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Just before Stewart was named CEO in early 2009, the company had gone through a couple of chief executive changes. It had just tried and failed to find a buyer. The day he was announced as the new boss, the stock closed at 29 cents per share.
In the most recent fiscal year, the company did not reach profitability on the net income line, but it did have earnings before interest, taxes, depreciation and amortization, or EBITDA, that dramatically increased from the prior year, to $12.7 million.
The best that can be said now is that ValueVision stayed in business. The estimate Piper Jaffray & Co. has for the current fiscal year is earnings of just 4 cents per share.
But staying in business means the stock no longer trades for 29 cents, and by the time Clinton showed up in fall 2013 the stock had recently traded at more than $6. “Where were these guys when the stock was 18 cents?” Routh asked.
Routh likened ValueVision’s proxy fight to watching a football team execute a long drive, finally getting the ball inside the opponent’s 1-yard line. Only then do the second stringers demand to be put in the game so they can fall forward with the ball a couple of feet to score and claim credit for the victory.
It’s also fair to point out that there are plenty of recent examples of situations in which the activist succeeded in changing the team, only to have the new team fumble the ball.
Activist William Ackman’s firm emerged as a big investor in J.C. Penney Co. several years ago, and he helped bring aboard former Apple executive Ron Johnson to run it.
Rather than being renewed with the fresh thinking Johnson brought from Apple, J.C. Penney under Johnson was a disaster, and for Ackman too. When he resigned from the board last summer and his funds sold, the loss was just under a half-billion dollars.
Clinton appears to have done well, but even one of the high-profile wins against an incumbent board that Taxin talked about last week is far from being a clear victory. That’s at a California retailer called Wet Seal, where four directors left the board in favor of four of Clinton’s nominees.
That was in October 2012, when Wet Seal shares were trading at $3.14 per share. Last week they traded for $1.04.
“My assessment is … it would have been worse without them,” Taxin said, of the directors he got elected to Wet Seal’s board.
In my experience, saying “it could have been worse” never really makes investors feel any better.
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