Combine a beaten-down stock price, a once-strong brand and a failed turnaround with the exit of some of the company's biggest shareholders, and you have a situation sure to attract the interest of some activist investors.
Major shareholders Wellington Management Co., TCW Group Inc., and Maverick Capital Ltd. have all disposed of large stakes in Circuit City (NYSE: CC) recently, likely contributing to the rapid decline in the share price.
These holders have been replaced by less passive investors, including D.E. Shaw & Co, HBK Investments, and Wattles Capital Management. All three firms have a track record of sparring with management/boards of directors for control of companies, and Wattles has already nominated five people to the company's board of directors.
The company told The Wall Street Journal that (subscription required) it believes it has "a good, strong, diverse and independent board." But given that the share price has lost more than 6/7th of its value over the past few years, you have to shudder to think about what might have happened if the board wasn't so wonderful. Either that, or you have to question Circuit City's defense of its board.
Given that the activists control a significant stake in the company and the company's poor track record, it will be difficult for the company to resist change in the boardroom/executive suite. Whether change will be enough to resuscitate this increasingly irrelevant brand remains to be seen.
Circuit City attracts activist investors
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Reader Comments (Page 1 of 1)
3-27-2008 @ 7:50AM
johndawson_23467 said...
03.28.2008
Small investors like me, as well as large institutions like Wattles Investments, are extremely dissatisfied with CC CEO Schoonover and Schoonover's hand picked "do nothing" cronies currently comprising supposedly independent majority of CC Board of Directors.
Read CC's news reports and CC SEC filings (especially since December 2007 to present) and a blind person sees that Schoonover and his selected group of EVP and SVP gross mismanagers are stuffing their collective pockets at shaeholder expense with low price goal stock options (Schoonover) and retention bonuses ranging from $600K for SVP's to $1M for EVP's. Retention bonuses vest in 1/3 installments over three years. All this incompetent mismanagement group has to do is stay another three years to collect retention bonuses in full- but that optimistically assumes CC is still breathing in another three years.
The only positive CC news recently was news that architect of CC ongoing sales debacle (less sales every quarter and increased financial losses every quarter) finally left his COO position is Janaury. Good riddence; hopefully the next to go is Schoonover and cadre of remaining cronies.
The only way to finally fire Schoonover is to replace a majority of CC current Board of Directors. At CC upcoming June 2008 annual shareholder meeting a majority of newly elected board members will quickly show Schoonover and remaining senior level associates the exit door.
Current CC Board of Directors had plentiful opportunities to take corrective actions to turn around existing CC mess that Schoonover is largely responsible for creating.
Classic example of CC ongoing mismanagement was CC firing sales employees because employees made on average .50 cents an hour more than CC HR determined was industry average. Result was experienced sales staff left CC and now works for Best Buy. I cannot blame them for jumping at opportunity to work for Best Buy. Who in their financial right mind would choose to stay with CC increasingly fast sinking ship?
I'm voting FOR Wattle Investment's nominated slate of new CC directors. Why? Because any new director is an IMPROVEMENT over CC current crop of "hear nothing, see nothing and do nothing" board members who routinely failed miserably to exercise even minimal corporate governance.
My post Car Max spin-off adjusted cost of 600 shares CC stock is $22.15 per share. Currently CC stock trades in
$3.50 - $4.00 range. A great ROI on initial investment is it not?
Time for a much needed change at CC- starting first with deservedly replacing "rubber stamp" CC board members.
John Dawson
An all too long CC Investor
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