Ephraim Fields letter to NeuroMetrix, Inc
$NURO
February 27, 2024
To the Board Of Directors:
As of December 31, 2023, NeuroMetrix had approximately $18.0 million of net cash and approximately 1.5 million shares outstanding, which equates to approximately $12.00 of net cash per share. Despite having all this net cash, plus assets that have some value and no significant liabilities, NURO’s stock trades at only $3.50 per share or at a 70% discount to its net cash.
We believe the stock’s dramatic undervaluation is largely attributable to the perception that you are not acting in the best interests of shareholders. Your incentives do not appear to be aligned with those of all shareholders because you personally own very few shares (despite your many years of service at the company and the generous compensation you have received).
We believe investors’ concerns about your motivations have been recently heightened because:
1)You continue to permit NURO to issue shares via an ATM offering even though the stock is trading at a massive discount to its net cash and the company appears overcapitalized, not undercapitalized. We wonder why you think it is smart to issue equity at these prices?
2)You initiated a strategic review process to “promote growth and maximize shareholder value.” To be clear, we have never, ever, seen such a dual mandate review process like the one you have initiated. We believe your primary fiduciary responsibility is to maximize shareholder (which can be accomplished in many ways including growing the company, shrinking the company or liquidating the company). Therefore, we are surprised that the review process is not limited to only maximizing shareholder value and that it also includes a mandate to “promote growth” (which may actually destroy shareholder value).
It is abundantly clear to us that it would be in shareholders’ best interests if you were to immediately liquidate the company. We see no reason for NURO to remain public because the company is too small, its products have questionable growth prospects, corporate overhead is ridiculously high and the investment community has little confidence in your ability and/or desire to create shareholder value. Liquidating the company today would return the greatest amount of capital to shareholders in the shortest amount of time while exposing shareholders to the least amount of risk.
We believe you may be tempted to merge NURO with another company; However, we believe that would be a terrible mistake because it would be highly risky and would return no capital to your long-suffering shareholders.
Considering how much money shareholders have lost under your leadership and how much money you have personally made while shareholders have suffered greatly, we doubt many shareholders would be supportive of NURO remaining public and making an acquisition. We believe shareholders would overwhelmingly support our suggestion to immediately liquidate the company and return all proceeds to shareholders.
We hope you will accept our advice and immediately announce a liquidation plan without us having to take additional public action. If you have any questions, please do not hesitate to contact us.
Sincerely,
Ephraim Fields
Echo Lake Capital
Source:
https://www.sec.gov/Archives/edgar/data/1289850/000168316824001211/fields_13d.htm