War of Words Continues Between Big 5 Sporting Goods Corporation (BGFV), Stadium Capital

It seems that Big 5 Sporting Goods Corporation (NASDAQ:BGFV) and Alexander Medina Seaver‘s Stadium Capital Management, are at an impasse. A series of letters sent between the representatives of both sides continues to display their recent inability to find common ground concerning the governance of the sporting goods retailer’s board. Stadium Capital is Big 5’s largest shareholder among institutional investors, with ownership of 11.3% of their Common Shares; 2.51 million to be precise.

Stadium Capital is a small hedge fund with offices in Bend, Oregon and New Canaan, Connecticut, which manages a number of client-focused equity portfolios. The fund was founded in 1997 by Seaver, who has both a BA in Economics from Harvard and an MBA from Stanford. The fund’s equity portfolio was valued at $315 million as of September 30, with Big 5 representing the sixth most valuable position in it at $23.5 million, 7.46% of the portfolio’s total value.

We reported on the escalating war of words on January 22, one day after Stadium Capital’s Dominic Demarco, who was elected to the board of Big 5 in October 2011, sent a scathing letter to Big 5’s Chairman Steven Miller. In it, he criticized both the board’s decision to create a “Super Committee” that would have the full power of board, while excluding only Demarco, as well as their justification for doing so, which claimed he had a conflict of interest with other non-management stockholders. Demarco flatly denied those allegations, calling them “absurd”.

On January 30, Miller sent Demarco a response, speaking on behalf of the entire Board of Directors. In it, he expressed surprise at Demarco’s chagrin over the “Super Committee”, claiming it was in fact a means for the board to consider the various proposals made by Stadium and to better coordinate with them. He further went on to state that the “Super Committee” was formed as a result of Stadium’s own aggressive actions, in which they tried to bypass the natural review process under which Big 5 Sporting Goods Corporation (NASDAQ:BGFV)’s board would have reviewed the three proposals submitted by Stadium in October, 2014, by filing a Rule 14a-8 stockholder proposal in December.

Miller again claimed that Demarco’s interests were not for the benefit of all shareholders, but only to Staidum Capital and its investors. He added that the fact Demarco was sharing confidential board matters with the public only reinforced their need for a special committee that excludes him.