RANDOLPH, Mass. and AMSTERDAM, June 26, 2014 /PRNewswire/ -- JEC Capital Partners and Ratio Capital Partners, who together own 9.8% of Synacor's common stock, issued an open letter to the Board of Directors of Synacor demanding that the Company immediately be put up for sale.
The full text of the letter is below:
Dear Board of Directors:
We would like to thank your Chairman, Jordan Levy, for the dialogue over the past few days. Unfortunately, the only thing Mr. Levy said that we ultimately agreed with is that the Board is not proud of the poor operating results and that those results have led to a massive destruction in shareholder value.
At Synacor's most recent annual meeting, the two directors 'elected' each received an astonishingly low 45% of 'Votes For'. This is the result of the Board's failure of leadership, which is plainly evidenced by:
- Synacor's share price performance, which has dropped over 50% since its IPO and has lagged every comparable peer, metric, and index.
- Synacor's revenue, which has declined steadily from $122M in 2012 to the 2014 guidance of $100M.
- Synacor's cash balance, which has declined steadily from $43M in 2012 to $33M at the end of the most recent quarter.
- Synacor's R&D spend, which was $73M in aggregate from 2011 through 2013. Including the anticipated 2014 R&D spend, the number jumps to $103M or 2.8 times the current enterprise value.
- Synacor's corporate communications regarding its strategy. With no clear strategy, the share price reflects the track record of irresponsible cost expenditures and missed opportunities for growth.
- The Board's inexplicable decision to announce a CEO transition publicly with no succession plan and its decision to give the out-going CEO an above-market exit package.
We do not believe there is a realistic chance for improvement from a change in CEO.
Our request of the Board is simple and straightforward. We ask that you halt the search for a CEO and instead engage an investment banker to pursue strategic alternatives. We are confident that Synacor will have serious interest from multiple parties at prices far in excess of the current share price. We are also confident that the majority of Synacor's shareholders are in support of an open and formal sale process. We are not the only shareholders taking notice and we understand that this message has been communicated to the Board repeatedly by numerous shareholders.
Investors, analysts, and industry sources attribute the Board's indifference towards interested buyers to your Chairman, Jordan Levy's, self-interested and civic-minded agenda to maintain the headquarters of a public technology company in Buffalo, NY. If, on the other hand, the Board has determined that the value opportunity from an autonomous path, with a fully-burdened R&D spend and after adjusting for execution risk and time, exceeds the value from an immediate sale, we ask that the Board clearly and publicly articulate how it arrived at that conclusion. We believe that the reason no such strategy has been disclosed is that one does not exist. As a result, we do not believe there is a realistic chance of shareholder value creation from operating autonomously and Synacor has zero chance of retaining a world-class CEO who can regain some of the shareholder value that has been squandered.
We are confident that a properly run strategic review process will significantly enhance shareholder value above the current share price. Consequently, the Board should halt the CEO search and immediately take the necessary steps to commence a formal process to fully explore the sale of Synacor to the highest bidder.
JEC Capital Partners
Ratio Capital Management
SOURCE JEC Capital Partners