In its latest filing with the Securities and Exchange Commission, Greg Taxin’s Clinton Group has disclosed a letter sent to NutriSystem Inc. (NASDAQ:NTRI)’s Chief Executive Officer, Dawn Zier. According to the filing, the fund owns an aggregate of 1.70 million shares, representing about 5.9% of the company’s outstanding common stock. The position represents a decrease from 1.84 million shares the fund disclosed in February 2014.
In the letter, Clinton Group urged NutriSystem Inc. (NASDAQ:NTRI) to buy back $80 million worth of its own stock at prices up to $18 per share or consider an acquisition of the company by a private equity firm. NutriSystem Inc. (NASDAQ:NTRI) provides a weight management system. The investor has praised the company for a number of positive developments and expressed his continued enthusiasm for the company’s value and future.
According to the investor, the company could use the same cash it distributes annually as a dividend on each share to finance debt to purchase that same share. It states that such a buyback would not limit the company’s ability to execute its business plan or capital spending program because each share carries a $0.70 dividend, which would no longer be paid if the share were bought back.
“An $80 million buyback executed at prices up to $18 per share (as much as a 20% premium to today’s close) would allow the company to purchase 4.5 to 5.0 million shares of its own stock (equivalent to roughly eight days of trading volume). The company’s outstanding share count would decline by approximately 17%,” the investor states in the letter.
“If the company waits to buy stock until after the First Quarter 2014 financial performance is made public, we believe the opportunity to buy stock at these prices will be gone. For the time being, it seems, the stock has suffered at the hands of investors who have lumped NutriSystem in with the other commercial weight loss companies in spite of NutriSystem’s significant fundamental outperformance,” according to the letter.
Further, Clinton Group states there are innumerable private equity firms that would be happy to consider a leveraged buyout of NutriSystem Inc. (NASDAQ:NTRI), leaving the management team, strategy and employees in place.
The full text of the letter can be read below:
Another significant shareholder of NutriSystem is Renaissance Technologies, led by Jim Simons, which, in its latest 13F, revealed holding around 2.0 million shares of the company.
Services sector represents the largest share of Clinton Group’s equity portfolio. The fund holds significant long positions of 2.54 million shares worth $17.76 million in ValueVision Media Inc (NASDAQ:VVTV) and 1.22 million shares worth $15.07 million in Stillwater Mining Company (NYSE:SWC).