MISSION INTANGIBLE

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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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RepuStars 2010 Nov 15

C. HUYGENS - Monday, November 15, 2010

Weekly Reputation Index Metrics


At the close of trading 11 November 2010, the RepuStars and Repustars-II Composite Indices stood at 131.44 and 143.59, respectively. Over the past four weeks, the former Index has increased by 6.12%, while the latter has increased by 4.27%. The benchmark S&P500 Composite Index stood at 102.31 (rebased to 7 Jan 2005) and has increased over the past four weeks by 3.38%.

Since January 2009, the RepuStars and RepuStars-II Composite Indices have gained 47.62% and 70.71% respectively; the S&P 500 Composite Index has gained 30.24%. Over the trailing twelve months, The RepuStars II Composite Index has gained 28%; the S&P500 Composite Index has gained 11%. Other interval changes in the magnitude of the indices are shown below. 


The RepuStars™ family of composite indices reflect the added value of reputation resilience. The RepuStars Composite Index comprises the two firms in each of 20 major sectors with the greatest periodic rise in their Steel City Re Corporate Reputation Index ranking sampled from the large cap segment of the U.S. equities market. Eligibility requirements are market capitalization >$3.5B, share price >$5.0, and reputation ranking between the 25th and 85th percentile. The RepuStars-II Composite Index selection criteria include market fundamentals. The benchmark metric is the S&P500 Composite Index.

The 36-month trailing beta of the Repustars II index is 1.15. The alpha is positive.

The Repustars indices are reconstituted biannually in the first weeks of January and July. Click here for additional information on the indices.

Reputation, Risk and Finance

Reputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:

1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the first Friday of every month or read the book, Mission: Intangible. Managing risk and reputation to create enterprise value, available at the IAFS Store or other leading online book retailers
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow. 

REPUSTARS is a registration-pending trademark used under license.

Leftovers - M:I MB of 10-Nov-5

C. HUYGENS - Wednesday, November 10, 2010
At the Mission:Intangible Monthly Briefing this past Friday, Gerard J. Pannekoek, President and CEO of IPXI Holdings, the world's first financial exchange focused on intellectual property rights, and Donald Lyons, an executive with Moniker, a full service provider of domain name solutions including an auction marketplace, discussed the state of affairs in IP market liquidity and what is required in order to realize the efficient transfer of technology, meaningful price discovery and market-based pricing.

As with many of the programs in the Mission:Intangible series, questions from listeners outpaced the allowed time for the program. Here then, are the leftovers.

Question: What role, if any, exists for patent brokers in the IP ecosystem given the ongoing activities of Moniker and the rise of IPXI? Will it disrupt the IP brokering industry?
Lyons: The market has remained consistent as there is always a demand for high quality domains, yet the prices have correlated to the overall economy. Here is a link to the higher priced reported sales for the year: http://www.dnjournal.com/ytd-sales-charts.htm
Pannekoek: Brokers roles will expand. Patent brokers' role in the IP ecosystem will expand due to interaction with IPXI. IPXI expects that patent brokers will be an important source of ULR contract candidates. IPXI is a licensing distribution alternative, not a sale transaction alternative. Brokers will continue in the intermediary role and facilitate the movement of IP to the hands of highest value holders who will capture that value through the ULR contract distribution mechanism.

Question: You noted that large companies benefit from the absence of a level playing field. Moreover, earlier IP markets struggled because arbitragers (speculators) did not want price transparency. Why would those two stakeholders surrender that advantage to a liquid market?
Lyons: The market comprises one large company, GoDaddy, with several medium size companies, Oversee.net (parent company of Moniker), Demand Media and NameMedia as examples. There are large (over 100,000 domains) speculators as well as the average person who gets a domain because they like the name and think the value will appreciate. Noteworthy is the trend to build domains out into income producing web sites, usually in niche markets. This is also developing a secondary after market.
Pannekoek: The playing field asymmetry, whether applied to IP buyers, sellers or arbitragers, or small or large enterprises, in the aggregate, disadvantages the IP market and the broader economy by inhibiting transparency and pricing efficiency. Because most parties are both licensees and licensors, they have an incentive to support efficient market enhancing solutions. While some players participate only on one side of the market, they are a minority and their profit motive forces higher transaction costs on the majority. The question is whether market efficiency and its associated economic benefits will trump the narrower self interest. While some stakeholders may not surrender their advantage willingly, it is IPXI's expectation that its efficiency enhancing benefits will trump these players' narrow self interest and be the catalyst for a change in IP market dynamics. Additionally, we do not believe that any prior markets offered a transactional infrastructure which provides the transparency and liquidity necessary for effective arbitrager participation. The IPXI ULR contract market should therefore be far more attractive to these players than were prior markets.

Question: Supply and demand based pricing assumes limited supply. But licenses on IPXI are potentially unlimited. How do you establish supply limits to discover the clearing price?

Pannekoek: The supply of ULR contracts will be limited for each tranche of an offering and, based upon anticipated market size, is limited at various price points in the primary market. Similarly, ULR contracts are consumable, and once consumed are cancelled. Therefore, while ULR contracts are potentially unlimited over the course of various tranches or due to their availability in the secondary market, their supply is limited at early adoption price points, incentivizing early purchasing and accelerating adoption of the technology.

RepuStars 2010 Nov 08

C. HUYGENS - Monday, November 08, 2010

Weekly Reputation Index Metrics


At the close of trading 4 November 2010, the RepuStars and Repustars-II Composite Indices stood at 132.29 and 142.10, respectively. Over the past four weeks, the former Index has increased by 9.64%, while the latter has increased by 5.89%. The benchmark S&P500 Composite Index stood at 102.94 (rebased to 7 Jan 2005) and has increased over the past four weeks by 7.00%.

Since January 2009, the RepuStars and RepuStars-II Composite Indices have gained 48.58% and 68.94% respectively; the S&P 500 Composite Index has gained 31.04%. Over the trailing twelve months, The RepuStars II Composite Index has gained 30%; the S&P500 Composite Index has gained 14%. Other interval changes in the magnitude of the indices are shown below. 


The RepuStars™ family of composite indices reflect the added value of reputation resilience. The RepuStars Composite Index comprises the two firms in each of 20 major sectors with the greatest periodic rise in their Steel City Re Corporate Reputation Index ranking sampled from the large cap segment of the U.S. equities market. Eligibility requirements are market capitalization >$3.5B, share price >$5.0, and reputation ranking between the 25th and 85th percentile. The RepuStars-II Composite Index selection criteria include market fundamentals. The benchmark metric is the S&P500 Composite Index.

The 36-month trailing beta of the Repustars II index is 0.73. The alpha is positive.

The Repustars indices are reconstituted biannually in the first weeks of January and July. Click here for additional information on the indices.

Reputation, Risk and Finance

Reputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:

1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the first Friday of every month or read the book, Mission: Intangible. Managing risk and reputation to create enterprise value, available at the IAFS Store or other leading online book retailers
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow. 

REPUSTARS is a registration-pending trademark used under license.

GlaxoSmithKline: Move along - there's nothing to see

C. HUYGENS - Wednesday, November 03, 2010
Stakeholders expect pharmaceutical products to be safe and effective by design and meet quality standards by process. The complaints lodged against GlaxoSmithKline (NYSE:GSK), which last week agreed to pay the fourth largest fine in FDA’s history in relation to the production and sale of “adulterated” drugs, are therefore notable. From the Financial Times last week:

“… investigations unearthed manufacturing issues that included micro-organisms in Bactroban ointment, a topical antibiotic used to treat skin infections in babies; non-sterile doses of Kytril injection, an anti-nausea drug used by cancer patients; Paxil CR tablets for depression that lacked the active ingredient; and Avandamet tablets for diabetes that were super-potent and sub-potent.”

The issues have been on the table since at least 2003, and the costs were booked in the 2nd quarter financial results. Still, the lack of reputational consequences other than what may be minor recent equity movement is curious.

Over the trailing twelve months, GSK’s reputation ranking as measured by the Steel City Re Corporate Reputation Index rose from the 92nd to the 96th percentile among the 233 companies that comprise the ethical drug manufacturers sector. The exponentially weighted reputation moving average volatility was barely measurable at 0.3%, and the trailing twelve week velocity and vector values were 0. Its intangible asset fraction has been flat at nearly 100% which is greater than the industry mean of about 83%. In fact, the only sign that anyone was trading the stock was the fall in equity value so that the company’s performance this past year is about 7% below the median of this peer group.




Stakeholders may not have reacted to a large extent for one of several reasons. One could be that GSK’s reputation is so strong and resilient that this minor event was viewed as an aberration rather than a core risk. Another could be that, as with the airline industry, stakeholders have become complacent. The latter explanation is consistent with the relatively low ranking of the entire sector (less than 20th percentile) and its decreasing internal volatility.

Ho hum, indeed.

RepuStars 2010 Nov 01

C. HUYGENS - Monday, November 01, 2010

Weekly Reputation Index Metrics


At the close of trading 28 October 2010, the RepuStars and Repustars-II Composite Indices stood at 126.55 and 138.68, respectively. Over the past four weeks, the former Index has increased by 4.59%, while the latter has increased by 4.62%. The benchmark S&P500 Composite Index stood at 99.80 (rebased to 7 Jan 2005) and has increased over the past four weeks by 3.73%.

Since January 2009, the RepuStars and RepuStars-II Composite Indices have gained 42.13% and 64.87% respectively; the S&P 500 Composite Index has gained 27.04%. Over the trailing twelve months, The RepuStars II Composite Index has gained 30%; the S&P500 Composite Index has gained 14%. Other interval changes in the magnitude of the indices are shown below. 


The RepuStars™ family of composite indices reflect the added value of reputation resilience. The RepuStars Composite Index comprises the two firms in each of 20 major sectors with the greatest periodic rise in their Steel City Re Corporate Reputation Index ranking sampled from the large cap segment of the U.S. equities market. Eligibility requirements are market capitalization >$3.5B, share price >$5.0, and reputation ranking between the 25th and 85th percentile. The RepuStars-II Composite Index selection criteria include market fundamentals. The benchmark metric is the S&P500 Composite Index.

The 36-month trailing beta of the Repustars II index is 1.14. The alpha is positive.

The Repustars indices are reconstituted biannually in the first weeks of January and July. Click here for additional information on the indices.

Reputation, Risk and Finance

Reputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:

1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the first Friday of every month or read the book, Mission: Intangible. Managing risk and reputation to create enterprise value, available at the IAFS Store or other leading online book retailers
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow. 

REPUSTARS is a registration-pending trademark used under license.

Office Depot: Announcing departures

C. HUYGENS - Tuesday, October 26, 2010
The study of ethics must be daunting judging from frequency corporate officers stumble. The latest: the chief executive of Office Depot (NYSE:ODP), the US office supplies retailer, is to resign less than a week after the company agreed to pay a penalty to regulators for selectively providing investors with earnings guidance.

For the academically challenged, the principles of ethical behavior can be summarized thusly: for the rationally minded, there is the Kantian categorical imperative; for the spiritual or religiously inclined, there is the golden rule.

The company said Steve Odland would step down on November 1, after serving five years as chief executive. The reputation metrics say this is reasonable.



The Steel City Re Corporate Reputation Index metrics show that Office Depot began the trailing twelve month period with a reputation ranking in the 12th percentile and dropped by last Thursday evening to the 7th percentile relative to the 125 companies in the Miscellaneous Retailers sector. Over the trailing six months, the Exponentially Weighted Moving Average (EWMA) of the Index's volatility has been high closing last week at a whopping 68%. The trailing twelve week reputation velocity and vector have been negative at-.35 and -.126 respectively. Consistent with this picture is an economic return that is both negative and nearly 50% below the median of the peer group.



Office Depot's reputation volatility stands out in contrast to the sector where the group's median reputation ranking steadily declined from the 60th to the 55th percentile over the trailing twelve months while volatility within the sector rose steadily from 0.24 to more than 0.26.  Last, Office Depot's intangible asset fraction has bounced quite a bit from more than 70% of market value to less than 30% settling down last week to around 40% -- some 30% below the sector median.

The rationale for providing investors selectively with earnings guidance was to reduce volatility. At the time, it may have seemed like a good idea.

RepuStars 2010 Oct 25

C. HUYGENS - Monday, October 25, 2010

Weekly Reputation Index Metrics


At the close of trading 21 October 2010, the RepuStars and Repustars-II Composite Indices stood at 124.51 and 137.90, respectively. Over the past four weeks, the former Index has increased by 5.22%, while the latter has increased by 5.75%. The benchmark S&P500 Composite Index stood at 99.50 (rebased to 7 Jan 2005) and has increased over the past four weeks by 4.93%.

Since January 2009, the RepuStars and RepuStars-II Composite Indices have gained 39.83% and 63.95% respectively; the S&P 500 Composite Index has gained 26.66%. Over the trailing twelve months, The RepuStars II Composite Index has gained 24%; the S&P500 Composite Index has gained 10%. Other interval changes in the magnitude of the indices are shown below. 


The RepuStars™ family of composite indices reflect the added value of reputation resilience. The RepuStars Composite Index comprises the two firms in each of 20 major sectors with the greatest periodic rise in their Steel City Re Corporate Reputation Index ranking sampled from the large cap segment of the U.S. equities market. Eligibility requirements are market capitalization >$3.5B, share price >$5.0, and reputation ranking between the 25th and 85th percentile. The RepuStars-II Composite Index selection criteria include market fundamentals. The benchmark metric is the S&P500 Composite Index.

The 36-month trailing beta of the Repustars II index is 1.13. The alpha is positive.

The Repustars indices are reconstituted biannually in the first weeks of January and July. Click here for additional information on the indices.

Reputation, Risk and Finance

Reputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:

1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the first Friday of every month or read the book, Mission: Intangible. Managing risk and reputation to create enterprise value, available at the IAFS Store or other leading online book retailers
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow. 

REPUSTARS is a registration-pending trademark used under license.

RepuStars 2010 Oct 18

C. HUYGENS - Monday, October 18, 2010

Weekly Reputation Index Metrics


At the close of trading 14 October 2010, the RepuStars and Repustars-II Composite Indices stood at 123.86 and 137.71, respectively. Over the past four weeks, the former Index has increased by 4.59%, while the latter has increased by 6.47%. The benchmark S&P500 Composite Index stood at 98.96 (rebased to 7 Jan 2005) and has increased over the past four weeks by 4.37%.

Since January 2009, the RepuStars and RepuStars-II Composite Indices have gained 39.11% and 63.72% respectively; the S&P 500 Composite Index has gained 25.97%. Other interval changes in the magnitude of the indices are shown below. 


The RepuStars™ family of composite indices reflect the added value of reputation resilience. The RepuStars Composite Index comprises the two firms in each of 20 major sectors with the greatest periodic rise in their Steel City Re Corporate Reputation Index ranking sampled from the large cap segment of the U.S. equities market. Eligibility requirements are market capitalization >$3.5B, share price >$5.0, and reputation ranking between the 25th and 85th percentile. The RepuStars-II Composite Index selection criteria include market fundamentals. The benchmark metric is the S&P500 Composite Index.

The 36-month trailing beta of the Repustars II index is 1.28. The alpha is positive.

The Repustars indices are reconstituted biannually in the first weeks of January and July. Click here for additional information on the indices.

Reputation, Risk and Finance

Reputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:

1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the first Friday of every month or read the book, Mission: Intangible. Managing risk and reputation to create enterprise value, available at the IAFS Store or other leading online book retailers
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow. 

REPUSTARS is a registration-pending trademark used under license.

Valuation of intangibles: New international standards

C. HUYGENS - Thursday, October 14, 2010
Justice Potter Stewart’s concurring opinion in Jacobellis v. Ohio 378 U.S. 184 (1964) enshrined the qualitative standard “I know it when I see it” into business culture. Now there is a quantitative standard too. For features other than the content of films, that is, as well as other intangibles.

The International Organization for Standards (ISO) has adopted a standard for the valuation of brands - a common term for many of the assets comprising some fraction of the typical ~70% gap between market value and book value. As abstracted from the report in the IAM blog,

ISO 10668 applies to brand valuations commissioned for all purposes, including: accounting and financial reporting; insolvency and liquidation; tax planning and compliance; litigation support and dispute resolution; corporate finance and fund raising; licensing and joint venture negotiation; internal management information and reporting; strategic planning; and brand management. The last of these applications includes brand and marketing budget determination, brand portfolio review, brand architecture analysis and brand extension planning.

ISO 10668 is a meta standard which succinctly specifies the principles to be followed and the types of work to be conducted in any brand valuation. It specifies that when conducting a brand valuation the brand valuer must conduct three types of analysis before passing an opinion on the brand’s value. These are legal, behavioural and financial analysis.

1. Definitions: The first requirement is to define what is meant by brand and which intangible assets should be included in the brand valuation opinion. The brand valuer is required to assess the legal protection afforded to the brand by identifying each of the legal rights that protect it, the legal owner of each relevant legal right and the legal parameters influencing negatively or positively the value of the brand.

2. Behavior: The brand valuer must understand and form an opinion on value drivers; ie,  likely stakeholder behaviour in each of the geographical, product and customer segments in which the subject brand operates.

3. Financial:  [The standard] specifies three alternative brand valuation approaches - the market, cost and income approaches.


The above, which seem to enshrine common practice, may move valuation experts to apply these principles to patents and other intangible assets, and the fact that these practices now have the imprimatur of the ISO may enable the capital markets to accept more readily these indications of value.

To find out if this is the case and to get the latest news from the valuation front, the Society will be hosting three consecutive Mission Intangible Monthly Briefings programs on the subject of intangible asset valuation: markets, value management, and valuation, on Nov 5, Dec 3 and Jan 7. Registration is free. You won't want to miss these!

RepuStars 2010 Oct 11

C. HUYGENS - Monday, October 11, 2010

Weekly Reputation Index Metrics


At the close of trading 7 October 2010, the RepuStars and Repustars-II Composite Indices stood at 120.67 and 134.19, respectively. Over the past four weeks, the former Index has increased by 3.73%, while the latter has increased by 6.25%. The benchmark S&P500 Composite Index stood at 97.63 (rebased to 7 Jan 2005) and has increased over the past four weeks by 4.88%.

Since January 2009, the RepuStars and RepuStars-II Composite Indices have gained 35.52% and 59.54% respectively; the S&P 500 Composite Index has gained 24.28%. Other interval changes in the magnitude of the indices are shown below. 


The RepuStars™ family of composite indices reflect the added value of reputation resilience. The RepuStars Composite Index comprises the two firms in each of 20 major sectors with the greatest periodic rise in their Steel City Re Corporate Reputation Index ranking sampled from the large cap segment of the U.S. equities market. Eligibility requirements are market capitalization >$3.5B, share price >$5.0, and reputation ranking between the 25th and 85th percentile. The RepuStars-II Composite Index selection criteria include market fundamentals. The benchmark metric is the S&P500 Composite Index.

The 36-month trailing beta of the Repustars II index is 1.28. The alpha is positive.

The Repustars indices are reconstituted biannually in the first weeks of January and July. Click here for additional information on the indices.

Reputation, Risk and Finance

Reputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:

1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the first Friday of every month or read the book, Mission: Intangible. Managing risk and reputation to create enterprise value, available at the IAFS Store or other leading online book retailers
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow. 

REPUSTARS is a registration-pending trademark used under license.

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