Seawolf- the directors are departing. They are departed. They didn't stand for reelection at this past week's meeting and the US directors were elected to fill their vacancies.
I can't opine on the actual 50.7% vote count in the 8-k (http://1.usa.gov/12Foyy9) but I can attribute the discrepancy between the higher NO vote on the option plan renewal to all other vote tallies to the fact that ISS proxy advisors, while recommending FOR all directors and all other measures, including the by-law amendment proposal we adamantly opposed, recommended AGAINST the option plan renewal.
The discrepancy does provide insight into how many shares ISS influenced funds hold of EQU (at least until stock is added to Russell 3000 index products like Russell 2000)
Remarkably, Glass Lewis recommended in favor of all proposals, including the option plan and all directors BUT FOR director Doyle (our new Chairman) and he received no lower vote than the other legacy independent directors. Shows Glass Lewis's minimal influence correlated to the apparent lack of diligent analysis of EQU's proxy for this meeting.
Box office roundup: 1) Revenue continues to pour in at a breakneck pace for Disney's (DIS) Iron Man 3. Early estimates for the movie's opening U.S. weekend are for a $170M haul (vs. ~$150M consensus) to push global sales for the film to over $360M. 2) Keep an eye on IMAX (IMAX). The company is seeing the percentage of moviegoers in the U.S. choosing to see big tentpole films in the big-screen format increase - including an impressive 10% this weekend for Iron Man 3. 3) Analysts at Cowen and Co. think Warner Bros. (TWX) could have a big summer with The Hangover Part III and The Great Gatsby set up to beat estimates while they warn DreamWorks Animation (DWA) could struggle with 3D computer-animated film Turbo facing serious competition. [View news story]
not just IMAX and Real D but all exhibitors $RDI, $RGC $CNK $CKEC $MCS
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
Let me begin with Lawndale is not seeking to act as a proxy for any shareholder. We will not accept proxy cards, and any proxy cards received will be returned. We also aren't recommending how you should vote. But to answer your questions:
1) It isn't easy to find because the language is all "bundled" together.
Note - the Council of Institutional Investors (http://www.cii.org) has recently agreed with our interpretation that Equal's Proxy has bundled separate and unrelated matters into a single proposal - Proposal #6.
The CII's General Counsel Jeff Mahoney wrote a letter this past Friday April 26 to Lona Nallengara, Acting Director of the SEC's Division of Corporation Finance (cc'ing each SEC Commissioner,) illustrating Equal's apparent violation of Rule 14a-4 being another of many "bundled" proposals that have escaped or passed through SEC review to the dismay of the the Council.
2) In the Proxy for the May 13, 2013 meeting, http://1.usa.gov/17tAK80 Equal's description of the effects of the by-law changes were also 'bundled', obfuscating this very important nuance impacting the nomination of alternative director candidates.
3) read the actual language of Equal's by-laws from the exhibit in EQU's 8-K filed 1/30/13 at http://1.usa.gov/10wCI13
We feel the actual language used in Equal’s new by-law amendments, especially in section 4.5 “Proper Written Form”, requires submission of information that goes well beyond that which is legally required in an alternate candidate proxy, possibly an unlimited amount of extra information from nominators and nominees.
Illustrating this point is the fact several clauses in both 4.5 (a) and 4.5 (b) require all sorts of info and then clause vi each time begins with "AND" as follows: 'and (vi) any other information relating to the nominating shareholder or nominee that would be required to be made in a dissident’s proxy circular in connection with solicitations of proxies for election of directors ....'
Then new section 4.7, when combined with this unreasonably broader section 4.5 language, empowers the meeting Chairman to SUBJECTIVELY determine if the additional information sufficiently qualifies an alternative director nominee to be elected upon.
"The chairman of the meeting ... shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in the foregoing provisions ..."
Activism Adds To The Bottom Line At P&F Industries [View article]
In a filing with the SEC on May 2, 2013, Mill Valley, CA-based Lawndale Capital Management, LLC and its affiliates (“Lawndale”) filed SEC form 13D/A #5 in P&F Industries ("PFIN") triggered by a April 29, 2013 letter to PFIN’s Lead Independent Director and Board announcing Lawndale’s intent and rationale to vote its 10% of PFIN shares at the Company’s May 22, 2013 Annual Meeting as follows:
“AGAINST” approval of executive compensation resolution (“Say-On-Pay”) [ Proposal #3];
“WITHHOLD” on re-election of Richard Horowitz as Director [Proposal #1:]
Lawndale’s 13D/A filing and its letter exhibit, which further explains Lawndale's voting rationale, can be found on SEC Edgar at: http://1.usa.gov/107dy9q
Other Links
P&F Industries Proxy for its 2013 Annual Meeting to be held on May 22, 2013: http://1.usa.gov/ZZU76o
Lawndale’s previous 13D/A #4 filing (January 18, 2013) including letter exhibits to P&F Board: http://1.usa.gov/11DO5vh
Lawndale’s 13D/A #3 filing (May 25, 2011) including letter exhibit to P&F Board: http://1.usa.gov/wpLS5F
For a discussion of improvements and remaining weaknesses in Mr. Horowitz’ 2012 employment agreement, see this article, above.
Lawndale is not seeking to act as a proxy for any shareholder. We will not accept proxy cards, and any proxy cards received will be returned.
Melville, New York-based P&F Industries, Inc., through its two wholly-owned subsidiaries, Continental Tool Group Inc. and Countrywide Hardware, Inc., manufactures and/or imports air-powered tools and housing hardware. Its products are sold under their own trademarks, as well as under the private labels of major manufacturers and retailers. Further information on P&F can be found at its corporate website: http://www.pfina.com
About Lawndale Capital Management, LLC Lawndale Capital Management, a San Francisco Bay Area-based investment advisor, has managed activist hedge funds focused on creating and unlocking shareholder value in small- and micro-cap companies for over 19 years. Lawndale applies a private equity approach through active and relational ownership of public company securities. In most investments, Lawndale plays a constructive relational role by actively working with boards and management teams to help them achieve their strategic and operating goals. In other instances, Lawndale is a direct value-unlocking catalyst, utilizing a range of tools that include aggressively promoting improvements in a company's governance and operational structures, proxy actions, asserting shareowner’s legal rights and taking active roles in restructuring and buyout proposal negotiations.
For Further Information Contact:
Andrew Shapiro President Lawndale Capital Management, LLC 591 Redwood Highway #2345 Mill Valley, CA 94941 phone- 415-389-VALU (8258) fax- 415-389-0180 e-mail- aeshapiro@lawndalecap.com BLOG: http://bit.ly/vdEPvX
Pandora Radio: Stuck In The Mud Until 2015's Catalyst [View article]
I only was pointing out what you said about 'inferior' services and ads as it applies to P's inherent need to monetize their streaming which is all variable cost - (much more so than netflix BTW.) My comment was merely pointing out that the Pandora market share can be as fickle as your loyalty to any other radio station. Monetization will impact growth.
Even if I agreed with your suggestion that 3 years of ad-free being required to put a dent in p's market share (which I don't) I note that Apple's balance sheet and others have hordes of cash to afford ad free for far longer than 3 years.
You selectively quoted my Netflix comment but at least provide link to full text. However, you mischaracterized the conclusion of the quote to that of others who may be short Netflix. I have never asserted that Netflix would be killed or go away. Its a great service for what it is. When we have put on short exposure on Netflix it has been via put options, which control capital at risk when momo heads want to take stock to new heights, and since its not going out of business, usually we offset the premium cost of such risk controls with put spreads.
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
As for the SEC, we were on point enough to actually spur some action from them, even before the CII wrote its recent letter citing Equal's Proposal #6 as another example of a 'bundled' and thus improper proposal getting through to the proxy card.
According to SVP-Finance Dell Chapman, the SEC contacted them and raised the 'bundling' issue, but only after Equal spent thousands printing proxies and already had them into the mailing process. Had they got there earlier, Chapman feels there was no doubt changes would have been requested. However, the SEC chose not to force a very costly redo, refile, new mailing, and inevitably delayed Annual Meeting. This is in part because the company said the SEC failed to select the preliminary proxy for review in the prescribed 10 day time period. That review process is not mandated to be performed for every company. That is what the CII campaign is all about - to get more SEC resources allocated to review more proxies and catch and prohibit bundled proposals from reaching a proxy card.
The SEC's and CII concurrence in our findings has spurred us to investigate further the costs of litigating and repealing the by-law amendments and Proposal #6. But our need would only be if we felt the need to nominate an alternative slate and the by-law was used to block us.
Also, perhaps the shareholder vote or a well-run and full alternatives process that merges/sells the company will make the by-laws matter moot and avoid the need for such costly litigation.
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
Bank,
Sorry to disappoint you that we hadn't yet spent tens if not hundreds of thousands of dollars of mine and my investor's monies to file a proxy on what are mostly advisory votes, but for Proposal #6 which does require a approval from a majority of voted shares to ratify the Board's recently adopted advance notice by-law and director nomination qualification amendments.
From your comments, given your stated experience, I will assume you simply have not closely and carefully read these amended provisions and the restrictions they currently (until possible repeal) put in place regarding alternative director nominees. Nor have you likely read the details of the Alsaadi/ Goldstein Settlement/Standstill agreement. Why do you think Montclair, with its more acquisitive intent, has not nominated an alternative slate?
Pretty easy for you to be 'disappointed' from the free-rider seats. But if you were a partner in one of our funds, you would be most appreciative that Lawndale deploys activism costs very strategically and effectively. I think our extensive record on these matters speaks for itself.
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
Bank & Pentium
I don't disagree that it would be preferable for Lawndale to have reached 5% 13D filing position before the board triggered a time gun when it unilaterally adopted its advance notice by-law and director nomination qualification amendments (which I might add will get automatically repealed if shareholders fail to ratify Proposal #6) at the end of January. While Lawndale files 13Ds regularly (see http://1.usa.gov/YfcweV) we don't deploy our capital in an imprudent reckless manner.
We accumulated a remarkable amount of shares >4% of Equal's then outstanding shares in a short amount of time. At the time of my negotiations with Equal's Governance Committee, from February 21 till the March 25th press releases by Montclair and Equal, Lawndale was steadily accumulating shares at very attractive prices with the intent to go well over 5%, file a 13D, and become the company's largest shareholder. Our investment process that would inevitably take us above 5% pretty much was stopped (perhaps for the time being) by a competitive bidder (we suspect Montclair) and then the two press releases of March 25th which spiked the stock price. I also might add that a substantial amount of new stock issued by Equal to management over the course of the last quarter also increased the number of shares that = 5%.
A review of our extensive 13D history will show that the furthest thing you could characterize Lawndale's investment approach is 'pump and dump.' While the average mutual fund holding period is less than a year, there is plenty of public evidence of our multi-year investment horizon. Hence why acquiring shares at appropriately discounted prices with a substantial 'margin of safety' is essential.
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
Bank -
Your bio says you have an activist bent. That's great, but behind an anonymous facade, your baiting comments to me and comments to others urging how they should vote on a Canadian proxy action traverse over certain legal lines that frankly weaken your credibility to properly assess whether my statements are true.
Suffice it to say my posts aren't anonymous and Equal's lawyers know where to find me and already have the names of our attorneys in Canada and US should they have a problem with our actions, which are following the tricky lines of two countries laws.
But I am responding to your opening 'bait' here in public because Equal's Governance Committee and the rest of its Board was similarly skeptical or (so they say) such that they delayed and opposed considering our nominees over others they or insiders sourced and then demanded a standstill of us to include any of our nominees on the slate. [Creates my question to you and others - why should nominees sourced by shareholders, with no other tie to the company but their shares, be considered less independent (as target companies are oft to paint than nominees sourced by insiders?]
So to respond: There is absolutely NO financial or even past social connection WHATSOEVER to the highly qualified energy experienced Houston, US-based individuals we recommended to Equal's Governance Committee. How could that be you ask?
Lawndale has been successful activist investors for more than 20 years and an Educational Sustaining Member of the Council of Institutional Investors (http://www.cii.org) for over a decade. I personally have been a member of several well known reputable governance organizations (such as the National Association of Corporate Directors) for almost as long. In addition I regularly teach/present at various director education programs throughout the country (eg. UCLA Anderson Director Education Certification Program, Stanford Law School Director's College, etc.) Just a few months ago, I was named to the 2012 Directorship 100, a list of the most influential individuals in governance in the country over the past year. You can also check out my author's bio on Seeking Alpha at http://bit.ly/vdEPvX or elsewhere on web.
Through these many roles teaching, speaking, or practicing good governance and activist investing and for so long, I have a large network of prospective board members that have no connection or affiliation to Lawndale or myself. Some are former Director's education "students" others were attendees at some conference I was a panelist at. Bottom line, - we get a ton of resumes from many qualified capable individuals seeking board service that I have no affiliation or connection to whatsoever. Of course through interviews and background checks and eventual board service, we could come to know these candidates quite well.
Furthermore, as in the specific instance of Equal, many are not even known to me from those independent channels but are introduced to us from others in those channels (2nd derivative.) The nominees we sourced to Equal were literally introduced to us at end of last year when I put out a feeler for suggestions of good individuals to serve at one or more energy investments we were contemplating and wanted to have a file of capable director nominees ready to go should we need some. I still have not met these individuals in person but had interviewed them extensively over the phone, etc.
Finally, I have and will go on boards personally when the dysfunction or weakness in the boardroom calls for my unique skills and the size of the investment relative to my fund's capital visibility is a proper fit for the sizable illiquidity that board membership status involves. I don't think what the board needs is my particular expertise as much as it needs highly energy experienced US-based Independent directors who can request the proper information from management on Equal's drilling prospects to then capably balance and weigh objectively, depending on commodity pricing and prospects, whether to drill the 6th, 7th 8th or 9th well vs other alternative uses for the company's cash and borrowing power (eg. higher dividends, buying and retiring shares when the stock was being given away at $3/share, acquiring incremental acreage, merge with strategic partner, etc.) in order to maximize long-term sustainable shareholder value.
Pandora Radio: Stuck In The Mud Until 2015's Catalyst [View article]
It should be noted that you switch radio stations when an ad comes on and fast forward dvr through ads because there are so many or so long and you are able to. Your switching 'channels' to avoid ads. If you were not able to you would spend a lot less time with those avenues. The same goes with Pandora once/if they increase the ad load with all the ad sale overhead costs they are now investing. There are many many alternative 'channels' to Pandora and once/and if the ad pain increases sufficiently to meet very bullish forecasts, audience satisfaction will have already plummeted and many will have migrated to other free streaming, etc.
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
Pentium,
While we may contact the SEC again on the matter, with a May 13th meeting and a proxy that is already definitive, the SEC is less likely to act and force Proposal #6 to be pulled.
So the odds are the vote on Proposal #6 will continue to go ahead unless we or someone else with intent and desire to mount alternative slate, sooner rather than later, chooses to litigate in US Fed Court where Greenlight successfully got an injunction against Apple Computer. Interesting it would likely be in same court as EQU sued Alsaadi.
Additionally, one might legally argue after the fact that the vote was flawed and illegal and fight enforcement of the new by-laws at a later fight.
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
The Council of Institutional Investors (CII) has recently agreed with Lawndale’s interpretation that Equal's Proxy has "bundled two separate and unrelated matters on advance notice and special meetings into a single proposal." This is Proposal # 6 on Equal's proxy for its upcoming May 13, 2013 meeting, requesting shareholders ratify special meeting, advance notice (plus what Lawndale also considers beyond-the-norm director nomination qualification requirements) by-law amendments that Equal's board unilaterally adopted in January.
The CII's General Counsel Jeff Mahoney wrote a letter this past Friday April 26 to Lona Nallengara, Acting Director of the SEC's Division of Corporation Finance (cc'ing each SEC Commissioner,) illustrating Equal's apparent violation of Rule 14a-4 being another of many "bundled" proposals that have escaped or passed through SEC review to the dismay of the the Council.
We applaud the Council for its continuing policies and efforts to not only "ensure more informed decision making on each matter presented, but also prohibits electoral tying arrangements that restrict shareowner voting choices on important matters put before them by management for approval."
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
The company's definitive proxy did not highlight or address our concerns as the definitive proxy was basically unchanged from the preliminary proxy referred to in our letter.
We did receive a letter a few weeks ago in response but have received no further communication from the company and have not yet responded to the letter received.
Their letter said they were pleased Lawndale agreed with Equal's process around the consideration and decision to reject Montclair's initial offer.
It further stated Equal had not made any definitive determination as to what course of conduct will be taken going forward and, specifically responding to our requests, said the possibility of proactively seeking additional proposals, further restructuring the company, or engaging in other types of transactions all remained open.
The letter then went on to complain that our letter implied Equal wasn't fully "up front" in demanding a standstill agreement was a condition to adding Mr. Parkey, a highly experienced and qualified US-based director candidate, completely independent of Lawndale, that we went through efforts to find and source. They imply a standstill should always a condition to appointing a director that someone from outside of the company has found. For supposedly Canadian "Certified Corporate Director"- trained directors, very bad application in governance Best Practices if you ask me. A standstill arrangement in the instance of us basically serving in a free executive search role, with us having no history of hostility or disagreement with management's stated plans and no connection to this nominee was/is inappropriate to the demand for a non-insider sourced US director.
Where Equal missed the point of our letter's implication of not acting in good faith was the disproportionately broad scope and long duration of Equal's proposed standstill agreement which it said would be "narrow." Remember this agreement was simply to enable the placement of a single non-affiliated-to-Lawn... director. Moreover, pursuit of an agreement, seeking to lock up our votes and impose a Nawar Alsaadi-like gag order preventing our dialogue with other shareholders, while the Board had possession of information of the Montclair bid, their rejection and others interest, and could enter into another transaction if paramount interest to us and all Equal shareholders was how they were not 'up front."
The letter then went on to defend the special meeting, advance notice and what we also consider beyond-the-norm director nomination qualification by-law amendments Equal's board unilaterally adopted in January and which shareholders are being asked now to ratify and approve as Proposal # 6 at the upcoming Annual Meeting. We believe that Proposal #6 "bundled" what ought to have been several separate proposals seeking shareholder approval and have raised this bundling issue with representatives of the SEC, the Council of Institutional Investors (CII) and our legal counsel.
The letter then finally defended the legality of the stock transactions that took place during a time when the company was in possession of material non-public information on the Montclair bid, other's indications of interest and the company's responses to both.
Civil War At Equal Energy [View article]
Yes they should adopt majority voting.
Civil War At Equal Energy [View article]
I can't opine on the actual 50.7% vote count in the 8-k (http://1.usa.gov/12Foyy9) but I can attribute the discrepancy between the higher NO vote on the option plan renewal to all other vote tallies to the fact that ISS proxy advisors, while recommending FOR all directors and all other measures, including the by-law amendment proposal we adamantly opposed, recommended AGAINST the option plan renewal.
The discrepancy does provide insight into how many shares ISS influenced funds hold of EQU (at least until stock is added to Russell 3000 index products like Russell 2000)
Remarkably, Glass Lewis recommended in favor of all proposals, including the option plan and all directors BUT FOR director Doyle (our new Chairman) and he received no lower vote than the other legacy independent directors. Shows Glass Lewis's minimal influence correlated to the apparent lack of diligent analysis of EQU's proxy for this meeting.
Civil War At Equal Energy [View article]
Box office roundup: 1) Revenue continues to pour in at a breakneck pace for Disney's (DIS) Iron Man 3. Early estimates for the movie's opening U.S. weekend are for a $170M haul (vs. ~$150M consensus) to push global sales for the film to over $360M. 2) Keep an eye on IMAX (IMAX). The company is seeing the percentage of moviegoers in the U.S. choosing to see big tentpole films in the big-screen format increase - including an impressive 10% this weekend for Iron Man 3. 3) Analysts at Cowen and Co. think Warner Bros. (TWX) could have a big summer with The Hangover Part III and The Great Gatsby set up to beat estimates while they warn DreamWorks Animation (DWA) could struggle with 3D computer-animated film Turbo facing serious competition. [View news story]
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
1) It isn't easy to find because the language is all "bundled" together.
Note - the Council of Institutional Investors (http://www.cii.org) has recently agreed with our interpretation that Equal's Proxy has bundled separate and unrelated matters into a single proposal - Proposal #6.
The CII's General Counsel Jeff Mahoney wrote a letter this past Friday April 26 to Lona Nallengara, Acting Director of the SEC's Division of Corporation Finance (cc'ing each SEC Commissioner,) illustrating Equal's apparent violation of Rule 14a-4 being another of many "bundled" proposals that have escaped or passed through SEC review to the dismay of the the Council.
CII's full letter to the SEC can be found and read at
http://bit.ly/14IP0vH
2) In the Proxy for the May 13, 2013 meeting, http://1.usa.gov/17tAK80
Equal's description of the effects of the by-law changes were also 'bundled', obfuscating this very important nuance impacting the nomination of alternative director candidates.
3) read the actual language of Equal's by-laws from the exhibit in EQU's 8-K filed 1/30/13 at http://1.usa.gov/10wCI13
We feel the actual language used in Equal’s new by-law amendments, especially in section 4.5 “Proper Written Form”, requires submission of information that goes well beyond that which is legally required in an alternate candidate proxy, possibly an unlimited amount of extra information from nominators and nominees.
Illustrating this point is the fact several clauses in both 4.5 (a) and 4.5 (b) require all sorts of info and then clause vi each time begins with "AND" as follows: 'and (vi) any other information relating to the nominating shareholder or nominee that would be required to be made in a dissident’s proxy circular in connection with solicitations of proxies for election of directors ....'
Then new section 4.7, when combined with this unreasonably broader section 4.5 language, empowers the meeting Chairman to SUBJECTIVELY determine if the additional information sufficiently qualifies an alternative director nominee to be elected upon.
"The chairman of the meeting ... shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in the foregoing provisions ..."
Activism Adds To The Bottom Line At P&F Industries [View article]
“AGAINST” approval of executive compensation resolution (“Say-On-Pay”) [ Proposal #3];
“WITHHOLD” on re-election of Richard Horowitz as Director [Proposal #1:]
Lawndale’s 13D/A filing and its letter exhibit, which further explains Lawndale's voting rationale, can be found on SEC Edgar at: http://1.usa.gov/107dy9q
Other Links
P&F Industries Proxy for its 2013 Annual Meeting to be held on May 22, 2013:
http://1.usa.gov/ZZU76o
Lawndale’s previous 13D/A #4 filing (January 18, 2013) including letter exhibits to P&F Board:
http://1.usa.gov/11DO5vh
Lawndale’s 13D/A #3 filing (May 25, 2011) including letter exhibit to P&F Board:
http://1.usa.gov/wpLS5F
For a discussion of improvements and remaining weaknesses in Mr. Horowitz’ 2012 employment agreement, see this article, above.
Lawndale is not seeking to act as a proxy for any shareholder. We will not accept proxy cards, and any proxy cards received will be returned.
Melville, New York-based P&F Industries, Inc., through its two wholly-owned subsidiaries, Continental Tool Group Inc. and Countrywide Hardware, Inc., manufactures and/or imports air-powered tools and housing hardware. Its products are sold under their own trademarks, as well as under the private labels of major manufacturers and retailers. Further information on P&F can be found at its corporate website: http://www.pfina.com
About Lawndale Capital Management, LLC
Lawndale Capital Management, a San Francisco Bay Area-based investment advisor, has managed activist hedge funds focused on creating and unlocking shareholder value in small- and micro-cap companies for over 19 years. Lawndale applies a private equity approach through active and relational ownership of public company securities. In most investments, Lawndale plays a constructive relational role by actively working with boards and management teams to help them achieve their strategic and operating goals. In other instances, Lawndale is a direct value-unlocking catalyst, utilizing a range of tools that include aggressively promoting improvements in a company's governance and operational structures, proxy actions, asserting shareowner’s legal rights and taking active roles in restructuring and buyout proposal negotiations.
For Further Information Contact:
Andrew Shapiro
President
Lawndale Capital Management, LLC
591 Redwood Highway #2345
Mill Valley, CA 94941
phone- 415-389-VALU (8258)
fax- 415-389-0180
e-mail- aeshapiro@lawndalecap.com
BLOG: http://bit.ly/vdEPvX
Pandora Radio: Stuck In The Mud Until 2015's Catalyst [View article]
Even if I agreed with your suggestion that 3 years of ad-free being required to put a dent in p's market share (which I don't) I note that Apple's balance sheet and others have hordes of cash to afford ad free for far longer than 3 years.
You selectively quoted my Netflix comment but at least provide link to full text. However, you mischaracterized the conclusion of the quote to that of others who may be short Netflix. I have never asserted that Netflix would be killed or go away. Its a great service for what it is. When we have put on short exposure on Netflix it has been via put options, which control capital at risk when momo heads want to take stock to new heights, and since its not going out of business, usually we offset the premium cost of such risk controls with put spreads.
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
According to SVP-Finance Dell Chapman, the SEC contacted them and raised the 'bundling' issue, but only after Equal spent thousands printing proxies and already had them into the mailing process. Had they got there earlier, Chapman feels there was no doubt changes would have been requested. However, the SEC chose not to force a very costly redo, refile, new mailing, and inevitably delayed Annual Meeting. This is in part because the company said the SEC failed to select the preliminary proxy for review in the prescribed 10 day time period. That review process is not mandated to be performed for every company. That is what the CII campaign is all about - to get more SEC resources allocated to review more proxies and catch and prohibit bundled proposals from reaching a proxy card.
The SEC's and CII concurrence in our findings has spurred us to investigate further the costs of litigating and repealing the by-law amendments and Proposal #6. But our need would only be if we felt the need to nominate an alternative slate and the by-law was used to block us.
Also, perhaps the shareholder vote or a well-run and full alternatives process that merges/sells the company will make the by-laws matter moot and avoid the need for such costly litigation.
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
Sorry to disappoint you that we hadn't yet spent tens if not hundreds of thousands of dollars of mine and my investor's monies to file a proxy on what are mostly advisory votes, but for Proposal #6 which does require a approval from a majority of voted shares to ratify the Board's recently adopted advance notice by-law and director nomination qualification amendments.
From your comments, given your stated experience, I will assume you simply have not closely and carefully read these amended provisions and the restrictions they currently (until possible repeal) put in place regarding alternative director nominees. Nor have you likely read the details of the Alsaadi/ Goldstein Settlement/Standstill agreement. Why do you think Montclair, with its more acquisitive intent, has not nominated an alternative slate?
Pretty easy for you to be 'disappointed' from the free-rider seats. But if you were a partner in one of our funds, you would be most appreciative that Lawndale deploys activism costs very strategically and effectively. I think our extensive record on these matters speaks for itself.
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
I don't disagree that it would be preferable for Lawndale to have reached 5% 13D filing position before the board triggered a time gun when it unilaterally adopted its advance notice by-law and director nomination qualification amendments (which I might add will get automatically repealed if shareholders fail to ratify Proposal #6) at the end of January. While Lawndale files 13Ds regularly (see http://1.usa.gov/YfcweV) we don't deploy our capital in an imprudent reckless manner.
We accumulated a remarkable amount of shares >4% of Equal's then outstanding shares in a short amount of time. At the time of my negotiations with Equal's Governance Committee, from February 21 till the March 25th press releases by Montclair and Equal, Lawndale was steadily accumulating shares at very attractive prices with the intent to go well over 5%, file a 13D, and become the company's largest shareholder. Our investment process that would inevitably take us above 5% pretty much was stopped (perhaps for the time being) by a competitive bidder (we suspect Montclair) and then the two press releases of March 25th which spiked the stock price. I also might add that a substantial amount of new stock issued by Equal to management over the course of the last quarter also increased the number of shares that = 5%.
A review of our extensive 13D history will show that the furthest thing you could characterize Lawndale's investment approach is 'pump and dump.' While the average mutual fund holding period is less than a year, there is plenty of public evidence of our multi-year investment horizon. Hence why acquiring shares at appropriately discounted prices with a substantial 'margin of safety' is essential.
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
Your bio says you have an activist bent. That's great, but behind an anonymous facade, your baiting comments to me and comments to others urging how they should vote on a Canadian proxy action traverse over certain legal lines that frankly weaken your credibility to properly assess whether my statements are true.
Suffice it to say my posts aren't anonymous and Equal's lawyers know where to find me and already have the names of our attorneys in Canada and US should they have a problem with our actions, which are following the tricky lines of two countries laws.
But I am responding to your opening 'bait' here in public because Equal's Governance Committee and the rest of its Board was similarly skeptical or (so they say) such that they delayed and opposed considering our nominees over others they or insiders sourced and then demanded a standstill of us to include any of our nominees on the slate. [Creates my question to you and others - why should nominees sourced by shareholders, with no other tie to the company but their shares, be considered less independent (as target companies are oft to paint than nominees sourced by insiders?]
So to respond: There is absolutely NO financial or even past social connection WHATSOEVER to the highly qualified energy experienced Houston, US-based individuals we recommended to Equal's Governance Committee. How could that be you ask?
Lawndale has been successful activist investors for more than 20 years and an Educational Sustaining Member of the Council of Institutional Investors (http://www.cii.org) for over a decade. I personally have been a member of several well known reputable governance organizations (such as the National Association of Corporate Directors) for almost as long. In addition I regularly teach/present at various director education programs throughout the country (eg. UCLA Anderson Director Education Certification Program, Stanford Law School Director's College, etc.) Just a few months ago, I was named to the 2012 Directorship 100, a list of the most influential individuals in governance in the country over the past year. You can also check out my author's bio on Seeking Alpha at http://bit.ly/vdEPvX or elsewhere on web.
Through these many roles teaching, speaking, or practicing good governance and activist investing and for so long, I have a large network of prospective board members that have no connection or affiliation to Lawndale or myself. Some are former Director's education "students" others were attendees at some conference I was a panelist at. Bottom line, - we get a ton of resumes from many qualified capable individuals seeking board service that I have no affiliation or connection to whatsoever. Of course through interviews and background checks and eventual board service, we could come to know these candidates quite well.
Furthermore, as in the specific instance of Equal, many are not even known to me from those independent channels but are introduced to us from others in those channels (2nd derivative.) The nominees we sourced to Equal were literally introduced to us at end of last year when I put out a feeler for suggestions of good individuals to serve at one or more energy investments we were contemplating and wanted to have a file of capable director nominees ready to go should we need some. I still have not met these individuals in person but had interviewed them extensively over the phone, etc.
Finally, I have and will go on boards personally when the dysfunction or weakness in the boardroom calls for my unique skills and the size of the investment relative to my fund's capital visibility is a proper fit for the sizable illiquidity that board membership status involves. I don't think what the board needs is my particular expertise as much as it needs highly energy experienced US-based Independent directors who can request the proper information from management on Equal's drilling prospects to then capably balance and weigh objectively, depending on commodity pricing and prospects, whether to drill the 6th, 7th 8th or 9th well vs other alternative uses for the company's cash and borrowing power (eg. higher dividends, buying and retiring shares when the stock was being given away at $3/share, acquiring incremental acreage, merge with strategic partner, etc.) in order to maximize long-term sustainable shareholder value.
Pandora Radio: Stuck In The Mud Until 2015's Catalyst [View article]
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
While we may contact the SEC again on the matter, with a May 13th meeting and a proxy that is already definitive, the SEC is less likely to act and force Proposal #6 to be pulled.
So the odds are the vote on Proposal #6 will continue to go ahead unless we or someone else with intent and desire to mount alternative slate, sooner rather than later, chooses to litigate in US Fed Court where Greenlight successfully got an injunction against Apple Computer. Interesting it would likely be in same court as EQU sued Alsaadi.
Additionally, one might legally argue after the fact that the vote was flawed and illegal and fight enforcement of the new by-laws at a later fight.
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
The CII's General Counsel Jeff Mahoney wrote a letter this past Friday April 26 to Lona Nallengara, Acting Director of the SEC's Division of Corporation Finance (cc'ing each SEC Commissioner,) illustrating Equal's apparent violation of Rule 14a-4 being another of many "bundled" proposals that have escaped or passed through SEC review to the dismay of the the Council.
The CII's full letter to the SEC can be found and read at
http://bit.ly/14IP0vH
We applaud the Council for its continuing policies and efforts to not only "ensure more informed decision making on each matter presented, but also prohibits electoral tying arrangements that restrict shareowner voting choices on important matters put before them by management for approval."
Equal’s Proxy for May 13, 2013 Meeting
http://1.usa.gov/17tAK80
Lawndale Capital Management Sends Letter To Equal Energy Board Regarding Montclair Offer [View article]
We did receive a letter a few weeks ago in response but have received no further communication from the company and have not yet responded to the letter received.
Their letter said they were pleased Lawndale agreed with Equal's process around the consideration and decision to reject Montclair's initial offer.
It further stated Equal had not made any definitive determination as to what course of conduct will be taken going forward and, specifically responding to our requests, said the possibility of proactively seeking additional proposals, further restructuring the company, or engaging in other types of transactions all remained open.
The letter then went on to complain that our letter implied Equal wasn't fully "up front" in demanding a standstill agreement was a condition to adding Mr. Parkey, a highly experienced and qualified US-based director candidate, completely independent of Lawndale, that we went through efforts to find and source. They imply a standstill should always a condition to appointing a director that someone from outside of the company has found. For supposedly Canadian "Certified Corporate Director"- trained directors, very bad application in governance Best Practices if you ask me. A standstill arrangement in the instance of us basically serving in a free executive search role, with us having no history of hostility or disagreement with management's stated plans and no connection to this nominee was/is inappropriate to the demand for a non-insider sourced US director.
Where Equal missed the point of our letter's implication of not acting in good faith was the disproportionately broad scope and long duration of Equal's proposed standstill agreement which it said would be "narrow." Remember this agreement was simply to enable the placement of a single non-affiliated-to-Lawn... director. Moreover, pursuit of an agreement, seeking to lock up our votes and impose a Nawar Alsaadi-like gag order preventing our dialogue with other shareholders, while the Board had possession of information of the Montclair bid, their rejection and others interest, and could enter into another transaction if paramount interest to us and all Equal shareholders was how they were not 'up front."
The letter then went on to defend the special meeting, advance notice and what we also consider beyond-the-norm director nomination qualification by-law amendments Equal's board unilaterally adopted in January and which shareholders are being asked now to ratify and approve as Proposal # 6 at the upcoming Annual Meeting. We believe that Proposal #6 "bundled" what ought to have been several separate proposals seeking shareholder approval and have raised this bundling issue with representatives of the SEC, the Council of Institutional Investors (CII) and our legal counsel.
The letter then finally defended the legality of the stock transactions that took place during a time when the company was in possession of material non-public information on the Montclair bid, other's indications of interest and the company's responses to both.