Paullee
4 years ago
Acacia Research Patent Company Fires Top Lawyer After SEC Fine
Oct. 20, 2020, 7:54 PM
Company hired general counsel Meredith Simmons in June
Simmons paid $25,000 to settle SEC civil charges last month
Acacia Research Corp. terminated the employment of general counsel Meredith Simmons after less than five months on the job, the company recently disclosed.
The move, disclosed in a Tuesday securities filing by Acacia, comes after Simmons agreed in September to pay $25,000 in a settlement with the Securities and Exchange Commission. The SEC accused Simmons of backdating and withholding records in an insider trading inquiry of her former employer, hedge fund Mason Capital Management LLC.
A spokesman for Acacia, an Irvine, Calif.-based patent licensing and monetization company, didn’t immediately respond to a request for comment. Nor did Simmons, who currently has no disciplinary record with the New York State Bar Association.
The terms of Simmons’ SEC penalty prevent her from serving in any compliance position at a broker, dealer, investment adviser, or other agent for three years. Simmons is also barred from appearing or practicing before the SEC for a year, after which she can apply for reinstatement.
Simmons spent nearly eight years as general counsel and chief compliance officer Mason Capital, a New York-based hedge fund that she left in mid-2018. She spent the past two years as a consultant to the investment management industry.
Acacia announced June 5 its hire of Simmons as general counsel, the same day the company agreed to pay $284 million to acquire life sciences and health care assets from London-based Link Fund Solutions Ltd. Herbert Smith Freehills and Schulte Roth & Zabel advised Acacia on that deal, while LFS turned to Debevoise & Plimpton.
“Meredith has a proven track record of excellence both as an attorney, and in demonstrating her business acumen in her consulting work for hedge funds and private equity firms,” said Acacia CEO Clifford Press in a statement announcing her hire. “We think Meredith’s skills are essential to help us build our platform.”
Simmons was set to earn an annual salary of $400,000 in her role as Acacia’s legal chief, according to a June 4 securities filing by the company. Acacia also disclosed that it paid $131,000 to Simmons for consulting work during its last fiscal year.
Prior to joining Mason Capital in early 2011, Simmons worked as an assistant general counsel at Cantor Fitzgerald LP and was an associate at Epstein Becker & Green, Holland & Knight, and Winston & Strawn.
Darren Miller, who preceded Simmons as Acacia’s general counsel, left this past summer to become senior counsel at Elon Musk’s Space Exploration Technologies Corp., a Hawthorne, Calif.-based aerospace company.
Miller took over from former Acacia legal chief Edward Treska, who was terminated Aug. 10, 2018, and received $660,000 in severance and for a time between $15,000 and $25,000 in monthly consulting fees, according to a securities filing.
To contact the reporter on this story: Brian Baxter in New York at bbaxter@bloomberglaw.com
To contact the editor responsible for this story: Chris Opfer at copfer@bloomberglaw.com
https://news.bloomberglaw.com/business-and-practice/acacia-research-patent-company-fires-top-lawyer-after-sec-fine
Paullee
4 years ago
US buyer flips Woodford stocks after cut-price deal
By Daniel Grote 17 Jun, 2020 at 08:45
24
Comments
US buyer flips Woodford stocks after cut-price deal
The US investor acquiring cut-price assets from the failed Woodford Equity Income fund is offloading the stocks just days after completing the deal, in one case generating a £750,000 profit from a sale at more than 12 times the price paid.
Acacia Research was earlier this month unveiled as the buyer of up to 19 of the fund’s biotech stocks in a £224m deal struck with Link Fund Solutions, the fund’s administrator, which is overseeing the sell-off of assets.
Stock exchange filings in the UK and US suggest stakes worth up to £150m in eight stocks from the former Woodford fund have already been transferred to Acacia, which has quickly sold on a substantial portion, raising an estimated £128m.
The price Acacia paid for those stakes is not disclosed by the filings, except in the case of Alternative Investment Market stock Midatech Pharma (MTPH).
They show the US investor bought a 9.9% stake in the business from the former Woodford fund for just £65,000 at a little under 1.7p per share on 4 June, the day the £224m deal was struck. Less than a week later the stake was sold for just over £817,000 at 21p per share, more than 12 times the price paid, netting Acacia a profit of over £750,000. The shares were trading at 20p yesterday.
‘If that’s true, that’s genuinely shocking, that something could be sold at such a discount to its market cap,’ said Ryan Hughes, head of active portfolios at AJ Bell. ‘It’s shocking that Acacia would be able to offload that at such a profit. Woodford’s investors would be right to feel aggrieved.’
Investors have sent shares in US-listed Acacia soaring 58% since news broke of its swoop on assets from the former Woodford fund, believing it to have secured the better side of the deal. Savers trapped in Woodford’s former fund shouldered a 20% loss as the sale, struck at a price well below the level at which the stocks were being valued, was announced.
Documents outlining the details of the deal, filed with the US Securities and Exchange Commission (SEC), show Acacia has squeezed further concessions from Link.
Final prices for stakes in four unquoted companies, Oxford Nanopore, Viamet, AMO Pharma and Novabiotics, are yet to be agreed. Acacia has secured agreement that should the price for those stocks prove higher than the initial offer, the difference will be discounted from that paid for the listed companies.
The documents also underline the delay investors in the Woodford fund face before receiving any money from the deal. While both buyer and seller are working towards a 30 November deadline, they can agree to a one-month extension, meaning trapped Woodford investors could be waiting until after Christmas to receive all the proceeds.
Acacia is incentivised to recoup its outlay through quick sales of the acquired stocks, the documents also show. An initial $35m (£27.5m) payment under the deal was released from an escrow account, funded by Acacia’s activist fund backer Starboard Value. By replenishing this account with the proceeds of the stake sales, Acacia is able to reduce its interest payments to Starboard from 8% to 3%.
Transaction filings to the SEC show Acacia sold an 11.7% stake in US-listed Evofem (EVFM.O) for $29.3m (£23.2m) just days after acquiring the shares from the Woodford fund. SEC filings also suggest Acacia has quickly disposed of a 7.7% stake in Theravance Biopharma (TBPH.O) acquired in the deal, in a sale worth an estimated £99m.
Other stocks transferred to Acacia as part of the deal include the former Woodford fund’s stakes in Tissue Regenix (TRX), Open Orphan (ORPH), 4D Pharma (DDDD), Synairgen (SNG) and Mereo Biopharma (MPH).
Stock market filings show Acacia has already sold the bulk of its acquired stakes in Tissue Regenix and Open Orphan, while smaller portions of the 4D Pharma and Synairgen holdings have been offloaded.
The deal documents suggest the Woodford fund’s stakes in Arix Bioscience (ARIX), Induction Healthcare (INHC), Netscientific (NSCI) and Sensyne Health (SENS) are also included in the £224m package.
Link and Acacia declined to comment.
https://citywire.co.uk/funds-insider/news/us-buyer-flips-woodford-stocks-after-cut-price-deal/a1369015?section=funds-insider&_ga=2.231136159.1496876702.1592409676-604276758.1592409676
Paullee
7 years ago
Sidus Investment Management and BLR Partners File Definitive Proxy Materials to Elect Two Highly Qualified Director Nominees to Board of Acacia Research Corporation
PR Newswire PR NewswireMay 4, 2018
Issue Letter to Acacia Stockholders
Believe Continued Destruction of Stockholder Value, Abysmal Corporate Governance Practices and Unelected Directors are Responsibility of Executive Chairman Louis Graziadio
Urge Stockholders to vote the BLUE Proxy Card to Elect Clifford Press and Alfred V. Tobia Jr. to Bring Accountability to the Boardroom
NEW YORK, May 4, 2018 /PRNewswire/ -- Sidus Investment Management, LLC and BLR Partners LP (together, "Sidus," "we" or "us"), collectively one of the largest stockholders of Acacia Research Corporation ("Acacia" or the "Company") (ACTG), with aggregate ownership of approximately 4.5% of the Company's outstanding shares, announced today that it has filed definitive proxy materials, including a BLUE proxy card, for the election of two highly-qualified director nominees at the Company's 2018 annual meeting of stockholders (the "Annual Meeting") scheduled to be held on June 14, 2018 and issued a letter to Acacia stockholders. The full text of the letter follows:
May 4, 2018
Dear Fellow Acacia Stockholders:
We have nominated Clifford Press and Alfred V. Tobia Jr. for election to Acacia's Board of Directors (the "Board") because we believe that meaningful corporate governance improvements are required at Acacia. Stockholders of public companies are entitled to expect a basic governance framework – an independent and prudent board of directors overseeing a well-qualified CEO executing a clearly articulated business strategy. These are things Acacia lacks under the leadership of Executive Chairman Louis Graziadio.
In the face of overwhelming evidence, such as the lack of any succession planning or Board processes that has led to Acacia having no CEO for nearly two years and a Board consisting of over 50% of unelected directors that can be tied directly back to Mr. Graziadio (among the many of the Company's corporate governance shortcomings), Mr. Graziadio continues to defy our assessment of Acacia's poor corporate governance and "strongly disagrees" there is an issue. This should be alarming for Acacia's stockholders. Mr. Graziadio's strong disagreement with our assessment of Acacia's corporate governance, which assessment is shared by leading independent proxy advisory firms, indicates to us that he is committed to perpetuating these deeply troubling, stockholder-unfriendly practices. Some of Acacia's problematic corporate governance practices that Mr. Graziadio apparently finds acceptable are discussed below.
Under the current leadership team, Acacia's corporate machinery has been manipulated such that 57% of the current directors have been hand-picked by the incumbent Board and never elected by stockholders. Even worse, it appears that the appointments of all four of these unelected directors – James Sanders, Frank Walsh, Joseph Davis and Paul Falzone – are directly linked to Mr. Graziadio. Mr. Sanders' relationship with Mr. Graziadio goes back for at least two decades having served as a vice president, secretary or general counsel of various Graziadio-controlled entities since 1998. Mr. Sanders also serves as a Trustee of the Graziadio Family Trust. Mr. Walsh's ties to Mr. Graziadio include serving together on the board of directors of World Point Terminals Inc. (where they both continue to serve as directors today). With respect to Messrs. Davis and Falzone, the Company's proxy statement discloses that Mr. Graziadio approached both of them about becoming directors of the Company. We find this very troubling, but not surprising considering that the Nominating and Governance Committee has held just one meeting per year for at least the past ten fiscal years. How can the Nominating and Governance Committee identify and vet highly qualified director candidates if that is the extent of its engagement? To us, it appears that the Nominating and Governance Committee has allowed Mr. Graziadio to stack the Board with friendly faces rather than identify directors by acceptable means, whether with the assistance of a recognized search firm or otherwise.
The inactivity of the Nominating and Governance Committee could, in our view, help explain the Company's lack of a Chief Executive Officer. According to its Charter, one of the responsibilities of the Nominating and Governance Committee is to review "the succession plans relating to positions held by senior executives, and make recommendations to the Board regarding the selections of individuals to fill these positions." Upon the departure of the previous CEO on December 21, 2015, the Company announced that "The Board of Directors has commenced a search for a permanent Chief Executive Officer to replace Mr. Vella and will engage an independent executive search firm to assist in the process."1 Now nearly two and a half years later, the CEO position remains unfilled and we question whether a search process ever truly began.
We believe that the lack of a CEO has allowed Mr. Graziadio to act as the de facto CEO and avail himself of unusual and, in our view, troubling personal compensation arrangements. As Executive Chairman, Mr. Graziadio arranged for the Company to make payments to Second Southern Corp. ("Second Southern"), a company wholly owned by Mr. Graziadio, as "reimbursement" for its costs and expenses (including personnel, facilities and supplies) incurred in connection with Mr. Graziadio's performance of his duties. Given that Pearl Meyer, the Company's compensation consultant, recommends as best practices that companies "[a]dopt a policy stating a director or a director's firm should not be hired to provide professional or financial services to a corporation where he/she serves on the oard,"2 we question whether such arrangement with Second Southern was supported or approved by the Company's compensation consultant. We continue to struggle to comprehend how Mr. Graziadio obtained $2,417,426 in aggregate compensation in fiscal 2016 despite not being an employee of the Company.
We do not recall ever seeing such outlandish practices in our long history of governance-oriented investing. Not surprisingly, for the past four annual meetings, Institutional Shareholder Services has assigned Acacia a governance risk score of "9" on a scale where a "10" is the worst possible score and indicates maximum governance risk. What basis does Mr. Graziadio have to "strongly disagree" with our assessment regarding Acacia's corporate governance in the face of ISS's stark indictment? His seeming inability to grasp what acceptable corporate governance practices look like for a public company further cements our belief that he is not qualified to serve on the Board or exert the outsized influence over the Company that exists.
Instead of addressing these urgent governance concerns following our director nominations, the Board doubled down on entrenching tactics with the unilateral appointments of two directors, neither of whom has any public company board experience, to classes that are not up for election at this year's Annual Meeting (the same approach taken when Messrs. Sanders and Walsh were appointed). We believe that the Company's first quarter earnings call on May 1st also goes to show just how out of touch Acacia's leadership has become. Consistent with the lack of accountability that has become commonplace at Acacia, Mr. Graziadio did not even participate on the call, and those representatives who did partake read a prepared script and refused to take any questions from analysts or stockholders. Company representatives disparaged the level of holdings in Acacia stock by individual members of our group and sought to compare them to the holdings of Mr. Graziadio and his family trusts, which is misleading because it fails to consider or acknowledge the NOL poison pill that caps our group's collective ownership at 4.9%. If the Company grants us a waiver to the pill today, we will start making additional purchases tomorrow.
Acacia's criticism of the short sale made by Bradley L. Radoff in his personal account was bizarre since the Company failed to mention it was for 4,000 shares and executed at approximately $40 on March 12, 2012 and closed on March 2, 2018 at approximately $3.50. If anything, it painfully demonstrates the disastrous performance of Acacia's share price under the current regime, which was inadvertently highlighted by President Robert Stewart's awkward statement that "We feel it is more prudent to take a longer view." We remind Mr. Stewart of the long-term record of value destruction at Acacia – stockholders have endured shocking losses over the past one (-34.4%), three (-65.0%), five (-86.6%) and ten-year (-32.4%) periods.3 Acacia's performance has been indisputably abysmal over the near and long term – clearly change is needed. Mr. Radoff's significant purchases of Acacia stock and nomination of two highly qualified independent director candidates signals his commitment to improve the Company for the benefit of all stockholders.
The upcoming Annual Meeting scheduled for June 14, 2018 is a critical opportunity for Acacia stockholders to remove Messrs. Graziadio and Walsh from the Board elect representatives of their own choosing.
The time for change is now – Sidus urges all stockholders to vote the BLUE proxy card today!
Sincerely,
Sidus Investment Management, LLC and BLR Partners LP
Contacts:
Clifford Press
(212) 277-5635
Alfred V. Tobia Jr.
(212) 751-6644
John Ferguson
Paullee
7 years ago
Acacia Research Corporation Issues Letter to Stockholders
Business Wire Business WireMarch 21, 2018
NEWPORT BEACH, Calif.--(BUSINESS WIRE)--
Acacia Research Corporation (ACTG), an industry leader in patent licensing (“Acacia” or the “Company”), today issued a letter to its stockholders in response to a letter from Sidus Investment Management, LLC and BLR Partners LP. The full text of the letter is as follows:
March 21, 2018
Dear Acacia Stockholders:
On March 20, 2018, Sidus Investment Management, LLC (“Sidus”) and BLR Partners LP (“BLR”) issued a letter to the stockholders of Acacia Research Corporation (“Acacia” or the “Company”), in which they publicly announced their intention to nominate two director candidates for election to the Board of Directors at the Company’s upcoming 2018 Annual Meeting of Stockholders.
In their letter, Sidus and BLR misguidedly criticized the strategy that the Company and its Board of Directors have pursued over the last two years, as well as personally attacked Mr. Louis Graziadio, our Executive Chairman. The purpose of this letter is to inform Acacia’s stockholders that the Company’s Board of Directors and management team strongly disagree with the views expressed in the Sidus/BLR letter, which not only reveal a lack of strategic vision on their part, but also contain false and misleading statements with respect to material facts and make baseless allegations that impugn the character, integrity and personal reputation of the Company’s leadership, as described in more detail below.
Acacia’s Board of Directors and Management Have Never Declined to Discuss Matters of Concern to Our Stockholders
Contrary to the assertions made in the Sidus/BLR letter, the Company’s Board of Directors and management have never ignored them or declined to engage in a discussion regarding matters of concern to our stockholders. In fact, in January 2018, Messrs. Graziadio, our Executive Chairman, Robert Stewart, our President, and James Sanders, a member of our Board of Directors, had a telephone conversation with Mike Barone, Sidus’ portfolio manager, at his request, during which they discussed with Mr. Barone the Company’s strategy, among other things. Because Acacia’s representatives were unable to discuss certain matters with Mr. Barone due to confidentiality and Regulation FD concerns, they suggested continuing these discussions immediately after the Company issued its 2017 earnings release, which was issued on February 13, 2018. To our surprise, instead of accepting the Company’s invitation to resume these discussions in a constructive way, Sidus and BLR chose to publicly issue their letter, accusing the Company’s Board of Directors and management of ignoring them, even though they know that is not true.
The Company has discontinued the Q&A portion of its analyst calls because it had proven to have limited utility in communicating with our stockholders. Instead, members of the Company’s Board of Directors and management regularly respond to calls from our investors, which we believe is the better way to communicate with our stockholders.
Sidus’ and BLR’s Critique of Acacia’s Strategy Reveals a “Trader’s Mentality” Focused on Short-Term Returns Rather Than Long-Term Stockholder Value
Turning to the “substantive” points raised in the Sidus/BLR letter, their main area of concern seems to be Acacia’s recent strategy of generating stockholder value through partnering with high-growth technology opportunities. Regrettably, their critique of the Company’s business model reveals both a lack of strategic vision as well as the nearsightedness inherent in a “trader’s mentality” focused on achieving short-term returns rather than maximizing long-term stockholder value.
As Acacia recently disclosed in its 2017 annual report, we continue to experience challenges in the existing patent and licensing environment, including challenges in identifying and acquiring new high-quality patent assets, which will likely reduce the Company’s revenue generating opportunities from new IP portfolios going forward. While the Company’s Board of Directors and management have been working tirelessly to overcome these negative trends, turnarounds are difficult and take time. Nonetheless, contrary to the assertions contained in the Sidus/BLR letter, Acacia has not “transitioned away” from its patent licensing business and has continued to invest in and monetize our existing quality patent assets, as described in our 2017 annual report. In fact, our patent licensing business has generated substantial cash revenues since December 31, 2015. During the last two fiscal years, the Company generated $218.1 million in revenues and cash flows from operations of $59 million, while reducing its fixed G&A related expense run rate by 56%, reducing personnel headcount by 70%, and reducing litigation expenses as a percentage of revenues by 33%, thereby delivering some of the best financial performance in the Company’s history.
Mindful of the challenges facing our patent licensing business, in addition to continuing to monetize our existing IP assets, the Company has pursued a strategy designed to generate additional stockholder value by partnering with high-growth technology companies. We expect that this strategy will enable Acacia to capitalize on cutting-edge technologies by leveraging its experience, expertise, data and relationships developed as a leader in the IP industry. We believe that strategic opportunities for Acacia (including expanding revenues) exist in the areas of artificial intelligence (AI) and machine learning, machine vision, robotics, blockchain, healthcare technology and other potentially disruptive technologies, where our partners can benefit from Acacia’s IP expertise and experience. We believe that Acacia’s knowledge and experience in investing in IP assets uniquely position the Company to capitalize on these strategic opportunities. In order to assist the Board of Directors and management in pursuing this strategy, Acacia has established a strategic review committee to identify, review and evaluate potential strategic opportunities, and has engaged a consultant with substantial experience in technology investing.
Examples of our early execution of this strategy include our investments in Veritone, which Sidus and BLR misguidedly criticize in their letter, and Miso Robotics. Veritone is a leading AI company that has developed a cutting-edge platform for data transformation and analysis that offers commercial applications to clients in a variety of markets, including media and entertainment, legal, compliance and government. Miso leverages robotics and AI technology to increase productivity, reduce costs and drive profitability in the restaurant and food service industries. Marketing research indicates that a virtually unlimited marketplace potential exists in these areas. For example, Forrester Research shows that a $1.2 trillion market for cognitive computing technologies will exist by 2020, while according to the Gartner report, presently there is a nearly $0.5 trillion market for food preparation in the United States and over $2.0 trillion worldwide. By virtue of its early-stage investments in Veritone and Miso, Acacia is well positioned to capitalize on these unique opportunities, which creates a tremendous potential for generating value for Acacia’s stockholders.
In addition, we believe that this strategy will enable Acacia to leverage its IP expertise in other ways. For example, as part of its partnerships with Veritone and Miso, Acacia has entered into IP services agreements with Veritone and Miso, pursuant to which Acacia has agreed to provide IP procurement, prosecution, anti-infringement and other IP-related services to its partners. These arrangements have the potential for generating additional value for Acacia’s stockholders. We also believe that by making the Company financially stronger, our current strategy will enable Acacia to generate better value from prosecuting our existing patents.
Unfortunately, the Sidus/BLR letter indicates that they fail to understand the full potential of Acacia’s partnerships with Veritone and Miso. Rather than focusing on its potential for generating long-term stockholder value, their letter laments the trading volatility that Veritone’s stock has experienced since its IPO was completed in May 2017, the unrealized gains and losses recorded in Acacia’s financial statements for the third and fourth quarters of 2017 due to our mark-to-market accounting for our investment in Veritone, and the decline in Veritone’s stock price since December 31, 2017. The letter also complains about the trading restrictions to which Acacia is currently subject, failing to acknowledge that post-IPO lock-ups and Rule 144 volume limitations are entirely customary for large stockholders that have board representation and could be deemed to be affiliates.
Apparently, Sidus’ and BLR’s unhappiness with the trading restrictions stems from the fact that they prevented Acacia from immediately liquidating its position in Veritone for a quick profit, as Sidus has repeatedly urged the Company to do. What they seem to fail to understand, however – presumably, due to their focus on short-term profits as well as the fact that they have no meaningful operational experience, whether in the technology space or otherwise – is that emerging technology companies typically take time to develop and that real execution and revenue generation take more than just a few quarters to achieve. Also, their letter fails to acknowledge that while the trading volatility of early stage public companies is not uncommon, as of the date of this letter, our investment in Veritone remains in an inception-to-date net unrealized gain position totaling approximately $18 million. The Sidus/BLR letter also demonstrates their failure to understand the simple fact that board representation is necessary for Acacia to shepherd its investment in Veritone and assist its Board of Directors and management as they work to execute on their business plan. The truth is that Acacia’s lock-up is entirely customary and appropriate, given the size of Acacia’s equity stake in Veritone, its representation on the Veritone board and the assistance provided by Acacia to Veritone in preparing for the IPO, and that it is no more restrictive than the lock-ups to which all of the other large stockholders, directors and officers of Veritone are subject.
Sidus’ and BLR’s Allegations Relating to Compensation Practices of Acacia’s Leadership Are Not Supported by Facts
In their letter, Sidus and BLR personally attack Mr. Graziadio for what they describe as Acacia’s “compensation practices.” In particular, their letter states that despite Mr. Graziadio’s undertaking at the time of his appointment as Executive Chairman that he would not receive a salary for his service as Executive Chairman, and despite not being an employee of the Company, Mr. Graziadio received aggregate compensation of $2,417,426 for 2016, consisting of $375,000 paid to Second Southern Corp. (“Second Southern”), a company wholly owned by Mr. Graziadio, an option grant valued at $1,962,422 and a director fee of $80,004. These allegations present the relevant facts in a misleading manner designed to impugn Mr. Graziadio’s integrity and call into question his commitment to the Company.
Prior to his appointment as Executive Chairman on August 1, 2016, Mr. Graziadio served as a member of the Office of the Chairman of Acacia from December 2015 through July 2016. During that period, although he devoted substantial time and effort to Acacia, far exceeding any level that might be considered customary for a director, he received no compensation for his services. Moreover, Second Southern incurred substantial out-of-pocket costs in providing resources (including personnel, facilities and supplies) used by Mr. Graziadio in connection with his duties as a member of the Office of the Chairman. Accordingly, at the time of his appointment as Executive Chairman, the Compensation Committee approved a consulting agreement between Acacia and Second Southern, pursuant to which Acacia paid to Second Southern a one-time payment of $250,000 for services performed and as reimbursement of expenses incurred by Second Southern on behalf of the Company during the period from December 2015 through July 2016, as was disclosed in the Form 8-K filed by Acacia on August 5, 2016. The consulting agreement also provides that Second Southern will provide executive personnel to consult with and assist Acacia and its Board of Directors in connection with the Company’s business, and that Acacia will pay Second Southern an annual fee of $250,000 per year, payable in quarterly installments. Pursuant to this arrangement, Acacia paid to Second Southern two quarterly payments of $62,500 for the period from August 1, 2016 through December 31, 2016, for a total of $375,000 paid in 2016. These quarterly payments and the total amount paid by the Company to Second Southern in 2016 were fully disclosed in the Company’s 2017 proxy statement. Accordingly, the demand for accounting as to these payments contained in the Sidus/BLR letter is unwarranted, and their statements implying that the Company has somehow tried to hide these payments from Acacia’s stockholders are false and misleading.
With respect to the stock options granted to Mr. Graziadio in 2016, while the Sidus/BLR letter states that these options are valued at $1,962,422, it fails to mention that most of this value will not be realized unless and until Acacia’s stock trades above $5.75 per share, the exercise price of the majority of these options (which was at the time of the grant, and continues to be, significantly above Acacia’s stock price), and that most of these options are subject to market-based vesting milestones based on the Company’s stock trading in or above the range from $7.00 to $10.00 per share. These criteria align Mr. Graziadio’s interests in the Company with those of Acacia’s public stockholders. Moreover, these options were granted to Mr. Graziadio by the independent Compensation Committee, based upon the recommendation of Pearl Meyer, the Company’s independent compensation consultant, and their value is well within the recommended range of equity-based incentive compensation for senior executives of similarly situated companies. Obviously, all of the options granted to Mr. Graziadio have been fully disclosed, as have been all of his regular director fees.
As noted above, Acacia has significantly reduced its operating costs over the past two years and has a small management team. As a result, in pursuing its current strategy, the Company has relied on the help of several of our directors, who have worked tirelessly to assist the management team in executing on the Company’s business plan. Since Mr. Graziadio’s appointment as Executive Chairman in August 2016, he has devoted virtually all of his time and effort to Acacia and its business, effectively functioning as acting CEO, overseeing, advising and assisting Acacia’s senior management team and playing the leading role in the formulation and implementation of Acacia’s new strategy, including the planning, negotiation and execution of the Veritone and other investments. Although his role at Acacia has required more than a full time commitment and significant personal sacrifices, he has not received any salary for his work, consistent with the promise that he made to Acacia’s stockholders at the time of his appointment. Moreover, Mr. Graziadio, along with members of his immediate family and family trusts, has acquired in excess of one million Acacia shares in the open market, which shows his strong commitment to Acacia’s success and further aligns his interests with those of Acacia’s public stockholders.
The Sidus/BLR letter also criticizes Acacia for granting profit interests in AIP Operation LLC (“AIP”), an indirect subsidiary of the Company, to certain of the Company’s directors and officers in February 2017. In particular, the letter alleges that the Company established AIP “to receive contributions of corporate assets (without providing any consideration)” and describes the grant of the profit interests as an attempt by insiders to profit at the expense of Acacia’s stockholders. These baseless allegations are clearly intended to disparage and impugn the character, integrity and personal reputation of the Company’s leadership.
What the Sidus/BLR letter fails to mention is that the profit interests in AIP were granted pursuant to a compensation program developed by Pearl Meyer, the Company’s independent compensation consultant, in order to incentivize and compensate the members of the Company’s management who are expected to provide IP and other services to AIP and Veritone (as described above). The profit interests were designed to provide a highly-focused compensation tool directly aligned with the success of the Veritone investment. The only asset that has been contributed by Acacia to AIP is the Veritone 10% Warrant. The holders of the profit interests will not receive any value unless and until Acacia realizes an actual return on the Veritone 10% Warrant, thereby benefitting all of Acacia’s stockholders. The terms and conditions of the profit interests and their allocation among the Acacia executives were approved by the Compensation Committee, based upon the recommendation of Pearl Meyer, and were subsequently approved by the full Board of Directors. Moreover, the grant of the profit interests and their material terms and conditions were fully disclosed in the Form 8-K filed by the Company on February 22, 2017.
The Company’s Board of Directors and management are deeply concerned about the false accusations and empty threats contained in the Sidus/BLR letter. We will continue to manage Acacia’s business and execute on its strategic plan in order to maximize value for our stockholders. We will also carefully review and consider the director candidates nominated by Sidus and BLR. However, the “trader’s mentality” and lack of strategic vision demonstrated by the Sidus/BLR letter raise serious concerns that the true objective of their attempt to seek board representation is not to maximize long-term value for all of Acacia’s stockholders, but to create short-term gains for themselves. In these circumstances, it seems unlikely that their director candidates would be in a position to make a valuable contribution to Acacia’s growth for the benefit of all of its stockholders.
Lastly, the Sidus/BLR letter indicates that they have been advised that the Company’s 2018 Annual Meeting of Stockholders will be held on June 7, 2018 and that the record date for the Annual Meeting is April 9, 2018. These statements are inaccurate. The date of the Annual Meeting and the record date have not been determined yet. The Company will separately announce the date and location of the Annual Meeting and the record date for the Annual Meeting once they have been determined.
Thank you for your understanding, patience and support.
Sincerely yours,
Robert B. Stewart, Jr.
President
ABOUT ACACIA RESEARCH CORPORATION
Founded in 1993, Acacia Research Corporation (ACTG) is an industry leader in patent licensing and partners with inventors and patent owners to unlock the financial value in their patented inventions. Acacia bridges the gap between invention and application, facilitating efficiency and delivering monetary rewards to the patent owner. Acacia also leverages its patent expertise and background to partner with emerging disruptive technologies such as Artificial Intelligence, Robotics and Blockchain.
Paullee
7 years ago
Sidus Investment Management and BLR Partners Issue Letter to Stockholders of Acacia Research Corporation
PR Newswire PR NewswireMarch 20, 2018
Troubled by Destruction of Value and Change in Strategic Direction Under Current Leadership
Announce Nomination of Clifford Press and Alfred V. Tobia Jr. for Election at Upcoming 2018 Annual Meeting
NEW YORK, March 20, 2018 /PRNewswire/ -- Sidus Investment Management, LLC and BLR Partners LP (together, "Sidus," "we" or "us"), collectively one of the largest stockholders of Acacia Research Corporation ("Acacia" or the "Company") (ACTG), with aggregate ownership of approximately 4.1% of the Company's outstanding shares, today issued a letter to Acacia's stockholders. In the letter, Sidus confirmed that it has formally nominated two independent, highly-qualified candidates, Clifford Press and Alfred V. Tobia Jr., for election to the Company's Board of Directors (the "Board") at the Company's upcoming 2018 annual meeting of stockholders (the "2018 Annual Meeting"). The full text of the letter follows:
March 20, 2018
Dear Fellow Acacia Stockholders:
We collectively beneficially own approximately 4.1% of the outstanding shares of Acacia, making us one of the Company's largest stockholders. We have repeatedly attempted to privately address our concerns with the Company in a constructive manner. Unfortunately, the incumbent Board and management team have elected to ignore us (and other stockholders as demonstrated by the termination of the Q&A portion of the Company's conference calls and failure to participate in broker-sponsored research conferences or non-deal road shows), leaving us little choice but to nominate a competing slate of director candidates for election at the upcoming 2018 Annual Meeting.
Our concerns with Acacia's governance and strategic direction have coincided with the appointment of Louis Graziadio as Executive Chairman of the Board on August 1, 2016 and the subsequent shift in Acacia's business model. In fact, since his appointment as Executive Chairman, Acacia's stock price has declined by approximately 36% while the NASDAQ Composite Index has appreciated by approximately 30%.1
At the time of Mr. Graziadio's appointment as Executive Chairman, the Company disclosed that he would "not receive a salary for his service as Executive Chairman" other than what he would be entitled to as a director, and that Second Southern Corp. ("Second Southern"), a company wholly owned by Mr. Graziadio and which he serves as President, would be entitled to certain payments as "reimbursement" for its costs and expenses (including personnel, facilities and supplies) incurred in connection with Mr. Graziadio's performance of his duties.2 We demand an accounting as to the costs and expenses actually incurred by Second Southern. When reviewing the Company's proxy statement for the 2017 annual meeting of stockholders, we were astonished to see that, despite not being an employee of the Company, Mr. Graziadio managed to obtain $2,417,426 in aggregate compensation for fiscal 2016, consisting of $375,000 paid to Second Southern, an option grant valued at $1,962,422 and a director fee of $80,004.
We are also concerned by the recent appointment of James Sanders to the Board. Since October 1998, Mr. Sanders has served as secretary and general counsel of Boss Holdings, Inc., a company of which Mr. Graziadio serves as Chairman and Chief Executive Officer. We question whether Mr. Sanders is truly independent.
Furthermore, we are troubled that, following Mr. Graziadio's appointment, the Company established an indirect subsidiary, AIP Operation LLC ("AIP"), to receive contributions of corporate assets (without providing any consideration) and adopted a corresponding profits interest plan pursuant to which an appreciation in these contributed assets provides additional compensation to certain of the Company's directors and officers. For example, according to the Company's Form 10-K for fiscal 2017, the Company contributed the Veritone 10% Warrant, which provides for the issuance of 809,400 shares of common stock of Veritone, Inc. ("Veritone") at an exercise price of $13.6088 per share, to AIP, and Acacia retains 60% of the membership interests in AIP with certain of its officers and directors owning the remaining 40% through profits interests. We do not believe that it is appropriate for stockholders to take the risk of loss on the capital invested while insiders receive such a significant percentage of the upside if it succeeds.
In addition to the compensation practices, we are concerned about the new business model that the incumbent Board adopted under Mr. Graziadio's leadership, described as "an increased focus on partnering with high-growth and potentially disruptive technology opportunities which will include… those in the areas of Artificial Intelligence (AI) and machine learning, machine vision, robotics and blockchain technologies."3
Based on publicly available information, it does not appear that either management or the Board of Acacia has any demonstrated record of success in technology investing that gives us confidence in the Company's ability to execute this particular strategy. The Company's first foray into this strategy saw Acacia commit nearly $54 million to an investment in Veritone – a cloud-based AI technology company. In 3Q17 Acacia reported an unrealized gain of $159 million on this investment, followed by an unrealized loss of $104 million in the following quarter. Based on the price of Veritone stock today, Acacia has sustained a further unrealized loss of $31 million.4 We are concerned that Acacia has such a high level of exposure to such a volatile stock, which has traded between $7.76 and $74.92 during the past year – especially because the Company entered into a lock-up agreement that prevented sales of Veritone stock until February 15, 2018 and continues to be subject to Rule 144 volume limitations that inhibit Acacia's ability to liquidate its position.
Although Acacia has a classified Board and only two directors are up for election at the 2018 Annual Meeting, we believe that stockholders have an opportunity to effect meaningful change because Mr. Graziadio is one of the directors up for election at the 2018 Annual Meeting. We have been advised that Acacia has notified Broadridge Financial Solutions of a April 9th record date and a June 7th meeting date for the 2018 Annual Meeting. It is crucial that stockholders take whatever steps may be needed with their custodial banks and brokerage firms to ensure that they have the ability to vote their shares at the 2018 Annual Meeting.
Our director nominees are:
Clifford Press is a Managing Member of Oliver Press Partners, LLC, an investment advisory firm. He previously served as a General Partner of Hyde Park Holdings, Inc., a private equity investment firm that he co-founded. Mr. Press currently serves as a director of several public companies including Stewart Information Services Corporation, Quantum Corporation and Drive Shack, Inc. He also previously served as a director of public companies Coherent Inc. and SeaBright Holdings, Inc. We believe that Mr. Press's financial expertise and over 25 years of experience investing in a broad range of public and private companies, together with his governance oriented public company board experience, makes him well qualified to serve on the Board.
Alfred V. Tobia Jr. is a Managing Member of Sidus Investment Management, LLC, an investment firm he co-founded, and has been a technology investor for the past 16 years. He previously served as Senior Managing Director and Supervisory Analyst at Banc of America Securities LLC (formerly Montgomery Securities). He also was a Senior Analyst at Wertheim Schroeder & Co., where he was twice named to the Wall Street Journal's Analyst All-Star team for stock selection. Mr. Tobia currently serves as a director of Harte Hanks, Inc. We believe Mr. Tobia's expertise in corporate finance, strategic planning and the capital and credit markets, coupled with his executive experience through the management of an investment fund, well qualifies him to serve on the Board.
We strongly believe that the Company's stockholders will benefit from the addition of Messrs. Press and Tobia to the Board and we look forward to providing stockholders with an alternative to the status quo at the upcoming 2018 Annual Meeting.
Regards,
Alfred V. Tobia Jr.
Sidus Investment Management LLC
Bradley L. Radoff
BLR Partners LP
Contacts
Clifford Press
(212) 277-5635
Alfred V. Tobia Jr.
(212) 751-6644
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
Sidus Investment Management, LLC, together with the other participants named herein (collectively, "Sidus"), intends to file a preliminary proxy statement and accompanying proxy card with the Securities and Exchange Commission ("SEC") to be used to solicit votes for the election of its slate of director nominees at the 2018 annual meeting of stockholders of Acacia Research Corporation, a Delaware corporation (the "Company").
SIDUS STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR.
The participants in the proxy solicitation are anticipated to be Sidus Investment Partners, L.P. ("Sidus Partners"), Sidus Double Alpha Fund, L.P. ("Sidus Double Alpha"), Sidus Double Alpha, Ltd. ("Sidus Double Alpha Offshore"), Sidus Advisors, LLC ("Sidus Advisors"), Sidus Investment Management, LLC ("Sidus Management"), Michael J. Barone, Alfred V. Tobia Jr., BLR Partners LP ("BLR Partners"), BLRPart, LP ("BLRPart GP"), BLRGP Inc. ("BLRGP"), Fondren Management, LP ("Fondren Management"), FMLP Inc. ("FMLP"), Bradley L. Radoff and Clifford Press.
As of the date hereof, Sidus Partners directly beneficially owns 167,448 shares of common stock, par value $0.001 per share (the "Common Stock"), of the Company. As of the date hereof, Sidus Double Alpha directly beneficially owns 458,461 shares of Common Stock. As of the date hereof, Sidus Double Alpha Offshore directly beneficially owns 209,967 shares of Common Stock. As of the date hereof, 194,124 shares of Common Stock were held in an account to which Sidus Management serves as the sub-advisor (the "Managed Account"). Sidus Advisors, as the general partner of each of Sidus Partners and Sidus Double Alpha, may be deemed to beneficially own the (i) 167,448 shares of Common Stock owned directly by Sidus Partners and (ii) 458,461 shares of Common Stock owned directly by Sidus Double Alpha. Sidus Management, as the investment manager of each of Sidus Partners, Sidus Double Alpha and Sidus Double Alpha Offshore, and as the sub-advisor of the Managed Account, may be deemed to beneficially own the (i) 167,448 shares of Common Stock owned directly by Sidus Partners, (ii) 458,461 shares of Common Stock owned directly by Sidus Double Alpha, (iii) 209,967 shares of Common Stock owned directly by Sidus Double Alpha Offshore and (iv) 194,124 shares of Common Stock held in the Managed Account. Each of Messrs. Barone and Tobia, as a Managing Member of Sidus Management, may be deemed to beneficially own the (i) 167,448 shares of Common Stock owned directly by Sidus Partners, (ii) 458,461 shares of Common Stock owned directly by Sidus Double Alpha, (iii) 209,967 shares of Common Stock owned directly by Sidus Double Alpha Offshore and (iv) 194,124 shares of Common Stock held in the Managed Account. As of the date hereof, BLR Partners directly beneficially owns 1,046,000 shares of Common Stock. BLRPart GP, as the general partner of BLR Partners, may be deemed to beneficially own the 1,046,000 shares of Common Stock owned directly by BLR Partners. BLRGP, as the general partner of BLRPart GP, may be deemed to beneficially own the 1,046,000 shares of Common Stock owned directly by BLR Partners. Fondren Management, as the investment manager of BLR Partners, may be deemed to beneficially own the 1,046,000 shares of Common Stock owned directly by BLR Partners. FMLP, as the general partner of Fondren Management, may be deemed to beneficially own the 1,046,000 shares of Common Stock owned directly by BLR Partners. Mr. Radoff, as the sole shareholder and sole director of each of BLRGP and FMLP, may be deemed to beneficially own the 1,046,000 shares of Common Stock owned directly by BLR Partners. As of the date hereof, Mr. Press does not beneficially own any shares of Common Stock.
1 Calculated from August 1, 2016 to March 19, 2018.
2 Acacia Form 8-K filed on August 5, 2016.
3 Acacia press release dated February 13, 2018.
4 Calculated as of March 19, 2018.
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