Shares of RealNetworks Inc. soared Wednesday after investors learned that the digital entertainment company will not have to pay damages to VeriSign Inc.
In 2008, RealNetworks started an arbitration action against VeriSign, a digital security company, to resolve a dispute about a 2001 alliance agreement between the two. VeriSign argued RealNetworks breached the agreement and interfered with the proposed sale of certain business units.
In May 2009, the arbitrator sided with VeriSign but didn't set any damages.
According to a Securities and Exchange Commission report filed late Tuesday, RealNetworks said the arbitrator has now reversed course and concluded RealNetworks is not responsible for any damages.
RealNetworks' stock jumped 53 cents, or 15 percent, to $3.98 in afternoon trading.
J.P. Morgan analyst Vasily Karasyov upgraded RealNetworks' stock to "Neutral" from "Underweight" after the ruling, saying it reduced the risk to RealNetworks' cash position and thus its stock price.
However, Karasyov wrote in a note to investors Wednesday that the upgrade doesn't mean he is any more positive about the company's operations.
"We believe the company is facing competitive and cyclical challenges which we expect to persist in the midterm. As such, we don't expect a material improvement in earnings trend," he wrote.
Shares of VeriSign slipped 35 cents to $21.76.