TSR Inc (NASDAQ:TSRI) is a small computer staffing company in Long Island. This week, Daniel Zeff’s Zeff Capital sent a troubling letter “expressing the continued grave concerns of the Reporting Persons that the Board is acting in a manner that is not consistent with shareholder interests and further expressing serious concerns about a lack of proper internal controls, in addition to troubling questions about the Board’s commitment to required transparency.
The letter included the following statements:
“In the last three months, TSR has added four new directors (none of whom own any stock), imposed an onerous and uncustomary poison pill, amended the Company’s bylaws to eliminate the ability of stockholders to call special meetings, failed to appropriately report the disagreements of a director who chose to resign, and increased both the salary and bonus of the CEO so that he now makes more than TSR’s total net income. There has been no report on the progress of the Special Committee.
As you know, the CEO was promoted in July 2017, well over a year ago, and there is no evidence that he is capable of (or interested in) improving stockholder value. On the contrary, the CEO is primarily focused on lining his own pockets, just like his predecessor. TSR reported that revenues and consultants on billing declined in the fourth quarter. Shareholder value is being destroyed.
We truly hope that the recently added Board members, including Ira Cohen and Joe Pennacchio, who are purportedly there to assist the Special Committee in its evaluations, will convince the other Board members (and the existing Special Committee members, including you and Brian Mangan) of the necessary actions to take to maximize stockholder value. We are also of the belief that the new Board members are aware of the value of TSR. It is time for the Board to act to preserve stockholder value before further damage is done.”
I don’t want to spend too much time on this tiny company that had only 54 shareholders at the end of June. However, I have a feeling that Zeff Capital isn’t telling the whole story, so I went through TSR Inc (NASDAQ:TSRI)’s 10-K. The company has no debt and about $5.5 million in cash and another $7.5 million or so in accounts receivables. So, if the company shuts the doors today, it will have about $13 million in assets. Its stock closed at $7.43 on Friday, corresponding to a market cap of slightly more than $14 million.
That’s interesting because Zeff Capital offered to buy TS for $6.15 a share a year ago and recently purchased shares from TSR founder Joseph Hughes and his wife who are parents of the company’s current CEO for a price of $6.25 per share. Basically, Zeff Capital wants to pay the company whatever liquid assets (cash, marketable securities and accounts receivables) it has, and take over the underlying business for free.
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The only recommendation we have for our readers is that they should stay away from company. It shouldn’t have been a publicly traded stock. The founders should have borrowed some money and taken the company private long-time ago.
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