Daniel Khoshaba's letter to Wheeler Real Estate Investment Trust, Inc.
$WHLR
Re:Decisive Losses at the 2023 Annual Meeting Reiterates Need for Urgent Action
Dear Directors:
As you are aware, I am the former CEO of Wheeler Real Estate Investment Trust, Inc. (“Wheeler” or the “Company”) and presently a holder of 11% of the common stock of the Company. Twice over the past two months I have written the Company’s Board of Directors (the “Board”) detailing my dire concerns with the management and financial performance of the Company and urged the Board to address several significant issues that continue to erode stockholder value, and twice the Board has ignored my concerns and failed to develop a plan to address these important matters. It is clear that not only is the Board obviously inward-looking and entrenched, the Board and management have totally lost stockholder confidence.
At this year’s annual meeting, stockholders forcefully asserted their disapproval with the Board and management by voting in opposition to the Board’s recommendations. Notably, all but one of the Company’s director nominees received more “WITHHOLD” votes than “FOR” votes.1 Making matters more clear, stockholders voted against the Company’s say-on-pay proposal, which advisory vote on executive compensation received more “AGAINST” votes than “FOR” votes at the meeting.2 For even the most notoriously poorly managed public companies in corporate history, results like these would constitute catastrophic boardroom failure.
1See the Company’s Current Report on Form 8-K filed with the SEC on May 22, 2023.
2Id.3See “2023 Policy Guidelines – United States,” published by Glass Lewis on November 17, 2022.
Wheeler Real Estate Investment Trust, Inc. June 12, 2023
According to Glass Lewis, in a typical year, fewer than 100 directors fail to receive majority support from stockholders.3 That is fewer than 100 directors out of thousands upon thousands of boards, with thousands upon thousands of directors. So, despite being exceedingly rare, six of the Company’s directors yet and still failed to receive majority support! Glass Lewis has a phrase for elections like this in which a nominee fails to receive majority support, but, due to a plurality voting standard for uncontested elections, the nominee still gets elected – a “failed election.”4 Likewise, Institutional Shareholder Services (“ISS”) has found plurality voting standards in uncontested director elections “problematic” for many, many years.5 For these reasons, in addition to plain common-sense, Glass Lewis and ISS, the two most prominent proxy advisors in the world, disfavor plurality voting standards in uncontested elections and believe a majority voting standard represents proper corporate governance. The Board and management failed to even have the decency to have adopted a resignation policy, which could have addressed an absurd outcome like that which manifested at this year’s annual meeting.6 And if the Company refuses to engage with stockholders to address this year’s overwhelmingly negative voting results, the Company risks having Glass Lewis and ISS recommending against each of the Board’s nominees for director at next year’s annual meeting – a rare event for modern corporate democracy. This year’s voting results are a tabulated record of the stockholders’ resounding rebuke of the Board and management.
Stockholders have signaled that urgent changes are needed in the Company’s boardroom, and I have noted for you on two separate occasions that changes must be made to prevent value destruction and to resuscitate the Company’s plunging stock price. What more evidence do the Board and management need? It is imperative that the Board (1) negotiate a settlement with the holders of the Company’s Series D preferred stock, (2) stop issuing deeply discounted preferred securities in lieu of cash interest payments on the 7.00% Subordinated Convertible Notes due 2031 (the “Convertible Notes”), (3) gain control over the Company’s expenses and (4) initiate quarterly conference calls in order to effectively foster transparency.
Stockholders clearly recognize that the Board and management are imperiling stockholder value and have placed the Company on a path toward continued and pronounced value destruction. Board members must immediately stop disregarding stockholders’ interests and making self-interested decisions that appear to insulate themselves from the Company’s performance. For example, Kerry Campbell, a director on the Board, recently sold all of his shares of the Company’s common stock and now fails to hold even a single share of common stock!7 Mr. Campbell only holds Convertible Notes. Who is Mr. Campbell running the Company for – the common stockholders or the noteholders? The Company is now in crisis. Urgent action by the Board and management is necessary. While the Board’s disregard for the Company’s stockholders is consistent with the tone-deafness that stockholders have come to expect, the Board must face the consequential decisions that it has been delaying. The decisions that need to be made are obvious. And, even if they weren’t intrinsically obvious to management, I have made them so in two (now three) separate letters. There is no more time to waste.
Sincerely, /s/ Daniel Khoshaba
Source:
https://www.sec.gov/Archives/edgar/data/1457592/000110465923070495/tm2318097d1_sc13da.htm