Current Board has proven itself incapable of
being credible stewards of capital or proper corporate
governance
SilverBow trades at a 50% discount to peers
& continues to pursue dilutive transactions, while maintaining
the industry's only poison pill
NEW
YORK, Nov. 30, 2023 /PRNewswire/ -- Riposte
Capital LLC, one of the largest shareholders of SilverBow
Resources, Inc. (NYSE: SBOW), owning approximately 6.7% of the
Company's outstanding common stock, today sent the following letter
to SilverBow's Board of Directors.
***
SilverBow Resources, Inc.
920 Memorial City Way, Suite 850
Houston,
TX 77024
Attention: Board of Directors
Dear Sean and Members of the Board,
As significant and constructive shareholders of SilverBow
Resources, Inc. (NYSE: SBOW), owning approximately 6.7% of the
Company's outstanding common stock, we recognize the material
unrealized value in SilverBow's assets across an important basin,
and can no longer just hope that you will do better.
You have proven yourselves incapable of being credible stewards
of capital or corporate governance. It is clear to us, and likely
many others in the investment community, that you have no interest
in enabling shareholders to exercise their right to participate in
the strategic decision-making process. You also appear to have no
intention of engaging in good faith discussions with potential
suitors.
On June 14, 2023, as one of the
largest shareholders in SilverBow, we called on you to take
decisive and common sense actions to unlock shareholder value,
positioning the Company for long term success. Regrettably, you
chose a different path – one that has eroded hundreds of millions
of dollars in shareholder capital, while further siloing and
backing the Company into a corner.
You have continued to pursue a value destructive strategy, which
has:
- Further entrenched the Board;
- Significantly depressed SilverBow's share price;
- Widened the Company's already material peer group
discount;
- Added significant debt to an already fragile balance sheet;
and
- Made the Company less attractive to potential acquirers.
When we wrote to you in June, your stock price was languishing
and meaningfully underperforming relevant indices and peers.
SilverBow traded at a 40% discount to peers with a mere EV/EBITDA
multiple of 1.9X. Five months later, as a result of your
misguided strategic initiatives, you have increased SilverBow's
valuation discount to approximately 50% vs. the peer group. The
sector multiple currently sits at 3X, whereas SilverBow sits at
just 2X 2024 EV / EBITDA.
We specifically advised you to avoid dilutive acquisitions given
your lack of scale, financial profile and modestly valued equity.
However, a mere two months after our public letter you went ahead
and made a $700mm "transformational" acquisition of Chesapeake's
South Texas position. Sean, in
announcing the purchase you said, among other things, that
"…this is a value-enhancing transaction for SilverBow
shareholders." Predictably, since the announcement on
August 14, 2023, SilverBow's share
price has decreased by 23%.
Your "transformational" acquisition destroyed much of the value
that had accrued to the Company following our open letter and a
rise in commodity prices. Notably, because of your poor financial
profile, you were compelled to issue fresh equity, 12% discounted
to an already undervalued share price – an irresponsible
tactic that was highly prejudicial to the interests of your
shareholders, precisely what we foresaw and advised against in
prior communications.
It has become clear that you have done everything within your
power to deter potential acquirers of the Company in the midst of
an ongoing wave of logical consolidation that is unfolding across
your peer groups' ecosystem. Why else would you maintain the
dubious distinction of being the only public E&P company with a
poison pill? The existence of this pill has been widely criticized
by both investors and Institutional Shareholder Services, a leading
proxy and corporate governance advisory firm.
In the face of your complete absence to either engage with us as
a material shareholder, or to pursue a strategy that creates value
for your investors, we have concluded that in order for the best
interests of the Company to be served, the composition of your
Board must be materially altered at the 2024 annual meeting of
shareholders.
Three new and independent candidates must be nominated and
elected by shareholders – the true owners of SilverBow. Riposte
is keen to support or put forward such independent nominees.
Sincerely,
/s/ Khaled Beydoun
Riposte Capital
About Riposte Capital
Riposte Capital is an SEC Registered Investment Advisor based
in New York City. The equity strategy was launched in 2013 and
is primarily focused on cyclical industries.
Riposte Contact:
Jeremy Goodman
Head of Business Development
+44 (0) 7788 567 913
jg@ripostecapital.com
Media Contact:
Ross Lovern
Kekst CNC
212.521.4800
ross.lovern@kekstcnc.com
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SOURCE Riposte Capital