Disappointed that Company has Rebuffed
Firefly’s Attempts at Constructive Private Engagement and
Collaboration around Board Refreshment
Believes that Incumbent Board—Which has
Overseen Massive Value Destruction and a String of Poor
Decisions—Should Not be Trusted to Select New Directors Who Possess
Sufficient Independence and Experience
Board Refresh Needs to Include Firefly
Principal as Shareholder Representative
Firefly Value Partners, LP, which manages funds that, together
with affiliates, collectively beneficially own 9.9% of the
outstanding common stock of Gulfport Energy Corporation (Nasdaq:
GPOR), today issued a public letter to the Gulfport Board of
Directors.
The full text of the letter is below.
Dear Members of the
Board,
Firefly Value Partners, LP
(“Firefly” or “we”) manages funds that, together with affiliates,
collectively beneficially own 9.9% of the outstanding common stock
of Gulfport Energy Corporation (“Gulfport” or the “Company”),
making it the Company’s largest active stockholder.
We have had a meaningful
investment in Gulfport since 2013. Over the past six years, two
things have remained constant: Gulfport has had a first-rate asset
in the Utica Shale, and Gulfport’s Board of Directors (the “Board”)
has seemingly done its best to prevent the full value of this asset
from accruing to shareholders.
In late 2018, after years of
underperformance in the Company’s shares, Firefly initiated a
private dialogue with the Board. Throughout that dialogue, we
expressed our concerns about the Board’s history of poor governance
and its approval of value-destructive capital allocation policies.
To address these issues and promote alignment between stockholders
and Company directors, we proposed an action plan, including the
addition of meaningful shareholder representation in the boardroom.
The Board refused, instead promising that the Company’s latest
personnel changes would lead to improvements in governance and
strategy.
Disappointed by the Board’s
unwillingness to work constructively with shareholders, Firefly
published a public letter on January 17th outlining proposals to
improve the Company’s capital allocation. Later that day, the Board
announced a capital plan that substantially adopted our
suggestions.
Following that announcement,
we chose to give the Company time to implement its plan without
distraction in the hope that the Board would finally display a true
commitment to creating value for shareholders. In our March 6th
public letter, we underscored the importance of Gulfport following
through on its commitments with urgency.
Almost a year has passed since
Firefly first engaged with the Board. Unfortunately, things have
not improved. The Company has not even come close to fulfilling its
commitments to urgently pursue non-core asset sales and return cash
proceeds to shareholders. While the Company has issued
presentations and press releases regarding its plans, these steps
have been half-measures at best and do not show real progress or
strategic direction from the Board.
The market has reacted
negatively to this state of affairs, sending Gulfport’s shares down
another 66% since our first public letter. Over six years,
Gulfport’s shares have lost an incredible 95% of their value.1
Gulfport’s performance lags those of its peers and the overall
market by a massive margin.
We strongly believe that a
Board refresh is needed. In fact, we have expressed this view
repeatedly to the Company, both in public and private discussions.
In our most recent discussions, we specifically identified the need
for three directors to be replaced and for a shareholder
representative to be added to the Board. We proposed that the
Company collaborate with us to identify three candidates who
possess the right mix of skillsets and experience—and add a Firefly
principal to the Board to ensure that the best interests of all
shareholders are represented.
However, in the middle of our
most recent private discussions, instead of engaging with us in
good faith to add true shareholder representation and necessary
skills to the Board, the Company rushed out a press release with
vague commitments to Board refreshment. On November 18th, the
Company announced the planned resignations of nearly half of the
Board without naming their replacements or providing a timeline to
do so. We view this half-baked proposal as yet another example of
poor strategic planning and a deafness to the urgency of
shareholder concerns. This defensive response does nothing to
satisfy the need for shareholder perspective in the boardroom.
Unsurprisingly, the market reacted poorly, sending the shares down
another 12%.
We believe the Board’s actions
send a crystal-clear message that the Board does not care about
having shareholders’ perspectives in the boardroom or their input
when it comes to finding highly qualified directors. Instead, the
Board has chosen to act unilaterally while ignoring the attempted
engagement of the Company’s largest active shareholder.
We are reluctant to resort to public and potentially
antagonistic actions, but we must advocate for Gulfport’s
shareholders. Unfortunately, the only time we see positive change
at this Company is when shareholders stand up against the very
Board that is charged with representing them. The incumbent Board
has overseen numerous failures and massive underperformance. The
directors responsible for this should not be trusted to select the
right people to clean up the mess they have made.
That is why we are asking that
the Board immediately fill one of the new director vacancies with a
Firefly principal as a shareholder representative. This
representative would work collaboratively with the remaining Board
members to select the best candidates to fill the upcoming
vacancies and complete the belated Board refresh, then help
establish improved capital allocation and governance oversight at
the Company. We find it astounding that a Board with Gulfport’s
track record of value destruction continues to deny the need for
large shareholder representation.
We believe in the value of the
Company. Gulfport has great assets and great people. For the sake
of all stakeholders, we implore you to do the right thing now. If
our calls for collaborative engagement are once again ignored, we
will be compelled to take action. Change is needed, and we will
pursue any and all options available to us, including the
nomination of director candidates for election to the Board at the
2020 Annual Meeting.
Sincerely,
Firefly Value Partners,
LP
About Firefly Value Partners, LP
Founded in 2006, Firefly is an investment partnership focused on
fundamental primary research and business analysis. Firefly invests
with a long-term time horizon in a concentrated portfolio of deeply
undervalued companies.
__________________ 1 As of market close on November 20,
2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191121005528/en/
Investors: John Ferguson / Joe Mills Saratoga Proxy
Consulting LLC 212-257-1311 jferguson@saratogaproxy.com /
jmills@saratogaproxy.com Media: Dan Zacchei / Joe Germani Sloane & Company 212-486-9500 dzacchei@sloanepr.com / jgermani@sloanepr.com
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