- Shareholders collectively holding 24.66% of the issued and
outstanding shares of Charlotte’s Web have submitted instructions
to “WITHHOLD” votes for four of the Company’s director
nominees
- Since Joel Stanley left the Board in March 2021, Charlotte’s
Web stock price has fallen 95%, revenues have decreased by 22.8%
(from approximately US$96 million in 2021 to approximately US$74
million in 2022) and the value of the Company is at its lowest
levels since going public
- To effect change, the Concerned Shareholders encourage fellow
shareholders to “WITHHOLD” votes for John Held, Jacques Tortoroli,
Thomas Lardieri and Alicia Morga
Jesse and Joel Stanley (the “Concerned Shareholders”),
co-founders of Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX:
CWBHF) (“Charlotte’s Web” or the “Company”), have
submitted instructions to “WITHHOLD” votes for four of six of the
Company’s director nominees – namely, John Held, Jacques Tortoroli,
Thomas Lardieri and Alicia Morga (the “Subject Directors”) –
ahead of the annual general meeting of shareholders scheduled to be
held on June 15, 2023 (the “Meeting”). The Concerned
Shareholders understand that certain supporting shareholders,
including Major League Baseball (the “Supporting
Shareholders”), have also submitted instructions to “WITHHOLD”
votes for the Subject Directors ahead of the Meeting.
The Concerned Shareholders and the Supporting Shareholders
collectively represent 24.66% of the common shares of the Company
(“Common Shares”) entitled to vote at the Meeting. Given the
voter turnout for the election of directors at last year’s annual
general meeting of shareholders, changes to the Company’s board of
directors (the “Board”) appear to be inevitable.
Under the Company’s majority voting policy, any director that is
not elected by at least a majority of the votes cast with respect
to his or her election must immediately tender his or her
resignation to the Chair of the Board following the Meeting. The
Board must determine whether or not to accept the resignation
within 90 days following the Meeting. The Board must accept the
resignation unless it determines that the applicable director
should continue to serve on the Board. The rules of the Toronto
Stock Exchange require that a board will accept the resignation
absent exceptional circumstances that warrant the director
continuing to serve on the board. As a result, the Concerned
Shareholders expect the Board to accept any resignations it
receives and to cause the Company to call a special meeting of
shareholders without delay to fill any vacancies on the Board.
In light of the above and in order to avoid additional costs of
calling a special meeting of shareholders by the Company, the
Concerned Shareholders proposed to the Company that (i) the Subject
Directors not stand for election, and
(ii) the Board waive the Company’s advance notice requirements,
which would allow the Concerned Shareholders to nominate Joel
Stanley, Jesse Stanley, Lynn Kehler and Angela McElwee for election
as directors of the Company at the Meeting. The Concerned
Shareholders reached out to the Board to discuss a smooth
transition. Rather than engage with the Company’s largest
shareholders, the Board has unfortunately chosen to remain silent.
This has forced the Concerned Shareholders to make their concerns
public.
The Concerned Shareholders are disappointed in the Board’s
refusal to engage. On every relevant metric ranging from revenue
growth to future outlook, the Company is facing an unprecedented
negative market sentiment of its own making and irreparable
trust-deficit in the incumbent Board. Shareholders urgently need a
reconstituted Board to address the challenges at hand.
Joel Stanley, co-founder of the Company, said,
“Without urgent action today, the future of
Charlotte’s Web is at risk. We call on the Charlotte’s Web Board
and the four incumbent directors, who will fail to achieve majority
support, to put shareholders first and to do the right thing by
stepping down and avoid delaying change. Shareholders have seen the
value of their investments collapse and the stock price is trading
at an all-time low. The Company is in need of a refreshed Board and
we have the right people to take on the huge challenges that lie
ahead, in order to restore shareholder value.”
Jesse Stanley, co-founder of the Company, said,
“The significant cash burn rate with
decreasing revenues must end immediately. The current leadership
blames general industry decline and regulatory headwinds to avoid
taking responsibility for their actions. The truth is that the
actions of this Board have clearly contributed to the destruction
of shareholder value.”
THE CASE FOR CHANGE IS CLEAR
- Hope is Not a Strategy: The
incumbent Board and management’s business strategy has been to pin
their hopes on FDA regulations changing in favor of the business.
Rather than innovate within the current framework, the Company
continues to burn money on conventional marketing.
- Uncontrolled Spending Without
Consequences: The Company has spent more than US$270 million
and accrued a loss of over US$186 million between April 1, 2021 and
March 31, 2023. Despite this, there has been a steady decline in
revenue across all channels, with little to no product innovation
or SKU expansion in the CBD category.
- Failure to Maximize Potential: The
Company has the infrastructure to support other categories and
provide fully integrated manufacturing of all products. Yet,
manufacturing of the Company's largest revenue category, gummies,
has been outsourced.
- Poor Hiring Practices: The Company
has cycled through four different CFOs in the past two years.
Additionally, the Board has provided exorbitant compensation to the
CEO and other senior executives relative to the Company’s current
size and performance. These practices have led to unacceptable
levels of dilution to shareholders.
- Lack of Accountability: Management
has not been held accountable by the Board for chasing acquisitions
and distributor and marketing relationships but repeatedly failing
to successfully execute on these transactions.
SHAREHOLDER WARNING: THE BOARD MAY TRY TO DELAY THE
INEVITABLE
The Concerned Shareholders caution fellow shareholders that the
Board may use delay tactics to avoid change. Under the Company’s
majority voting policy, the Board is able to deliberate for 90 days
on whether or not to accept resignations from any directors that
have failed to obtain majority support at the Meeting and to
develop reasoning as to why such director(s) should remain on the
Board despite failing to achieve majority support. However, the
broad and significant shareholder opposition makes it clear that
those directors that do not obtain majority support do not have a
mandate from shareholders to serve as directors of the Company and
should therefore vacate the Board immediately.
THE CONCERNED SHAREHOLDERS’ PLAN WILL PUT THE COMPANY ON THE
RIGHT TRACK
It is clear that the Company needs to adopt a founders’
mentality and stop wasting resources on bad deals and bad hires.
The Concerned Shareholders understand that the Board and management
must bring costs in line with the reality of present-day revenues
with a strategic focus on product diversification and innovation.
The Company led by a new Board will return to its roots of deeper
engagement with industry and consumers, focus on regulatory action
requirements, and improve cost structures. The Concerned
Shareholders believe that innovation of new products and product
categories should have been the Company’s priority over the past
four years and that the Company’s existing resources must be
deployed with far more calculated strategies from here forward.
THE CONCERNED SHAREHOLDERS’ REQUEST FOR BOARD
REPRESENTATION
The Concerned Shareholders have requested board representation
and proposed to the Company that the Subject Directors be replaced
by Joel Stanley, Jesse Stanley, Lynn Kehler and Angela McElwee,
each of whose biographies have been provided below for reference
purposes. The Concerned Shareholders have suggested to the current
Board that this could be facilitated either by (i) the Subject
Directors not standing for election at the Meeting and having the
Company waive its advance notice requirements, which would allow
the Concerned Shareholders to propose nominees at the Meeting, or
(ii) the Company calling a special meeting of shareholders to fill
any vacancies on the Board resulting from the resignations of the
Subject Directors if they fail to obtain majority support at the
Meeting. The Concerned Shareholders are prepared to provide further
information on each of Joel Stanley, Jesse Stanley, Lynn Kehler and
Angela McElwee in accordance with applicable law, should (i) the
Company decide to waive its advance notice requirements and allow
the Concerned Shareholders to nominate Joel Stanley, Jesse Stanley,
Lynn Kehler and Angela McElwee for election as directors of the
Company at the Meeting, or (ii) a special meeting of shareholders
be called by the Company for purposes of election of directors to
fill any vacancies that result from the resignation of the Subject
Directors.
- Joel Stanley. Joel Stanley is a
co-founder of Charlotte’s Web and was the Company’s first Chief
Executive Officer & Executive Chairman. From incorporation in
2013 to the election of a majority independent board in late 2018,
he played an instrumental role in the Company’s growth. Joel
planted the roots that built Charlotte’s Web and has over a
decade’s experience in the industry that will be valuable in
turning the Company around. Joel is currently the co-founder and
Chief Executive Officer of AJNA Biosciences PBC, a botanical drug
development company focused on full-spectrum cannabinoid and
natural psychedelic options for mental health and neurological
disorders. He is also a board member of Stanley Brothers USA
Holdings, Inc., a pioneering medical marijuana licensing company
with a global presence that has played a significant role in
shaping the industry.
- Jesse Stanley. Jesse Stanley is a
co-founder of Charlotte’s Web and was a member of the Company’s
first board of directors. During his role at Charlotte’s Web, Jesse
was the marketing force behind the iconic CBD brand. Jesse has over
a decade’s experience in the industry; his expertise and start-up
grit will help align brand building and build product marketing
with revenues. Jesse currently serves as the Chief Executive
Officer of Stanley Brothers USA Holdings, Inc.
- Lynn Kehler. Lynn Kehler is a
veteran business and finance executive with almost four decades of
experience in executive leadership, corporate finance, and capital
markets. Lynn joined Charlotte’s Web in 2014 when it was
pre-revenue and worked closely with its founders to develop the
Company’s business and marketing strategies, leadership team, and
raise private investment capital. Lynn served as Chief Financial
Officer until shortly after its initial public offering in August
2018 and during his tenure, the Company remained EBITDA positive.
He started his career with the audit staff of
PriceWaterhouseCoopers in Houston and is a retired CPA and CMA.
Lynn currently is the Managing Director at Alpine Advisory Group, a
business consulting firm that specializes in strategy development,
leadership, and financial management of small to middle market
companies. He also oversees several private investment companies
that make venture and private equity investments in real estate,
technology and secondary private equity offerings.
- Angela McElwee. Angela McElwee has
worked within the natural products industry for nearly 30 years and
has held leadership positions with wellness-centric consumer
packaged goods organizations for the last 20 years. From April 2008
to January 2021, she was an executive at Gaia Herbs, Inc.
(“Gaia”), a leading herbal supplement brand, including
serving on the company’s board of directors from 2013-2021. From
2016 to 2021, she served as President and Chief Executive Officer
of Gaia. Prior to her tenure at Gaia, she led the U.S. sales
organization at Nature’s Way Products, LLC. She holds a B.S. in
Biology from Miami University. Angela is currently a Venture
Partner at Springdale Ventures, a venture capital firm, and also
holds several board positions including with NASDAQ-listed
Cyanotech Corporation.
THE CONCERNED SHAREHOLDERS ENCOURAGE FELLOW
SHAREHOLDERS TO “WITHHOLD” VOTES FOR JOHN HELD, JACQUES TORTOROLI,
THOMAS LARDIERI AND ALICIA MORGA. DOING SO WILL HELP BRING ABOUT
THE POSITIVE CHANGE THAT CHARLOTTE’S WEB NEEDS.
DON’T DELAY! YOU CAN CHANGE YOUR VOTE! If you are a
beneficial shareholder (hold shares through a financial
intermediary) or a registered shareholder (hold shares in
certificate form) you may immediately change your vote online by
using a 16-digit control number at www.proxyvote.com or by calling
1-800-690-6903.
Your control number can be found with the proxy materials
mailed to you. If you do not have your materials, you can request
your control number by email at shareholder@broadridge.com or by
calling 1-800-353-0103.
Need more information or need help voting? Call Kingsdale
Advisors on 1-888-564-7333 or email
contactus@kingsdaleadvisors.com.
ADVISORS
Kingsdale Advisors (“Kingsdale”) is acting as strategic
shareholder and communications advisor and Fasken Martineau
DuMoulin LLP is acting as legal advisors to the Concerned
Shareholders.
INFORMATION IN SUPPORT OF PUBLIC BROADCAST
SOLICITATION
The following information is provided in accordance with
applicable law. The Concerned Shareholders are relying on the
exemption under sections 9.2(4) of National Instrument 51-102 –
Continuous Disclosure Obligations to make this public broadcast
solicitation.
This news release and any solicitation made by the Concerned
Shareholders in advance of the Meeting is, or will be, as
applicable, made by Concerned Shareholders and not by or on behalf
of the management of the Company.
The Concerned Shareholders may solicit proxies in reliance upon
the public broadcast exemption to the solicitation requirements
under applicable law, conveyed by way of public broadcast,
including through press releases, speeches or publications, and by
any other manner permitted under applicable law. Proxies may also
be solicited by the Concerned Shareholders pursuant to an
information circular sent to shareholders after which solicitations
may be made by or on behalf of the Concerned Shareholders by mail,
telephone, fax, email or other electronic means as well as by
newspaper or other media advertising, and in person by directors,
officers and employees of the Concerned Shareholders, who will not
be specifically remunerated therefor. The Concerned Shareholders
may engage the services of one or more agents and authorize other
persons to assist in soliciting proxies on behalf of the Concerned
Shareholders.
The Concerned Shareholders have retained Kingsdale as its
strategic advisor and to assist the Concerned Shareholders in the
solicitation of proxies. The Concerned Shareholders will pay
Kingsdale fees currently estimated at up to $100,000. Kingsdale’s
responsibilities will principally include advising the Concerned
Shareholders on developing and implementing shareholder
communication and engagement strategies, and advising with respect
to meeting and proxy protocol.
All costs incurred for any solicitation will be borne by the
Concerned Shareholders, provided that, subject to applicable law,
the Concerned Shareholders may seek reimbursement from the Company
of the Concerned Shareholders’ out-of-pocket expenses, including
proxy solicitation expenses and legal fees, incurred in connection
therewith.
A registered shareholder of the Company that gives a proxy may
revoke it: (a) by completing and signing a valid proxy bearing a
later date than the proxy being revoked and returning the newly
completed and signed proxy in accordance with the instructions
contained in the form of proxy; (b) by depositing an instrument in
writing executed by the shareholder or by the shareholder’s
attorney authorized in writing, as the case may be: (i) at the
registered office of the Company at any time up to and including
the last business day preceding the day of the Meeting at which the
proxy is to be used, or (ii) with the chairman of the Meeting on
the day of the Meeting; or (c) in any other manner permitted by
law. A non-registered holder of common shares of the Company will
be entitled to revoke a form of proxy or voting instruction form
given to an intermediary at any time by written notice to the
intermediary in accordance with the instructions given to the
non-registered holder by its intermediary.
To the knowledge of the Concerned Shareholders, the Company’s
mailing address is 700 Tech Court Louisville, CO 80027. A copy of
this news release may be obtained on the Company’s SEDAR profile at
www.sedar.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This press release contains forward-looking information within
the meaning of applicable securities laws. In general,
forward-looking information refers to disclosure about future
conditions, courses of action, and events. All statements contained
in this press release that are not clearly historical in nature or
that necessarily depend on future events are forward‐looking, and
the use of any of the words “anticipates”, “believes”, “expects”,
“intends”, “plans”, “will”, “would”, and similar expressions are
intended to identify forward-looking statements. These statements
are based on current expectations of the Concerned Shareholders and
currently available information.
Forward-looking statements are not guarantees of future
performance, involve certain risks and uncertainties that are
difficult to predict, and are based upon assumptions as to future
events that may not prove to be accurate. The Concerned
Shareholders undertake no obligation to update publicly or revise
any forward-looking statements, whether as a result of new
information, future events, or otherwise, except as required by
applicable securities legislation.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230612014469/en/
Kingsdale Advisors: Aquin George Director, Special Situations
Phone: 647-265-4528 Email: ageorge@kingsdaleadvisors.com
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