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Oplink Communications, Inc (OPLK): Engaged Capital Raises Activist Stake & Sends Letter to Shareholders

As a new filing with the Securities and Exchange Commission, Glenn Welling‘s Engaged Capital reported slightly increasing its stake Oplink Communications, Inc (NASDAQ:OPLK) and revealed a letter sent to the company’s shareholders. Engaged owns currently around 913,500 shares of Oplink, the activist stake being equal to 5.4% of the company’s common stock. Previously the fund held 863,500 shares, representing 4.7% of the company.

Oplink Communications, Inc (NASDAQ:OPLK)

Engaged went activist on Oplink Communications, Inc (NASDAQ:OPLK) earlier this year, after forming an activist group, with another investor, Voce Capital. Voce owns around 342,700 shares of the company, equal to 2% of the outstanding stock. Back in June when investors formed their group, both Mr. Welling and the manager of Voce Capital Daniel Plants agreed to discuss Oplink’s operating results and costs with the management and to find ways to increase the shareholder value of the company. At the end of September, Engaged Capital announced that it has nominated two directors to be elected to the company’s board at the next shareholder meeting.

In their latest letter to shareholders, Engaged and Voce expressed their disappointment with the board not taking any steps regarding the next annual shareholder meeting, even though over a year has passed since the previous meeting. The letter also added that the board was required last week to file a 10-K form with the SEC to aknowledge that it “no longer expects[s] to file [its] definitive proxy statement” within 120 days of the end of its fiscal year.

“The Board’s abdication of such an essential duty is indefensible and shameful. […] It is our fundamental right to express our opinion, through the exercise of the shareholder franchise at the Annual Meeting, on the job that our Board is doing on our behalf. Delaying the director electoral process is a dereliction of the Board’s fiduciary duty and a violation of our rights as shareholders” the investors said in their letter.

In this way, the activists said that they will pursue all legal measures in order to compell the board to hold the annual meeting of shareholders, including a petition at the Delaware Court of Chancery.
Back in September, after Engaged and Voce announced their intentions to appoint directors to the board, Oplink Communications, Inc (NASDAQ:OPLK) said that it is focused on delivering value for shareholders. The company also said that it has undertaken several initiatives to increase this value, such as increasing its buyback program by $40 million, and initiating a divident payment. Moreover, Oplink said that they planned to expand their board by two members and have been willing to consider Engaged and Voce’s nominees, but the investors refused to participate in the process, leaving the company disappointed with their decision.
Oplink Communications, Inc (NASDAQ:OPLK)’s stock gained around 22% since Engaged iniaited a stake in June. The stock also picked up at the end of October, after the company reported its financial results for the first quarter of its fiscal 2015, posting a 4% on the year increase in revenue to $57.1 million, while its income grew to $0.24 per share, from $0.22 per share a year ago. For the current quarter, the revenue is expected between $58 and $62 million and income in the range between $0.32 and $0.38 per share.
Two other shareholders of Oplink Communications, Inc (NASDAQ:OPLK) are John W. Rogers‘ Ariel Investments and Chuck Royce‘s Royce & Associates, which held around 1.17 and 1.14 million shares as of the end of June, both positions being increased during the second quarter.
Being an activist investor, Mr. Welling previously went activist on Volcano Corporation (NASDAQ:VOLC). At the end of September, the fund raised its stake to 2.64 million shares from 2.02 million shares held previously. With an activist stake of 5.1% of the company’s stock, Mr. Welling sent a letter to the company’s board, accusing it and the management team of damaging the company’s value and expressed its disappointment over the healthcare company’s underperformance.
With this in mind, knowing that activist investors often manage to reach their agenda and significantly improve the situation at a particular company, Oplink Communications, Inc (NASDAQ:OPLK) is a stock worth following. We shall keep track of Engaged and Voce’s next moves and see how they will affect the company’s value.
Disclosure: none

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