Happy weekend guys and let us in, or else it's proxy war. On Friday the Clinton Group and Imation, both stockholders of Violin Memory, sent a forceful letter to Violin's Board about the ongoing sale process and a need for dialogue.
Imation is controlled by the Clinton Group.
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The two companies believe that troubled Violin Memory should be sold to a strategic buyer and expect the sale search process to conclude in the next month.
Both say they would expect Violin’s board “to engage in meaningful discussions about the Company's options with its largest common shareholders and bondholders to decide the fate of the Company.” They should be given confidentiality agreements and allowed to voice opinions on the sale proposals.
The Clinton Group has previously said it intends to nominate three candidates to Violin’s board at the upcoming annual meeting.
The letter says; “Shareholders should not bear the brunt of a Board of Directors and executive team that may be desirous of preserving their own interests by pursuing an ill-fated standalone plan while continuing to enrich themselves with annual compensation and equity grants.”
The writers say; ”The track record of [Violin’s] management team and Board of Directors speaks for itself, and unbiased stakeholders should decide the fate of this Company.“
Imation, the Clinton Group and others - Ralph Schmitt, Michael Wall, and Alex Spiro - intend to make an SEC proxy statement filing for Violin shareholders at the AGM. It will contain important additional information “related to the participants.”
Violin shareholders would be encouraged by the proxy statement to vote in favour of the Clinton-Imation proposals and against the Violin Memory board's own proposals at the meeting.
A Clinton Group investment fund recently received $20m in cash from Imation.
Ralph Schmitt was the CEO of failed SSD maker OCZ when it was sold to Toshiba. He came in to pick up the pieces after the previous CEO was forced out.
Michael Wall was Amplidata’s CEO when it was sold to Western Digital. Alexo Spiro is an attorney and Imation board member.
Here's a thought; Violin's share price is $0.794 and its market capitalisation is $76.5m. The $20m that Imation put into the Clinton Group investment fund represented 25 per cent of its excess cash, meaning the total was $80m - more than Violin's current market capitalisation.
Could the Clinton Group and Imation mount a takeover bid for Violin Memory?
Imation NYSE delisting
In related news Imation has been threatened with delisting by the New York Stock Exchange because its average share price has been less than $1 over a 30-day period. The company has six months to fix this, after which a share suspension process will be started. We might expect a reverse stock split or similar action to get the stock price up above the $1 limit.
However Imation is also facing NYSE delisting because its own market capitalisation has fallen below $50m over a 30-day period, and reverse stock splits won't fix that.
Back to Violin. The Clinton Group seems to think that Violin could decide not to sell itself and try to make it through to recovery on its own. Violin’s board appears not to be talking to the Clinton Group, hence the letter and proxy filing, which is designed to encourage Violin’s board into a dialogue now or force one after the AGM through having Clinton Group nominees on Violin’s board.
That will cause a few anxious phone calls over the weekend. ®