Chun Ming has spent the past two weeks in a cramped San Francisco courtroom, sending notes from his laptop to a tight-knit group of investors glued to a $4 billion antitrust battle involving some of the world's biggest chipmakers.
A passionate Rambus Inc shareholder, Ming prizes the few seats close to an electrical outlet in the crowded gallery. He's a prime spectator as the technology licensing company tries to wrest a fortune from Hynix Semiconductor Inc and Micron Technology Inc in a trial expected to last months.
I'd bet my life on Rambus at least doubling, but I have no money left, said Ming, a former electronics tester who is in his mid-fifties.
Investors for years have wagered on disputes related to Rambus' memory-chip patents, and the company's stock price swings dramatically on court rulings. Options activity in Rambus appeared to turn bullish with the start of the California trial, where a Rambus victory could cause its stock price to skyrocket.
But to get that boost, the Sunnyvale, California-based company and its shareholders need the jury -- including a retired medical secretary, a library worker and a software company employee who owns his own patent -- to sift through highly technical material and rule in their favor.
It's the kind of bet several analysts view as no better than a coin toss.
Rambus has spent more than $300 million on legal bills since it was founded in 1990, equivalent to $1 million per employee, as it sued the biggest names in the business for allegedly infringing some of its more than 1,000 patents.
Many Rambus investors are attracted to the stock's volatility -- and others to the narrative of a small company defending itself from larger aggressors. The company has a stock market value of $1.6 billion, modest compared to the $4.38 billion it seeks from the jury.
Rambus says South Korea's Hynix and Idaho-based Micron colluded to fix prices of memory chips used in personal computers and prevent its technology from becoming widely used. It claims it lost billions of dollars in business.
Micron and Hynix say Rambus' chip technology was plagued with technical problems and that the company blames its competitors for its own failure.
In the past 10 trading sessions starting June 22, investors bought more than 12 Rambus calls for every put as a new position on three U.S. options exchanges, according to Schaeffer's Investment Research. That ratio is higher than 97 percent of the readings this past year.
(For a graph of Rambus option activity, click http://r.reuters.com/puv52s )
At the trial, day-to-day proceedings are laden with complex instructions to jurors about how they may use the detailed evidence. Two weeks into the case, Superior Court Judge James McBride gently warned jurors not to sleep on the job.
Rambus co-founder Mark Horowitz testified this week along with former Hynix executive Farhad Tabrizi. Micron Chief Executive Steve Appleton is on the company's witness list.
While Rambus has been successful in settling some claims in the past, putting a case in the hands of a jury creates a wild card, said Gareth Feighery, a founder of Philadelphia-based options education firm MarketTamer.com. The uncertainty will lead to more speculative than smart trading, he said.
Sharing a vigorous online message board where they discuss Rambus, shareholders chip in money to pay for the lunches of members who attend the trial to post reports on its progress. Rambus followers at the trial have included one who flew in from Connecticut and another stopping by on a break from work.
Last year, after an Ohio man committed suicide, mourning members of the message board said he was part of their group and had been devastated after losing his savings on Rambus shares and options.
There has been a real sense of community on that board for a long time, John Danforth, general counsel for Rambus until 2006, told Reuters. Some volunteers go to court, some are lawyers, some are patent experts.
WHO DID WHAT?
The jury may award Rambus none, some, or all of the billions it seeks. Any payment they decide on could be tripled under California law, although the judge has leeway to reduce a jury's award and the verdict could face lengthy appeals.
Jurors often see trials as morality plays and are less focused on technical details, said U.S. District Judge Jeremy Fogel, who has presided over several patent trials.
They're trying to figure out the good guys and the bad guys, said the San Jose, California-based judge, who is not involved in the Rambus case. They're trying to take the narrative of the trial and understand it in terms of who did what to whom.
Rambus could reach a deal with Micron and Hynix. Samsung, the world's top memory-chip maker, inked a licensing agreement with Rambus last year worth up to $900 million, allowing it to avoid this trial. A Hynix representative declined to comment, and representatives for Rambus and Micron did not have an immediate comment on any settlement possibility.
Rambus shares, which closed at $14.93 on Thursday, might be worth anywhere from $9 to $109 depending on the trial's outcome, said Capstone Investments' Jeff Schreiner, one of only a few analysts covering Rambus. He has a $45 price target.
Memory-chip stocks have fallen since April on worries about sluggish PC sales, but analysts say Micron's shares have also been hurt by concerns about the trial. The stock is down about 30 percent since the end of April and is trading below book value. Hynix shares are down about 21 percent.
You can never completely factor in the lawsuit because we never seem to be able to completely handicap what is happening, said JMP Securities analyst Alex Gauna.
After years of mixed results in court for Rambus, Ming is optimistic but doing his best not to get his hopes up.
I've already pretended they lost.
(Additional reporting by Doris Frankel in Chicago and Miyoung Kim in Seoul; Editing by Martha Graybow and Tim Dobbyn)