HACKENSACK, N.J., April 21, 2020 /PRNewswire/ -- Tang PC investigates GNC's Board of Directors and Management for Possible Fraud and Breach of Fiduciary Duty
Tang PC, a laws firm based in New York and New Jersey announces the investigation of the Board of Directors ("Board") and the senior management ("Management") of GNC Holdings, Inc. (NYSE: GNC) for allegations including, but not limited to fraud and breach of fiduciary duty.
John Tang, Esq., the principal of Tang PC, is a long-term investor with a significant holding of 7.88% of outstanding GNC Holdings, Inc. (NYSE: GNC) class A common stock. John Tang, in concert with a group of individual GNC shareholders across the world, has recently established the GNC Shareholder Advocacy Group ("SAG") to protect and promote the shareholder's interest.
The SAG and Tang PC have received material information and extremely disturbing allegations from multiple credible sources that warrants the aforementioned investigation. Tang PC will investigate the allegations including, but not limited to:
- GNC's Board and Management are not pursuing any readily available options to address the short-term liquidity issue due in May 2020 caused by the coronavirus pandemic as claimed by the Management, and instead are actively working with the lenders on the avoidable bankruptcy filing.
- GNC's Board and Management colludes with the GNC creditors to defraud the shareholders for the purposes of self-enrichment by orderly and gradually sinking GNC into bankruptcy and into the hands of GNC creditors at the minimum cost.
- GNC's Board and Management deliberately rejected several tender offers in the past few years to serve towards the GNC creditors' ultimate goal of stealing the company at the expenses of the shareholders.
- GNC's Management has purposefully not restructured the long-term debt in the best interest of the Company and engineered several default risks in the past few years to facilitate the seemingly inevitable bankruptcy filing in the interest of GNC creditors
- GNC's Management conspires with the GNC creditors to drive down the stock price so that crumbles, if any, to the shareholders from the bankruptcy proceeding constitutes a premium.
- GNC's Board and Management's clear Breach of fiduciary duty owed to the shareholders on the grounds of their numerous actions on record.
GNC's Board and Management are not responsive to Tang PC's letter dated April 19, 2020 that sought their response to those allegations. Tang PC is compelled to instigate the investigation immediately and may expand the scope of the investigation to include other related parties.
Due to the imminent nature of the alleged bankruptcy filing and foreseeable irreparable damages to the shareholders, the shareholders have authorized Tang PC to promptly initiate the lawsuit against the Board, Management and other parties, seeking injunctive and other reliefs.
Tang PC Proposes the Public Sale of GNC
Tang PC, on behalf of the shareholders, proposes the sale of GNC on the grounds as follows:
GNC's true and fair value can only be determined and unlocked by the public sale. GNC is a leading global powerhouse of health and nutritional products with revenue of $2.07 billion, EBITDA of $191.8 million and net cash flow of $96.5 million in 2019. GNC has approximately $100 million in cash, $45 million receivable from IVC and $871.2 million in debt as of today. In the United States, the average value of enterprise value to EBITDA (EV/EBITDA) in the retail and trade sector as of 2020 was a multiple of approximately 13.4x, 22.8x for online retail. A more conservative multiple of 10 would still give GNC an enterprise value of $1.918 billion and a net value of $1.19 billion after cash and debt, not counting China joint venture. By contrast GNC's current market capitalization is less than $35 million.
GNC has never been offered for sale but nevertheless has seen several attempts of acquisition in the past. A public sale of GNC could attract companies like P&G (PG), Nestle (NSRGY), Hershey's (HSY), Amazon (AMZN) and other health/nutritional products companies domestic or international. The right buyer has the opportunity to acquire GNC at a low price, financing through the issuance of low yield bond or low interest loan.
The public sale is the only way to protect the shareholders from the possible collusion of the insiders, including the Board and Management, the creditors and CITIC/Harbin Pharmaceutical. CITIC/Harbin completed the $300 million investment for preferred stock to be converted to 40% of GNC common stock at $5.35/share. Currently CITIC/Harbin has 5 directors. A backroom deal will embolden the Board and Management to push for the unnecessary bankruptcy. The insiders will reap all the benefits of the bankruptcy, wiping out or greatly diluting the shareholders' stake. As the result, the insiders would own the debt-free GNC for less than $1 billion.
The public sale is warranted by the complete loss of confidence in the Board and Management. There shall be no doubt that this Board and Management do not serve the best interest of the shareholders. GNC's stock performance may not reflect the true value of GNC but it does indicate the ineptness of the Board and Management. Despite the mismanagement of GNC and constant injection of uncertainty and confusion in the market by the surprising, misleading and conflicting press releases one after another, the Board and Management rewarded themselves with $250K compensation to the directors and multiple million compensation to the Management when the GNC stock becomes penny stock and the employees earn minimum wages.
Tang PC (www.gettang.com) is a law firm committed to providing premium legal services to clients across the world. GNC SAG is a shareholder advocacy group organized by John Tang, Esq.
SOURCE Tang PC