Investor Group Owning Over 40% of Leaf Group Comments on Resignation of Fourth Board Member in Five Months
August 17 2020 - 12:55PM
Business Wire
Current Board Members Should Evaluate Whether
Continued Support of Mr. Moriarty is Worth the Associated Costs
The Time for True Board Refreshment – With
Participation of Majority of Shareholders – Is Long Overdue
Investors owning a majority of the issued and outstanding shares
of Leaf Group Ltd. ("Leaf Group" or the "Company") (NYSE:LEAF) have
publicly called for significant change at the Company.
A group that owns more than 40% of Leaf Group – 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 joint statement regarding the
resignation of Charles “Lanny” Baker from the Company’s Board of
Directors (the “Board”):
“Mr. Baker is now the fourth director to resign since April and
the second director since our Investor Group started demanding
significant change – a troubling pattern, which is nearly as
unprecedented as a Board that ignores the clearly expressed views
of a majority of its shareholders. We remind our fellow
shareholders and the Board that Mr. Baker served as the Chairman of
the Special Committee that was charged with overseeing the
Company’s recently completed strategic review process. In its May
20th letter to shareholders regarding the conclusion of its
strategic review, the Company attempted to demonstrate the
integrity of this process by stating that “[t]he strategic review
was conducted by a Special Committee of the Board of Directors
consisting of independent directors.”1 We had already doubted
whether the Special Committee could have run a truly independent
process, and our doubts only grew as the Board pulled Mr. Baker
from its audit committee last month because his service violated
bright-line NYSE independence rules. As the Board continues to
claim that shareholders should trust the integrity of its strategic
review process, Mr. Baker’s resignation casts serious doubt on
whether the results of the Company’s recently completed strategic
review process should be trusted.
While we acknowledge that Mr. Baker’s resignation is a
meaningful step toward eliminating some of the Board’s troubling
conflicts of interest, his resignation cannot cleanse the
already-concluded strategic review process, which was tainted by
his lack of independence. To make matters worse, the Board and the
Company continue to harp on the outcome of that “failed” process as
the rationale for their opposition to shareholders’ calls for
change. That rationale is misguided at best. The remaining
directors should ask themselves why they are so confident that more
than half of shareholders are wrong about Leaf Group’s need for
dramatic change.
This Board is left fighting a losing battle in opposing a
majority of shareholders. Mr. Moriarty will ultimately have to
resign or be fired. With that in mind, the directors should
seriously evaluate whether maintaining their absolute loyalty to an
underperforming CEO is worth the personal risk associated with
sacrificing the fiduciary duties the Board owes to the Leaf Group
shareholders.
We do not believe any responsible professional would join the
Board as a new director under these circumstances. Nevertheless, we
caution the Board that attempting to reinforce their numbers
without input and approval from a majority of shareholders will
only make members of their shrinking band more vulnerable to
criticism. We urge the Board to engage with us to refresh the Board
with objective professionals who are prepared to work on behalf of
shareholders.”
Visit www.LiberateLeaf.Group for additional information.
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.
___________________ 1 Leaf Group’s May 20, 2020 8-K:
https://www.sec.gov/Archives/edgar/data/1365038/000110465920064014/tm2020234d1_8k.htm
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Media Sloane & Company Dan Zacchei / Joe Germani
dzacchei@sloanepr.com / jgermani@sloanepr.com
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