SAN DIEGO, Sept. 3, 2018 /PRNewswire/ -- Earlier this
year, a group of investors (the "Group") working with Johnson
Fistel, LLP took a stock position in Big 5 Sporting
Goods (NASDAQ: BGFV) (referred to below as "Big 5" or the
"Company") because they believe that the shares of Big 5 are
undervalued and represent an attractive investment
opportunity. The Group includes individuals who have decades
of experience as C-level executives at publicly traded off-price
retail companies as well as extensive experience in the shoe
industry (one of Big 5's largest sources of revenue). On
May 7, 2018, the Group sent a letter
to the Company seeking significant changes, including changes to
the Company's senior management and its marketing. The
May 7 letter can be reviewed
here. Despite a number of calls between the lawyers, the
Board of Directors declined to meet with the Group or to consider
the Group's recommendations.
On August 17, 2018, the Group sent
a follow up letter urging the Board to again entertain a meeting
with the Group. Alternatively, the Group urged the Company to
voluntarily declassify the Board. Again, after a discussion
between the lawyers, the Board of Directors has not agreed to meet
with the Board, presumably deciding to keep doing business as
usual. With the stock price now at historic lows, the Group
again urges the Board to conduct strategic alternatives review.
The Group intends to further investigate declassifying the
Board of Directors, if the Company will not do so voluntarily, so
that shareholders have a stronger role in the next election of the
members of the Board of Directors. The Group is also looking
to discuss these alternatives with individual or institutional
shareholders. (click here to provide your contact
information)
A summation of the letter is as follows: About Johnson
Fistel, LLP:
Unfortunately, Big 5's stock price is trading at a
historically low price. As stated previously, I am working
with a group of investors (the "Group") who have taken a stock
position in Big 5 because they believe there is significant
opportunities to increase shareholder value as Big 5 is deeply
undervalued, especially considering its earning potential.
The Group continues to believe that the Company has an
exceptional chance to increase Company value in the short term by
implementing the proposals previously recommended. The Group
believes that the most important change that needs to be made is
with the Company's management. The members of the Group have the
combined off-price retail experience necessary to rebrand Big 5 and
improve the Company going forward. I again strongly recommend
that the Board entertain a meeting with the Group to discuss the
future outlook for the Company.
As part of the Company's effort to adopt "best practices" in
corporate governance, we also strongly request that the Board agree
to declassify the Board. As you may know, The Shareholder
Rights Project ("SRP") was established by the Harvard Law School
Program on Institutional Investors to contribute to education,
discourse, and research related to efforts by institutional
investors to improve corporate governance arrangements at publicly
traded firms.
During three academic years (2011-2012 through 2013-2014),
the SRP operated a clinic that assisted institutional investors
(several public pension funds and a foundation) in moving S&P
500 and Fortune 500 companies towards annual elections. This
work contributed to board declassification at about 100 S&P 500
and Fortune 500 companies. This movement was also supported
by empirical studies reporting that classified boards could be
associated with lower firm valuation and/or worse corporate
decision-making.
The Motley Fool explained the problem with a classified board
in an article entitled When Companies Do the Right Thing as
follows:
"A classified board
structure lets corporate directors serve for different term lengths
-- one may be elected for five years, while another comes up for
election every three. This can encourage longstanding directors to
become complacent, or get too cozy with management. It can also
complicate shareholders' ability to replace directors if business
starts going bad."
https://www.fool.com/investing/general/2011/07/01/when-companies-do-the-right-thing.aspx.
Investopedia describes the classified board as being a "moral
hazard of a board of directors being less accountable to the
company's shareholders in a structure where their control is more
protected."
https://www.investopedia.com/terms/c/classifiedboard.asp.
As we understand, Big 5's seven-member Board is classified or
staggered so that only two of the seven board members are up for
reelection in 2019, two are up for reelection in 2020, and three
are up for reelection in 2021. Please let us know if the
Board will voluntarily agree to declassify the Board. If it
is not willing to do so, the Group intends to take the steps
necessary to place the issue on the agenda for the next
shareholders' meeting.
About Johnson Fistel,
LLP:
Johnson Fistel, LLP is a
nationally recognized law firm with offices in California, New
York, and Georgia. For more
information about the firm and its attorneys, please visit
https://www.johnsonfistel.com.
If you are an individual or institutional investor that is
unhappy with the Company's direction and are interested in
assisting the Group, please call 619-814-4471, or click here to
provide your contact information.
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SOURCE Johnson Fistel, LLP