180 Degree Capital Corp. (NASDAQ:TURN) (“180” and the “Company”),
today issued the following open letter to the board and
shareholders of Enzo Biochem, Inc. (“ENZ”).
To the Board of Directors and fellow
shareholders of ENZ,
180 is a publicly traded closed-end fund focused
on investing in micro capitalization public companies with a
constructive, collaborative and collegial activist approach. We
currently own 1,147,969 shares, or 2.4%, of Enzo Biochem, Inc.
(“ENZ”), and we believe the company is extremely undervalued.
I recently sent an email to the ENZ’s Board of
Directors (the “Board”) to set up a time to speak about the results
of ENZ’s recent proxy vote and overall corporate governance at the
company. My email and request have unfortunately thus far gone
unanswered. I can only assume that the Board is hard at work trying
to create value for its shareholders rather than speaking to
shareholders. To that point, we are deeply concerned that the
current management team is completely incapable of generating a
return for its shareholders judging from performance of ENZ’s stock
during its tenure. As you can see from the following chart of total
return1, there is little for the Board to applaud, as ENZ’s total
return for shareholders, under the leadership of Mr. Rabbani, has
woefully underperformed and is squarely in the bottom decile of
performance among its peers.
TOTAL RETURN |
1YR-2020 |
3YR |
5YR |
Enzo
Biochem, Inc. |
12.4% |
(61.7%) |
(40.5%) |
Russell
2000 Index |
30.2% |
37.1% |
114.4% |
Russell
2000 Index Health Care |
58.0% |
73.4% |
190.9% |
Russell
2000 Index Biotechnology Subsector |
70.1% |
75.4% |
241.4% |
And yet, somehow, the Board overseeing this
terrible performance has seen it fit to approve what we believe to
be egregious compensation for Mr. Rabbini, as highlighted in the
chart below.
|
Base pay |
Option |
Performance Stock |
Non-Equity Incentive |
All Other |
Total |
Salary |
Awards |
Units Award |
Plan Compensation |
Compensation |
Compensation |
2020 |
$611,000 |
$112,400 |
$69,740 |
$500,000 |
$194,661 |
$1,487,801 |
2019 |
$611,000 |
$135,296 |
$70,000 |
$500,000 |
$190,308 |
$1,506,604 |
2018 |
$611,000 |
$137,340 |
$44,200 |
$500,000 |
$184,132 |
$1,476,672 |
2017 |
$585,802 |
$180,150 |
$0 |
$575,000 |
$191,044 |
$1,531,996 |
2016 |
$555,478 |
$87,600 |
$0 |
$575,000 |
$189,427 |
$1,407,505 |
Total |
$2,974,280 |
$652,786 |
$183,940 |
$2,650,000 |
$949,572 |
$7,410,578 |
The Board’s apparent belief that $7.4 million in
cash, stock options and other forms of compensation properly
reflects Mr. Rabbini’s performance as CEO raises what we believe
are troubling questions about ENZ’s overall corporate
governance.
We believe the case for how abhorrent the
oversight of ENZ has been throughout the history of this Board and
the current management team is clear. ENZ’s management and Board
have been the recipient of what we consider to be very sober and
thoughtful public criticism from a significant portion of its
shareholders. In our view, ENZ’s latest proxy contest ended exactly
the way it should, with a clear mandate from shareholders to enact
change in the corporate governance of the company. We note this
mandate came at a significant cost to shareholders, through the
wasteful spending of $4 million on legal fees, in an attempt to
resist shareholders’ efforts to push for reform. ISS could not have
been more explicit in their denunciation of ENZ’s “late-stage
entrenchment maneuvers” that ENZ proposed early last year.
As noted in a press release issued by Roumell
Asset Management, LLC on December 31, 2020, Glass Lewis was as
direct as it could be in advance of the board meeting on January 4,
2021, noting that “hallmarks of the [B]oard's regressive
methodologies remain, in our view, disconcertingly evident, from a
muddled representation of refreshment to plainly
questionable management of compensation programs to seemingly
inflexible reverie for Elazar Rabbani, a chairman and CEO who
still cannot be bothered to participate in calls with the Company's
owners and investment community […]" (emphasis
added).
"We would again emphasize our general view that
[Roumell] has otherwise presented sufficient cause to
suggest shareholders would benefit from the
replacement of certain incumbent candidates, including Dr. Rabbani,
in lieu of maintaining a status quo which continues
to lean on, in our view, regressive governance protocols to deflect
investor feedback fueled, in no small part, by Enzo's
dismal returns profile" (emphases added).
At the referenced meeting of shareholders, votes
were cast en masse to denounce the egregious and deplorable
treatment of shareholders for the benefit of management by not
electing Mr. Rabbini to another term as a director. Mr. Rabbani has
submitted his resignation, and as of yet, the Board has still not
accepted it. We are deeply concerned that the Board may choose to
ignore not only the opinion of the two most respected corporate
governance organizations in the country, but also the will of the
majority of ENZ’s shareholders. This isn’t a game. ENZ’s
shareholders voted in a clear and unambiguous manner and it is your
responsibility as Board members to act immediately on their
behalf.
To be clear, we do not hold the two new
directors, Dr. Ian B. Walters and Dr. Maria Tagliaferri,
responsible for the pathetic performance of prior board members or
the current management team. We do, however, absolutely hold them
and the rest of the current Board accountable for immediately doing
what is necessary today, as a result of the recent vote.
Bill Parcells famously said, “You are what your
record says you are.” The track record at Enzo is abysmal, and we
believe it is about time that the Board takes action and shows
accountability to its shareholders. In our view this is a settled
issue at this point. We expect you to immediately accept the
resignation of Mr. Rabbani. In addition, you should ensure the
company has a proper Board that works for the shareholders, find
the appropriate new leadership for the business, and determine the
best path forward, including all potential strategic alternatives.
This falls in your lap. Your shareholders, including 180, are
watching. The watchdog governance organizations are watching.
Despite your decision to not respond to our efforts to talk about
the business with you, we will not remain silent and on the
sidelines. We will be activists and take what steps we feel are
appropriate to hold accountable those that have caused meaningful
destruction of shareholder value and seek to reinstate proper
corporate governance at ENZ.
We welcome the opportunity to have constructive
conversations with the Board at its earliest convenience.
Regards,
Kevin RendinoChief Executive Officer, 180 Degree
Capital Corp.
1Total returns based on closing prices as of
January 29th, 2021
About 180 Degree Capital
Corp.
180 Degree Capital Corp. is a publicly traded
registered closed-end fund focused on investing in and providing
value-added assistance through constructive activism to what we
believe are substantially undervalued small, publicly traded
companies that have potential for significant turnarounds. Our goal
is that the result of our constructive activism leads to a reversal
in direction for the share price of these investee companies, i.e.,
a 180-degree turn. Detailed information about 180 and its holdings
can be found on its website at www.180degreecapital.com.
Press Contact:Daniel B. Wolfe180 Degree Capital
Corp.973-746-4500
Forward-Looking Statements
This press release may contain statements of a
forward-looking nature relating to future events. These
forward-looking statements are subject to the inherent
uncertainties in predicting future results and conditions. These
statements reflect the Company's current beliefs, and a number of
important factors could cause actual results to differ materially
from those expressed in this press release. Please see the
Company's securities filings filed with the Securities and Exchange
Commission for a more detailed discussion of the risks and
uncertainties associated with the Company's business and other
significant factors that could affect the Company's actual results.
Except as otherwise required by Federal securities laws, the
Company undertakes no obligation to update or revise these
forward-looking statements to reflect new events or uncertainties.
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such website is not incorporated by reference into this press
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