that someone that stole your idea, filed a patent at a later date and then went into bankcruptcy is not likely to win a patent war.