Investor Group Owning Over 40% of Leaf Group Releases List of Topics It Expects Management to Address at the H.C. Wainwright ...
September 14 2020 - 5:02PM
Business Wire
Investors owning over 40% of the issued and outstanding shares
of Leaf Group Ltd. ("Leaf Group" or the "Company") (NYSE: LEAF) –
including Osmium Partners LLC, PEAK6 Investments LLC, Boyle Capital
Opportunity Fund, LP, Oak Management Corp., Generation Capital
Partners II LP, Generation Partners II LLC, Spectrum Equity
Investors V, L.P. and Spectrum V Investment Managers’ Fund, L.P.
(together, the "Investor Group") – today issued the following
statement:
“We expect Leaf Group’s management, including its CEO, Sean
Moriarty, to address the following critical topics during today’s
H.C. Wainwright 22nd Annual Global Investment Conference. We
encourage conference attendees to raise these questions if they are
not proactively discussed during the Company’s prepared
remarks:
- Do you respect the views of your shareholders and, if so, which
of your shareholders are providing input that Leaf Group should
remain an independent public company? Why do you believe that 60%
of the Company’s shareholders – all of whom have invested millions
of capital in the Company – are wrong about the need for change and
that you and the Board are right?
- What should prospective investors make of the Board showing a
lack of engagement with a 40% ownership group in addition to the
other top shareholders that have contacted you? If a majority of
shareholders are ignored, how should prospective smaller
shareholders feel they will be treated by a board and management
team that ignores, disadvantages and is adversarial to owners of
the Company?
- Can you provide an example of another company that successfully
resisted a call for change from 60% of the shareholders and, after
opposing their views, was nevertheless able to rebuild credibility
and create value for shareholders?
- The Company referred to its former Board member, Charles
“Lanny” Baker, as an independent director during the time he was
Chairman of the Company’s Strategic Review Committee and a member
of the Audit Committee. When challenged on this determination by
this Investor Group, Mr. Baker was removed from the Audit Committee
and has now resigned from the Board. When the Board added Mr. Baker
to the Audit Committee, did it know he was ineligible under NYSE
rules because he was not independent? If they did not know that,
why did they not know that? Why did it take a shareholder to point
out the direct violation of the NYSE rule? Would the Company ever
have realized this violation and material misstatement on its own?
How did the Nominating and Corporate Governance Committee of the
Board miss it?
- How should prospective investors judge the past execution of
management and the future prospects when Society6 and its closest
comp, Redbubble, were tied in revenue in 2015 as Mr. Moriarty took
over as CEO? Since that time:
- Redbubble now has a market value of $800 million vs. a market
cap of $130 million for Leaf Group
- Redbubble trades at a valuation of 2.00x EV/Sale vs. a
valuation of 0.60x EV/Sales for Leaf Group – a persistent discount
that has existed for years
- Redbubble generates in excess of $2 million in revenue per
employee vs. revenue per employee of $350,000 for Leaf Group
- Redbubble is estimated to achieve EBITDA margins of 10-15% in
the current year vs. the 5% EBITDA margins for Leaf Group projected
in its guidance for 2022
- Did management expect that Redbubble would dramatically
outperform Society6? If not, what has Redbubble done well that
Society6 has failed to do?
- How does the Board think about shareholder alignment when the
entire Board owns less than 4% of Leaf Group stock while
shareholders have been diluted by nearly 50% and have lost 49% of
their investment over Mr. Moriarty’s tenure?”
For more information, please visit www.LiberateLeaf.Group.
About Osmium Partners
We seek to generate strong, risk-adjusted returns by investing
in undervalued, small capitalization companies across equity
markets. Our Osmium 8 research process is based on eight simple
factors involving factors such as balance sheet strength, aligned
interests, attractive reinvestment opportunities, a low valuation,
and reasonable growth prospects. As engaged owners, we actively
discuss corporate strategy and capital structure with management
teams and boards of directors. We prefer to conduct these
discussions in private, but we will publicly debate important items
with all shareholders when appropriate.
About PEAK6
PEAK6 uses technology to find a better way of doing things. The
company's first tech-based solution was developed in 1997 to
optimize options trading and, over the past two decades, the same
formula has been used across a range of industries, asset classes
and business stages to consistently deliver superior results.
Today, PEAK6 seeks transformational opportunities to provide
capital and strategic support to entrepreneurs and forward-thinking
businesses, helping to unlock potential and activate what is into
what ought to be. PEAK6's core brands include: PEAK6 Capital
Management, Apex Clearing, National Flood Services and Evil
Geniuses. Learn more at www.PEAK6.com or follow us on LinkedIn.
About Boyle Capital Opportunity Fund
Boyle Capital Opportunity Fund, LP is a value-oriented
investment partnership. We manage a focused portfolio of deeply
undervalued securities and actively engage with the company's
management and board of directors to unlock shareholder value over
the long-term.
About Oak Investment Partners
Oak Investment Partners was founded in 1978. Since that time,
the firm has invested $9 billion in over 525 companies around the
world, earning the trust of entrepreneurs with a senior team that
delivers steady guidance, deep domain expertise and a consistent
investment philosophy. We are involved in the formation of
companies, fund spinouts of operating divisions and technology
assets, and provide growth equity to mid- and late-stage private
businesses and to public companies through PIPE investments. These
companies are concentrated in the five major sectors that fuel the
most disruptive growth in our world today: Information Technology,
FinTech, Internet and Consumer, Healthcare Services, and Clean
Energy.
About Generation Partners
Founded in 1995, Generation Partners provides equity capital to
growth companies through buyout and growth equity investments.
About Spectrum Equity
Spectrum Equity is a leading growth equity firm providing
capital and strategic support to innovative companies in the
information economy. For over 25 years, the firm has partnered with
proven entrepreneurs and management teams to build long-term value
in market-leading internet, software and information services
companies. Representative investments include Ancestry, Bats Global
Markets, Definitive Healthcare, GoodRx, Grubhub, Lynda.com, Origami
Risk, SurveyMonkey and Verafin. For more information, including a
complete list of portfolio investments, visit
www.spectrumequity.com.
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Sloane & Company Dan Zacchei / Joe Germani
dzacchei@sloanepr.com / jgermani@sloanepr.com
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