13D Weekly Report - Feb 5, 2024 to Feb 9, 2024
$MAT, $CHEF, $LLAP, $GPRE, $OPTT
Table of Contents
Barington Capital Group's Recommendations to Mattel Inc (MAT) to unlock shareholder value
The Concerned Investor Group reached settlement agreement with Terran Orbital (LLAP)
Ancora Advisors reached agreement with Green Plains (GPRE)
INITIATED
Barington Capital Group's Recommendations to Mattel Inc (MAT) to unlock shareholder value
Key Summary: Barington Capital urges Mattel to address underperformance through strategies such as exploring Fisher-Price and American Girl options, reducing stock-based compensation, and initiating a $2 billion share repurchase. Improved governance is also proposed.Market Cap: $6.7 billion | Mattel, Inc., a children's and family entertainment company, designs and produces toys and consumer products worldwide.
On February 2, 2024, Barington Capital Group sent a letter to the company aimed to unlock the company's potential and recognized its iconic brands. They stated that Mattel had seen revenue growth from $4.5 billion in 2018 to $5.2 billion in the last year, with an improved EBITDA margin. Despite this, Mattel's stock price had declined by 13.2% in the last two years, underperforming the S&P 500 by 22.3%. Over the CEO's six-year tenure, Mattel's shares had only grown at a 3.6% annual rate, compared to much higher rates for the S&P 500 and Nasdaq Composite. Mattel's valuation appeared low, trading at an 8.4x EV/NTM EBITDA, below peers, and its own historical average. The company's shares had underperformed due to a P/E multiple de-rating of approximately 3x turns.
Mattel's valuation gap was due to three factors: revenue declines at Fisher-Price and American Girl, excessive stock-based compensation, and a lack of returns to shareholders.
To address this, Mattel should have considered:
o Exploring options for Fisher-Price and American Girl.
o Reducing excessive stock-based compensation.
o Initiating a $2 billion share repurchase program.
o These actions, combined with core segment improvements, could have doubled Mattel's share price in three years.
o Separating the CEO and Chairman roles for improved governance.
These steps were proposed to enhance Mattel's performance and shareholder value.
Barington Capital Group suggested that if Mattel couldn't address these issues within the company, they should explore strategic alternatives, citing SpinMaster's acquisition of Melissa & Doug as an example. This move could have generated strong demand for these brands, freed up capital, and potentially improved the company's earnings multiple. Additionally, Mattel should have reduced its excessive stock-based compensation practices, which had been 40-50% higher than peers, and considered an accelerated share repurchase program to benefit shareholders.
ONGOING
Ocean Power Technologies, Inc (OPT) Board Postpones Annual Meeting Again; Paragon Urges Shareholders to Disregard White Proxy Card
Key Summary: Paragon Technologies (3.9%) has raised concerns about Ocean Technologies' financials and initiated legal action following the company's declaration of their nomination letter as invalid. Despite Paragon continuing to seek votes for its nominees, the company has urged shareholders to ignore the nomination letter, stating that such votes will not be counted. On Feb 8, 2024, Paragon Tech criticized OPTT's annual meeting delays due to quorum issues.Market Cap: $18 million | Ocean Power Technologies, Inc. develops and commercializes proprietary systems that generate electricity by harnessing the renewable energy of ocean waves in North America, South America, Europe, and Asia..
Background
On July 7, 2023, Paragon Technologies (3.9%) provided a letter to the stockholders with respect to its views regarding the Company’s financial condition and the performance of the board. It expressed its concerns about the company's ongoing cash burn and lack of a coherent plan for profitability. It highlighted the company's history of net losses since its inception in 1994, declining share price, failed commercialization efforts, and high operating expenses. Paragon intends to provide a slate of director nominees with the aim of reducing losses, addressing the cash burn, and implementing a go-to-market strategy to create profitable operations at the company.
On July 14, 2023, Paragon Technologies (4%) expressed its concerns about alleged wrongdoing and mismanagement by the board and management. It has requested access to the company's records and will pursue litigation if the board does not comply. Furthermore, it stated that it may make binding or non-binding stockholder proposals or may nominate one or more individuals as nominees for election to the board. Source
On July 17, 2023, Paragon sent an Inspection Demand to the company, requesting access to the company's books and records for the purpose of investigating apparent wrongdoing and/or mismanagement by the Board and/or management. Source
On July 27, 2023, Paragon filed a complaint in the Delaware Court of Chancery to enforce for inspecting Company's books and records.
On August 2, 2023, Paragon Technologies, Inc. issued a press release regarding the company, demanding clear explanations from the board on how the company will fund operations beyond July 31, 2024.
On August 11, 2023, Paragon Technologies (4%) calls on the company to REFRAIN from ALL future equity share sales that will dilute shareholders and immediately announce a significant cost cutting plan to demonstrate the Board’s commitment to protecting shareholder value. Source
On August 25, 2023, Paragon demands corporate governance adherence and shareholder value enhancement, urging to:
Reinstate the Company’s bylaws to their original form prior to Paragon’s calling out the Company’s worsening financial performance
Terminate the Company’s poison pill and grant Paragon its limited waiver
Allow Paragon, as is Paragon’s right as a shareholder, to examine the Company’s books and records
Reconstitute its Board to appoint Paragon’s directors to the Company’s Board.
On August 25, 2023, Paragon Technologies notified its intent to nominate five directors for the company's board at the 2023 annual meeting. On August 29, 2023, Paragon Technologies submitted a second request for an exemption related to the "Section 382 Tax Benefits Preservation Plan" adopted by the company's board on June 29, 2023, limiting ownership to 19.9% of the company's outstanding shares. The company's board has not responded to these exemption requests. Source
On October 9, 2023, Paragon Technologies stated that it has initiated legal action against the board and CEO for alleged breach of fiduciary duties. They sought to appoint three directors to the board and requested an exemption from poison pill provision. Paragon criticized the management for self-serving actions and misleading statements. Source
On October 20, 2023, the Delaware Court of Chancery ruled in favor of Paragon Technologies (OTC PINK:PGNT), ordering Ocean Power Technologies (OPT) to provide Paragon with certain books and records for an investigation. Paragon had made a books and records demand on July 17, 2023, which OPT initially refused, leading to litigation. During the trial, Paragon raised concerns about OPT's financial losses, expenses, and director/officer compensation, as well as actions by OPT's board seemingly aimed at interfering with Paragon's efforts to elect new directors. The Court found that Paragon had a credible basis to suspect wrongdoing and rejected OPT's claim of an improper motive for the demand. Sham Gad, Chairman of Paragon, expressed satisfaction with the decision and urged OPT to work constructively with shareholders. Source
On October 24, 2023, Paragon Technologies sent a letter to the independent directors of the company, raising concerns about recent decisions made by the board. The letter questioned whether the actions taken by the directors are in the best interest of shareholders and suggests that these actions may be aimed at preventing certain director candidates from being presented to shareholders. Paragon highlights several actions, including the adoption of new by-laws, the implementation of a poison pill, engagement of multiple law firms and a proxy defence firm, and the refusal to provide access to company records. Paragon calls for transparency and questions the board's spending decisions in light of OPT's financial situation.
On November 13, 2023, Paragon Technologies notified the Company that Robert J. Tannor notified them of his withdrawal as a nominee, due to health reasons that he is still recovering from, for election to the Company’s board of directors at the Company’s 2023 AGM. Paragon Technologies intends to proceed to nominate the four other candidates previously notified to the Company. Source
On November 17, 2023, a Delaware Chancery Court ruling and evidence suggest a gap between OPT's public statements and financial reality. Paragon calls on OPT to implement a substantial cost-cutting plan and cease issuing equity to safeguard shareholder interests. Source
On November 28, 2023, Paragon Technologies filed proxy materials seeking support for its nominees.
On November 30, 2023, the Delaware Court of Chancery denied Paragon's request for injunctive relief filed on October 9, 2023. As a result, Paragon's nominations and exemption request remain rejected, and they cannot nominate their candidates for the OPT Board at the 2023 Annual Meeting. Source
On December 4, 2023, Paragon Technologies stated that it intends to move forward with its election contest at the Company’s 2023 annual meeting of shareholders (scheduled by the Company to be held on January 31, 2024) and intends to nominate its four director candidates at the annual meeting. Source
On December 11, 2023, Paragon Technologies reiterated its concerns and urges shareholders to vote for its nominees. Source
On December 18, 2023, Paragon Technologies reiterated its concerns and urges shareholders to vote for its nominees. Source
On December 21, 2023, the company announced shareholders may receive materials from Paragon Technologies but advised discarding them, as votes for Paragon's nominees on the blue proxy card will not be counted
On December 29, 2023, Paragon Technologies reiterated its concerns and urges shareholders to vote for its nominees. Source
On January 4, 2024, Paragon Technologies, Inc. reminded shareholders to DISREGARD any WHITE proxy from OPT and issued a presentation on how to vote the BLUE proxy card.
Valuation insight
Paragon believes OPT could be worth +$3 a share, or 10x return, with an improved operating cost structure, disciplined capital allocation, and a realigned focus on potential growth of Marine Advanced Robotics.
On January 15, 2024, Paragon Technologies issued a presentation reiterating its concerns and reminded shareholders to vote for its nominees.
On January 18, 2024, Paragon Technologies (4.8%) challenged OPT's CEO, Phillip Stratmann, over his conflicting statements regarding OPT's profitability in 2025. Stratmann had claimed OPT would be profitable using current capital, but Paragon pointed out discrepancies between this and OPT's EBITDA breakeven projection, questioning the lack of a clear cost-cutting strategy. Paragon criticized Stratmann's management, noting OPT's ceased R&D disclosures since he became CEO and escalating expenses. They accused OPT's Board of self-serving actions and misleading shareholders, failing to commercialize products or present a viable strategy. Paragon urged shareholders to vote using their BLUE proxy card for change and transparency in OPT's management and strategy. Source
On January 22, 2024, Paragon Technologies, Inc. issued a statement and a presentation relating to Ocean Power Technologies, Inc
On February 1, 2024, Paragon Technologies criticized OPT's annual meeting postponement due to a lack of quorum. Paragon questions the board's focus on entrenchment over financial responsibility and transparency. Source
On February 2, 2024, Paragon urges shareholders to disregard all messages from OPT and not vote on any white proxy card.
Update
On February 8, 2024, Paragon Technologies criticized OPTT's repeated postponement of its annual meeting due to a failure in obtaining a quorum. It urged shareholders to disregard OPTT's white proxy and vote against the then-current board, citing ongoing destruction of shareholder value and the futility of supporting the status quo. Source
Legion Partners Issues Letter to The Chefs’ Warehouse, Inc. (CHE) Shareholders Calling for Urgently Needed Board Change
Key Summary: On January 26, 2017, Legion disclosed a 5.9% stake, urging changes for long-term value. A Cooperation Agreement on Jan 15, 2018, led to board size increase and new directors. On Feb 8, 2024, Legion nominated four candidates to reverse underperformance, citing potential in Chef's markets. Projects share price > $85 and > $320M adjusted EBITDA by 2028.Market Cap: $1.3 billion | The Chefs' Warehouse, Inc. is a distributor of specialty food products in the United States and Canada.
On February 8, 2024, Legion Partners Asset Management (3.3%) issued a public letter to the shareholders announcing its nomination of four candidates to the Board in order to reverse the Company’s chronic underperformance. Legion Partners stated that despite concerns, sees potential in Chef's markets. Projects share price > $85 and > $320M adjusted EBITDA by 2028, with prudent spending and margin improvement.
Past
On January 26, 2017, Legion Partners Asset Management disclosed a 5.9% stake in the company and recommended actions including adopting a majority vote standard for director elections and phasing out related party deals, while also urging a refocus on executive compensation to create sustained long-term value. Subsequently, on January 15, 2018, a Cooperation Agreement was entered, leading to an increase in the Board size and the appointment of two new independent directors. On April 29, 2020, Legion Partners Asset Management decreased its stake to 3.3%.
BOARD SEAT/ AGM RESULTS
The Concerned Investor Group reached settlement agreement with Terran Orbital (LLAP)
Key Summary: On October 12, 2023, Concerned Investors, holding 8.4% stock, urged changes for performance and governance. On November 9, 2023, they reiterated proposals. On February 4, 2024, an Agreement was reached for a new director appointment, allowing three candidate recommendations.M.Cap: $162 million | Terran Orbital Corporation manufactures and sells satellites for aerospace and defense industry in the United States.
Background
On October 12, 2023, The Concerned Investor Group, including Sophis Investments LLC, Roark's Drift, LLC, Austin Williams, Roland Coelho, Jordi Puig-Suari, and affiliates, holding 8.4% of common stock, raised concerns about poor stock performance, undercapitalization, and misaligned compensation incentives. They recommended immediate actions: (i) Separate CEO and Chairman roles, appoint an experienced CEO; (ii) Implement top-tier corporate governance, including board restructuring; (iii) Start a comprehensive strategic review with independent advisors to maximize value. Source
On November 9, 2023, The Concerned Investor Group sent an open letter and issued a press release to the Board, reiterating their request for a meeting to discuss proposals aimed at enhancing long-term shareholder value. These proposals include separating the Chairman and CEO roles, appointing an experienced CEO, improving corporate governance, and conducting a strategic review.
Update
On February 4, 2024, The Concerned Investor Group (14%) and the company entered an Agreement for the prompt appointment of a new director. The Concerned Investor Group could recommend up to three candidates, with final approval from the Committee and the Board.
Ancora Advisors reached agreement with Green Plains (GPRE)
Key Summary: In Nov 2021, Ancora Advisors (7.1%) expressed its concerns about governance. In Jan 2023, it urged strategic review. In Feb 2024, it reached Cooperation agreement for review by Dec 31, 2023.Market Cap: $1.5 billion | Green Plains Inc. produces, markets, and distributes ethanol in the United States and internationally.
Background
On November 17, 2021, Ancora Advisors (7.1%) stated that it was encouraged by the company’s recent efforts to improve its corporate governance and refresh its Board however, Ancora Advisors believes these actions only address a portion of the myriad of corporate governance issues plaguing the company. Ancora Advisors expressed its concerns as follows: (i) their belief that the Board, as presently constituted, may not possess the requisite experience and skill sets necessary to lead the company at this critical juncture and successfully implement its transformation strategy; (ii) their belief that the interests of the Board may not be appropriately aligned with the interests of stockholders, particularly in light of the company’s recent capital raise and ongoing capital investment strategy, and given the recent and significant sales by insiders and the lack of stockholder representation on the Board; and (iii) their belief that the recent, long overdue corporate governance changes appear reactionary in nature and, importantly, fail to address certain key items such as the classification of the Board and the lack of an independent Chairman. In light of its concerns, Ancora Advisors are considering certain alternatives, including seeking Board representation and/or submitting a shareholder proposal for consideration by stockholders at the 2022 AGM. Source
On January 31, 2023, Ancora Advisors (7.1%) issued a press release and sent an open letter to the Board detailing its view that the Board should commence a review of value-maximizing strategic alternatives. Ancora Advisors believes the Board should commence a robust strategic review process in an effort to maximize value for all shareholders.
Update
On February 6, 2024, Ancora Advisors entered into a cooperation agreement with the company. Pursuant to this agreement, the company will publicly announce a formal review by its Board of Directors to explore strategic alternatives aimed at maximizing shareholder value no later than the disclosure of its financial results for the period ending December 31, 2023.