In a new 13D filing with the SEC reported in the last few minutes, activist firm Clinton Group disclosed a 5.8% stake in ValueVision Media Inc (NASDAQ:VVTV). In a separate letter sent to the electronic retailer’s Chairman Randy Ronning, Clinton discusses a few ways to “enhance” shareholder value at the company.
Here are a few highlights from that letter:
“As we have indicated to you, we believe the Company has great assets, a big opportunity for growth and a chance to create significant shareholder value. In particular, we believe the Company’s uncommon asset, its ubiquitous cable and satellite distribution, is valuable but under-exploited. Despite cable and satellite distribution that is nearly as good as that of HSN, the Company’s enterprise value is about one-tenth that of HSN.”
“Instead, as we have said, we believe that the Company has exploited that asset poorly and has dramatically under-performed its direct rivals, to say nothing of the Company’s potential. When Keith Stewart, the Company’s Chief Executive Officer, joined the Company, he declared that he was “going to change” the Company’s “business model” and its “poor execution.” Neither has happened.”
“Instead, Mr. Stewart missed nearly every long-term projection and metric he offered during his tenure. As we noted, for example, his publicly stated goal was to create a company with more than $1 billion in revenue with 8-12% EBITDA margins by now. He missed both targets by a country mile.”
“In the meantime, as we have discussed with you, we believe the Company has fallen further behind its competitors in terms of market share (of both revenue and gross profit dollars) and has failed to return to pre-recession levels of revenue, unlike most retailers, eCommerce companies and both of its home shopping network rivals. This performance gap has been caused, in our view, by a failure to innovate and differentiate the Company from its peers and repeated failures to hit customer count, penetration rate, distribution cost, operating expense and profit targets over the past four years. Mr. Stewart and his management team, many of whom we understand work from home, 1000 miles or more from the Company’s headquarters at least two days per week, have in our view abjectly failed to build significant proprietary brands, expand product assortments sufficiently, diversify the program schedule, optimize the product mix and retain key successful vendors. Recently, the Company – which refers to itself as a “multi-channel retailer” – was ranked dead last among such companies for its mobile website.”
“Accordingly, as we have said to you, we believe the Board should replace Mr. Stewart to enhance operational performance and to pursue a new strategic path. We advocate this not because we are ungrateful to Mr. Stewart for his past stewardship of the Company, but rather because gratefulness has no place in picking the future leader of ValueVision. The Board’s obligation, it seems to us, is to ensure the Company has the right leader for the future: a leader with entrepreneurial energy; strategic vision; a track record of operational excellence and exceptional performance; and credibility with investors, vendors and employees. We do not believe that person is Mr. Stewart.”
“That said, with the existing Board’s approval and subject to the completion of due diligence, we would be prepared to put our capital where our mouth is. We would be pleased to make a fresh, primary, minority investment in the Company of at least $25 million at a substantial premium to the stock price if the Board would accept our recommendation and replace Mr. Stewart and upgrade the Board significantly. We are aware of several other industry players and investors who would strongly consider investing alongside us in such a transaction and we would be pleased to have any other public or private investor join us, for example, in a rights offering, in helping to fund a new era of growth and profitability at the Company, under the direction of new, world-class leadership. We would be very surprised if the team we have in mind could not attract significant capital at a substantial premium.”