Star Equity Fund, LP (“Star Equity Fund” or “we”) is an investment
fund seeking to unlock shareholder value and improve corporate
governance at its portfolio companies. As a 5.1% shareholder of
Firsthand Technology Value Fund, Inc. (Nasdaq: SVVC) (“SVVC” or the
“Company”), we have nominated two highly qualified candidates for
election to the Company’s board of directors (the “Board”) at the
Company’s 2023 Annual Meeting of Shareholders (“2023 Annual
Meeting”).
The SVVC shareholders have long suffered value
destruction during the tenure of the Company’s incumbent Board of
directors; thus, we have concluded that significant change to the
Board is necessary to create value for all shareholders. Because of
the entrenchment of the incumbent Board through the Company’s
classified Board structure, SVVC shareholders are only able to run
a minority slate (currently expected to be two candidates) for
election at the 2023 Annual Meeting. We have nominated two highly
qualified candidates for election to the Board at the 2023 Annual
Meeting, Hannah M. Bible, and Robert G. Pearse, who are committed
to acting in the best interests of all shareholders. We are fully
prepared to take this matter to a shareholder vote at the 2023
Annual Meeting, which we expect to be held on the Company’s typical
timeframe in the second quarter of 2023.
The Company’s performance has been
abysmalDuring the incumbent Board’s tenure, SVVC
shareholders have long endured abysmal financial and investment
performance in addition to poor corporate governance. The Fund’s
unrealized losses on its investment portfolio stood at $95 million
at the end of Q3 2022, a staggering 67% decline in value versus the
cost basis of these investments. Also, SVVC’s share price has
declined approximately 93% over the last 5 years and it currently
trades at a 79% discount to the Company’s stated NAV of $5.58 per
share as of the end of Q3 2022, a sign of extreme skepticism of
SVVC’s stated NAV.
Meanwhile, the Company has maintained what we
view to be an egregiously anti-shareholder investment management
agreement (the “Management Agreement”) with Firsthand Capital
Management (“FCM”), under which a 2% management fee is
assessed annually on the Company’s gross assets, irrespective of
stock price performance. We believe the Management
Agreement’s fee structure as well as the Company’s broader
relationship with FCM represent a clear conflict of interest and
has been a longtime source of value destruction. The Management
Agreement is renewed annually by the Board and shareholders’
attempts to seek change to the Management Agreement have been
thwarted by the Company’s anti-shareholder rules. We believe the
incumbent Board has not acted consistent with its fiduciary duty to
shareholders. To us, the Board seems complacent to maintain this
trajectory despite significant displays of shareholder
frustration.
SVVC shareholders are frustrated and
have suffered long enoughThis value destruction has been
met with significant shareholder dissent. At the Company’s 2022
Annual Meeting, 65% of votes cast voted WITHHOLD on the election of
the sole incumbent director up for election, and at its 2021 Annual
Meeting, 59% of votes cast voted WITHHOLD on the election of the
two incumbent directors up for election. These levels of
disapproval are alarming and would trigger director resignation
policies at many companies. Furthermore, at the Company’s 2022
Annual Meeting, over 70% of votes cast voted FOR a binding
shareholder-submitted proposal regarding the termination of the
Management Agreement. Despite the overwhelming level of
shareholder frustration, the proposal did not pass as the Company’s
proxy statement declared that all abstentions and broker non-votes
would effectively count as votes AGAINST that proposal
specifically. This proposal was also put forth at the 2021 Annual
Meeting, where 62% of votes cast voted FOR. Moreover, at the 2020
Annual Meeting, a non-binding shareholder-submitted proposal
requesting the Board seek and pursue any and all measures to
enhance shareholder value was submitted and 70% of votes cast voted
FOR. Change clearly cannot come soon enough for SVVC
shareholders.
Unfortunately, the incumbent Board has
undertaken significant efforts to further entrench itself and
restrict shareholder rights. The Company’s classified board
structure discourages director accountability and makes it
difficult for shareholders to influence Board composition. In
addition, the Board erected a substantial barrier by amending the
Company’s bylaws in October 2019 to ensure that in a contested
election directors are elected by vote of a majority of outstanding
shares, unlike the plurality voting standard used for uncontested
director elections. The majority of the shares outstanding voting
standard is extremely unusual for contested elections, where
typically directors are elected by a plurality vote, and presents a
significant hurdle for shareholder-supported candidates to win
election to the Board. Based on the bylaws, we expect that
the incumbent directors, even if they receive fewer votes than
shareholder-supported candidates, will be deemed by the Company to
remain on the Board unless shareholder-supported candidates receive
FOR votes from a majority of the shares outstanding. In
our view, this bylaws provision was adopted specifically to
frustrate shareholders seeking change to the Board and entrench the
incumbent directors. If the Company did not intend as much, we
invite them to clarify publicly what will happen if incumbent
directors receive fewer FOR votes than shareholder-supported
candidates, or to amend the bylaws to adopt market standard voting
for contested elections.
In addition, the incumbent Board has been
particularly uncooperative in facilitating shareholder
participation at the Company. Last year, a fellow shareholder,
Scott Klarquist, filed a proxy statement with the SEC in an attempt
to run as a director candidate at the 2022 Annual Meeting. However,
his candidacy was vaguely rejected by the Company, which said he
“failed to provide all of the information required.” As Mr.
Klarquist notes in his open letter to shareholders on March 11,
2022, he found himself “stonewalled by the company ever since” he
declared his intent to solicit proxies, “based on what [he
considered] spurious, bad-faith arguments.” We have also
experienced similar frustrations with the Company. Even though we
requested the Company’s nomination questionnaire on November 14th,
we did not receive the questionnaire for over two weeks despite
multiple follow-ups. We only received the Company’s nomination
questionnaire on December 2nd after we instructed our attorney to
send a formal demand letter on December 1st. We believe these signs
are indicative of SVVC’s attempt to stifle shareholder interests
and rights by obstructing the nomination process.
Star Equity Fund remains resolute in its opinion
that a change in Board composition is vital to altering corporate
governance practices, improving financial results, and ultimately
unlocking shareholder value at SVVC. We believe long-suffering SVVC
shareholders deserve better, and we aim to give them an opportunity
for much-needed change on the Board at the 2023 Annual Meeting.
CERTAIN INFORMATION CONCERNING THE
PARTICIPANTS
Star Equity Fund, LP (“Star Equity Fund”),
together with the other participants named herein (collectively,
“Star Equity”), intends to file a preliminary proxy statement and
accompanying WHITE proxy card with the Securities and Exchange
Commission (“SEC”) to be used to solicit votes for the election of
its slate of highly qualified director nominees at the 2023 annual
meeting of stockholders of Firsthand Technology Value Fund, Inc., a
Maryland corporation (the “Company”).
STAR EQUITY 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.
The participants in the proxy solicitation are
anticipated to be Star Equity Fund, Star Equity Fund GP, LLC (“Star
Equity Fund GP”), Star Value, LLC (“Star Value”), Star Equity
Holdings, Inc. (“Star Equity Holdings”), Star Investment
Management, LLC (“Star Investment Management”), Jeffrey E.
Eberwein, Hannah M. Bible, and Robert G. Pearse.
As of the date hereof, Star Equity Fund
beneficially owns directly 350,000 shares of common stock, par
value $0.001 per share, of the Company (the “Common Stock”). Star
Equity Fund GP, as the general partner of Star Equity Fund, may be
deemed to beneficially own the 350,000 shares of Common Stock owned
directly by Star Equity Fund. Star Value, as the sole member of
Star Equity Fund GP, may be deemed to beneficially own the 350,000
shares of Common Stock owned directly by Star Equity Fund. Star
Equity Holdings, as the parent company of Star Equity Fund, may be
deemed to beneficially own the 350,000 shares of Common Stock owned
directly by Star Equity Fund. Star Investment Management, as the
investment manager of Star Equity Fund, may be deemed to
beneficially own the 350,000 shares of Common Stock owned directly
by Star Equity Fund. Mr. Eberwein, as the Portfolio Manager of Star
Equity Fund, may be deemed to beneficially own the 350,000 shares
of Common Stock owned directly by Star Equity Fund. As of the date
hereof, none of Ms. Bible or Mr. Pearse, beneficially owns any
Common Stock.
About Star Equity Fund, LPStar
Equity Fund, LP is an investment fund affiliated with Star Equity
Holdings, Inc. Star Equity Fund seeks to unlock shareholder value
and improve corporate governance at its portfolio companies.
About Star Equity Holdings,
Inc.Star Equity Holdings, Inc. is a diversified
holding company with three divisions: Healthcare, Construction, and
Investments.
For more information contact: |
|
Star Equity Fund, LP |
The Equity
Group |
Jeffrey E. Eberwein |
Lena Cati |
Portfolio Manager |
Senior Vice President |
203-489-9501 |
212-836-9611 |
jeff.eberwein@starequity.com |
lcati@equityny.com |
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