LAS
VEGAS, April 5, 2022 /PRNewswire/ -- Stephen J.
Cloobeck, a successful entrepreneur and substantial shareholder in
Playstudios Inc. ("Playstudios" or "the Company"), today released a
letter to the Company's Board of Directors advocating for the
removal of Chairman and Chief Executive Officer Andrew Pascal and his management team due to an
erosion in shareholder value under their watch, and a lack of
confidence they can execute the Company's strategy.
Full text of Mr. Cloobeck's letter to the Board of
Playstudios follows below:
April 5, 2022
PLAYSTUDIOS, Inc.
10150 Covington Cross Drive
Las Vegas, NV 89144
Attn: Board of Directors
Ladies and Gentlemen:
I write on behalf of myself, as a substantial shareholder of
Playstudios ("Playstudios" or "the Company"), as well as fellow
shareholders who like me are frustrated with the direction of the
Company under its current management. I implore you to take
immediate action and replace Chairman and Chief Executive Officer
Andrew Pascal and his management
team before shareholder value is eroded further than it has been
already. Under Mr. Pascal, the company has proven time and again
that it overpromises and underdelivers on critical product,
revenue, and profit goals.
Is it any wonder the company's stock has not only underperformed
the market, but also its closest competitors? One commentator
called Playstudios "One of (the) Worst-Performing De-SPACed
Companies Over Past Year," and that was last August, before the
stock plummeted even further. Another, more recently in February,
wrote a commentary titled, "Getting Played By Playstudios." Not
exactly a public vote of confidence in management.
I and other shareholders are also curious, and the SEC might be
too, about how Mr. Pascal profited by selling high into last year's
SPAC transaction, then proceeded to miss revenues and lower
guidance right out of the gate, cratering the stock. Now, with the
stock scraping the bottom thanks to Mr. Pascal's mismanagement of
the company, he is a buyer again at prices ranging from
$4 to $5. Has the Board taken any measures to ensure
that he is not trading on privileged information that other
shareholders are lacking?
Most recently in what some might call his latest act of
financial malpractice, Mr. Pascal has chosen to squander the
company's cash on a misguided buyback of outstanding warrants that
ARE UNDERWATER by more than half of their exercise price of $11.50!
This, despite Mr. Pascal saying on the February earnings call, "we
maintain our belief that the best use of our capital is to deploy
it into strategic growth opportunities as opposed to purchasing our
own stock." What does he think warrants are if not the right to
purchase stock?
Were this the only act of mismanagement, it might be excused as
a rookie mistake for someone with limited experience running a
public company. But it's not. Of equal concern is his pattern of
inflated revenue projections and failed product delivery promises
that are undermining confidence that the management team, including
Mr. Pascal, can execute the Company's strategy. By way of example,
when the Company first announced it would go public in a
$1.1 billion merger with a special
purpose acquisition company in February
2021, management told shareholders in an investor
presentation that it expected 2021 revenues of $328 million, and an estimated $435.2 million in 2022. These projections caused
the stock to trade at a high of more than $10 almost a year ago, double the current
price.
It's a different story today: Instead of $328 million, 2021 revenues were a disappointing
$287 million. And without disclosing
the diminished expectations, the company said in its February
earnings call that 2022 revenues would instead come in at an
underwhelming $305 million to
$325 million, far below the previous
guidance of $435.2 million. Rather
than owning up to management's failure, Mr. Pascal chose to
gaslight shareholders, pronouncing on the call, "our top line
results continue to outpace the broader market," and "Our revenue
growth has generally outpaced the market." What market is he
talking about?
It's the same story of unmet promises and lowered guidance with
EBITDA. In its February 2021 investor
presentation, the Company claimed it would achieve adjusted EBITDA
in 2021 of $21.8 million, and
$89.9 million in 2022. Wrong again.
Management now says it expects 2022 adjusted EBITDA "in the range
of $40.0 million to $50.0 million," which would barely beat 2021,
which itself plummeted from the $58
million produced in 2020. This is not what the Company's
shareholders were led to expect, nor what they deserve, when they
invested in the company based upon the representations of the Board
and management.
In yet another management blunder, the Company has been opaque
at best about the bungled release of its Kingdom Boss game, a game
that Mr. Pascal once claimed would produce annual revenues north of
$60 million, while gushing that it
was "an innovative and beautifully executed RPG game that brings
the dynamism of rewards to the $6
billion vertical." Now, after suspending development of the
game, management plans to take a charge that will likely be close
to $9 million and write it off. In
the February earnings call, Mr. Pascal said, "the game has
struggled to achieve all the criteria that were established for
wholescale launch," and "we really struggled to get all the metrics
to a place where we felt like the product was healthy and
investible."
What would those "criteria" and "metrics" be? Who knows, the
Company has never been specific about the issues. Why would
management pull the plug on a game that has actually garnered
decent user reviews and a 4.5 star ranking on the Apple App Store,
and a similar ranking on Google Play? What is management hiding
about this fiasco?
As noted above, this is just a summary but by no means the only
examples of the mismanagement under Mr. Pascal and his team. He has
fumbled on execution and shareholders are paying the price. I am
writing to the Board because it is your responsibility to assess
the overall direction and strategy of the business and supervise
and evaluate the CEO. I believe the facts show that Mr. Pascal has
not performed. I am writing to request that the Board do the right
thing and replace Mr. Pascal with someone who can restore
confidence that this Company is on a path for success.
Sincerely,
Stephen J. Cloobeck
About Stephen J.
Cloobeck
Stephen J. Cloobeck is a self-made entrepreneur with more than
thirty years' experience across every aspect of hospitality design,
development, and deployment. As the founder and former CEO and
chairman of Diamond Resorts International – a business that grew to
become the second-largest vacation-ownership company worldwide with
more than four hundred properties across thirty-three countries in
its portfolio – Cloobeck made a name for himself as an advocate for
radical customer service, what he calls embracing the "Meaning of
Yes". Diamond was sold to Apollo Global Management in 2016, then
sold by Apollo in 2021 to Hilton Grand Vacations. For his
commitment to serving the hospitality industry and expanding its
economic impact nationwide, Cloobeck was appointed by former
Commerce Secretary Gary Locke to
serve as the inaugural chairman of the board in Brand USA Inc., a US government-formed nonprofit
corporation with the sole mission of promoting travel to
the United States. As Brand
USA's leading voice, Cloobeck
coordinated with the Department of Homeland Security, the
Department of State, the Department of Commerce, Congress, the
White House, and leading American business in a first-ever effort
to efficiently, effectively, and economically make the United States a more welcoming and
accessible international travel destination for millions of
would-be visitors around the globe. Visit
https://stephenjcloobeck.com/ for additional information.
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SOURCE Stephen J. Cloobeck