NEW
YORK, Jan. 19, 2024 /PRNewswire/ -- Wynnefield
Capital and its affiliates, collectively the largest institutional
stockholder of TechPrecision Corporation (NASDAQ: TPCS), with a
4.5% beneficial ownership interest, today issued the following
public letter to the Company's Board of Directors.
***
January 19, 2024
Wynnefield Capital Demands TechPrecision's Board to Commit
That Stockholders Will Vote on the Votaw Transaction
Dear Board of Directors,
Wynnefield Capital and its affiliates (collectively,
"Wynnefield") own 393,857 shares of common stock, or 4.5%, of
TechPrecision Corporation (NASDAQ: TPCS) ("TechPrecision" or the
"Company") as of December 31, 2023.
Wynnefield is TechPrecision's largest institutional stockholder,
according to Bloomberg.
In its first public letter on December 7,
2023, Wynnefield asked the company to hold a public
conference call to explain the proposed acquisition of Votaw
Precision Technologies. After receiving no response to this very
reasonable request, on December 19,
2023, we publicly questioned why the board was
unwilling to disclose the transaction's funding strategy.
TechPrecision has given just a generalized response with no
material details. Wynnefield remains alarmed by this Board of
Directors' disregard for its duties to ALL stockholders, the
uncertainty it has created and its contribution to stockholder
value destruction.
TechPrecision's board has not earned stockholder trust to
approve at its sole discretion, under any circumstance, the
proposed Votaw transaction. The claim "the board is
unanimous in support of the acquisition" should not be reason to
circumvent stockholder interests to weigh in and vote on a proposed
transformational acquisition. Just when unfavorable voting results
were reported following the September 12,
2023, annual meeting of stockholders, the board was
approving the execution of a letter of intent with Votaw knowing
that the potential acquisition could cause significant dilution to
existing TechPrecision stockholders.
Wynnefield is at a total loss why the company would not engage
immediately with its shareholders. We intend to carefully monitor
the inevitable dilutive capital raise to ensure equal access
opportunity for all shareholders. Wynnefield has operated for over
30 years and never witnessed anything quite this bizarre.
Wynnefield Capital demands accountability given the
destruction of stockholder capital. It is time this board and
management ADMIT their shortcomings and publicly
ENGAGE with stockholders. TPCS stockholder returns are
clearly a disaster on an absolute and relative basis.
No matter how you look at it, TechPrecision's board has caused
great harm. The track record is as follows:
- Stockholder reaction to TechPrecision's press release on
January 8, 2024. TPCS shares
DECLINED by 14.7% to $4.46
per-share on Monday, January 8, 2024,
from $5.23 per-share on Friday, January 5, 2024 – an immediate, one-day
reaction to the company's press release.
- Stockholder reaction since TechPrecision's proposed Votaw
acquisition on November 29, 2023.
TPCS shares DECLINED by 37.8% to $4.04 per-share on January
18, 2024, from $6.50 per-share
on November 29, 2023.
- 2024 YTD TPCS share performance. TPCS shares DECLINED
by 22.0% on a 2024 YTD basis as of January 18, 2024, hitting a new 52-week low of
$4.04 per-share and the lowest
closing price since $4.00 per-share
on April 9, 2019 – almost 5 years
ago!
- 2023 TPCS share performance. TPCS shares DECLINED by
37.4% in 2023. The Russell Micro Index increased by 7.7% in
20231.
- TPCS share performance since STADCO acquisition. TPCS
shares DECLINED by 31.3% for the period from TechPrecision's
STADCO acquisition close on August 25,
2021, to January 18,
2024.
Source: Bloomberg data.
In TechPrecision's press release on June
8, 2023, the board's claim that it is "…limited by the
securities laws as to what topics…" can be discussed attempts to
obfuscate the many topics that are legally allowed and insults
stockholder acumen. TPCS shares plummeted by 14.7% that day. What
more proof does the board need that their path remains ill-advised
than the dismal stockholder returns presented above?
As Wynnefield attempted to understand this situation better
through constructive advice in our first two public letters, we now
request further explanations on behalf of ALL stockholders:
- VOTAW FINANCIALS and TRANSACTION FINANCING. The board
claims it is unable to provide "more information about Votaw's
financial condition and results of operations," which leaves
stockholders without key metrics to assess the opportunity against
potential financing scenarios. This claim is rubbish.
- Wynnefield demands to understand the margin of safety
between Votaw's operating cash flow and the board's assumed
long-term financing structure (or the board's philosophy on
acceptable financing parameters) to pay for Votaw's potentially
$110 million price tag.
- Wynnefield demands to learn why the board allowed the 45-day
termination period to expire without all or most of the financing
structure in place beforehand. If any of the financing
structure is in place, stockholders are entitled to that
information and the board would be irresponsible to keep this a
secret.
- VOTAW EARNOUT. The Earnout Payment is realized based on
an EBITDA target to be achieved for just the first 12-month period
of financial performance.
- Wynnefield's strong preference is to establish earnout
performance metrics realized over multiple years that better
match TechPrecision's anticipated significant financial obligation
payments. If Votaw's performance flounders any time after the first
year of TechPrecision's ownership, the Seller's Earnout Payments
are locked-in over the following years while TechPrecision is left
with a potential mismatch between its operating cash flow
expectation and financial obligations. Multi-year EBITDA
performance targets keep a Seller engaged with "skin in the game"
over a longer period and offers more protection for
stockholders.
- OVERHEAD SAVNGS. The board claims," Our immediate plan
is to start moving STADCO's operations into the Votaw facility
towards the end of 2024, continuing into 2025…"
- Wynnefield wonders why the board would allow critical
savings to be delayed. This is another way the board's bad
negotiations favored the Seller and their Earnout Payment (based on
performance ending October 31, 2024)
instead of prioritizing stockholders' best interests.
- Wynnefield asks for explanation of how TechPrecision plans
to serve critical STADCO customers during the potentially poorly
timed relocation. Public statements by the Department of
Defense and OEMs have made comments regarding the readying 2024
production ramps for Sikorsky's CH-53K heavy lift helicopters and
Boeing's F15-EX fighter jets, two major military programs that
STADCO contributes components. Moving STADCO's operations during
late 2024 and in 2025 is a concern.
- CAPEX SAVINGS. Stockholders know of but are not "well
aware of the deferred maintenance problems at STADCO" because these
have not been publicly discussed in detail.
- STADCO's CAPEX has been low. In the company's FORM 10Q,
STADCO's capital expenditures totaled just $4,530 during the six-month period ending
September 30, 2023. Per the company
10K report, STADCO capital
expenditures totaled $725k in 2023
and $113k in 2022.
- If TechPrecision can find financing to purchase a $110 million acquisition, surely the company
should be able to fund a considerably smaller amount to support a
recently completed acquisition. Stockholders might even expect that
TechPrecision's STADCO due diligence should have aptly informed of
future capital expenditure investments before the purchase. Lastly,
on FY2Q24 (ending September) earnings call, TechPrecision's CEO
stated, "…our delivery meets the expectations of the customers for
both subsidiaries…that across the board for our key customers, we
are not losing any confidence in any one of them…" suggesting
STADCO was on firm footing.
- STADCO and M&A. The board's claim "even prior to
completing the acquisition of STADCO in August 2021, it was our intent to relocate
STADCO, whether by finding a new location or acquiring a compatible
company."
- Wynnefield would like the board to cite when management
publicly informed the stockholders of STADCO's relocation and
M&A strategy intentions.
- STADCO's S-1 dated January 7,
2022 (nearly 4 ½ months after the acquisition), states, "In
addition, Ranor's and STADCO's businesses will continue to maintain
a presence in Westminster,
Massachusetts and Los Angeles,
California, respectively."
- Further, the board's statement of "…or acquiring a compatible
company" suggests that the board intended to execute on an M&A
strategy, a significant undertaking for TechPrecision's new
significantly leveraged balance sheet.
TechPrecision stockholders have been patient investors, but
recent board actions have been devastating. While Votaw's valuation
incorporates just recently improved financial performance, existing
TechPrecision stockholders would give up full ownership of RANOR
and STADCO just months before their production ramps up and after
waiting patiently for years.
IT'S NOT TOO LATE TO EXPLAIN THE PROPOSED VOTAW ACQUISITION
ON A PUBLIC CONFERENCE CALL AND TO COMMIT THAT STOCKHOLDERS WILL BE
ABLE TO EXERCISE THEIR OWNER VOTE.
Respectfully yours,
Nelson J. Obus,
Founder
Robert D. Straus, Portfolio
Manager
***
Media:
Daniel Yunger
Kekst CNC
daniel.yunger@kekstcnc.com
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SOURCE Wynnefield Capital