JANA Partners Statement on Freshpet’s Ill-Conceived Capital Raise

Rhea-AI Summary

JANA Partners LLC has criticized Freshpet (NASDAQ:FRPT) for its recent equity-linked capital raise announced on March 14, 2023. JANA expressed astonishment at the move, especially while Freshpet's shares are trading at less than 50% of their 52-week high. The firm criticized the board for opting for a larger capital raise than needed and for previously assuring investors against issuing equity due to the low stock price. JANA argues that this decision risks further damage to Freshpet’s credibility and suggests that significant board changes are needed, or the company should consider a sale.

Positive

• None.

Negative

• Underperformed in the stock market with shares trading below 50% of their 52-week high.
• Pursuing a larger equity-linked capital raise than necessary amidst a fragile market.
• Failed to maintain investor confidence after previously assuring against the issuance of equity.
• The capital raise may lead to an immediate decline in stock price, diminishing investor value.

Significant Board Change is Required

NEW YORK--(BUSINESS WIRE)-- JANA Partners LLC (“JANA”) today issued the following statement in response to Freshpet, Inc.’s (“Freshpet” or the “Company”) (NASDAQ:FRPT) equity-linked capital raise announced on March 14, 2023.

“We are astonished that Freshpet’s board has elected to initiate a large equity-linked capital raise in a fragile market reeling from a systemic crisis in the banking system, and with the Company’s shares trading at less than 50% of their 52-week high. Equally baffling is the board’s decision to choose this moment to pursue a substantially larger capital raise than immediately needed.

“We are further perplexed that the board is doing so with an equity-linked security, despite recently assuring investors on multiple occasions that – because it believes their stock is too cheap – it would not issue equity. In fact, the 27.5-32.5% conversion premium targeted by the offering would merely represent Freshpet’s approximate stock price at the time it was making these assurances, but now with the added cost of a coupon. Investors can easily see through the sleight of hand of using capped calls – a tactic that would have the board hand over ~$50 million of the proceeds to its financial advisors.

“The board has again been caught flat-footed, having failed to anticipate the terrible market response to this announcement. As Oppenheimer noted this morning, ‘investors were blindsided.’ Indeed, Freshpet appears poised to see a significant portion of its targeted 27.5-32.5% conversion premium reflected in the immediate stock price decline from this ill-conceived capital raise.

“This decision is the latest failure by Freshpet's board at a time when it could ill afford further damage to its credibility. We believe Freshpet requires either significant board change, or in the absence of such change, should be sold.”

About JANA Partners LLC

JANA Partners LLC was founded in 2001 by Barry Rosenstein. JANA applies a fundamental value discipline to identify undervalued public companies and utilizes shareholder engagement to unlock that value for all shareholders.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230315005529/en/

Media

Gasthalter & Co.

Jonathan Gasthalter/Nathaniel Garnick

JANA@gasthalter.com

Investors

IR@janapartners.com

Source: JANA Partners LLC

FAQ

What did JANA Partners say about Freshpet's recent capital raise?

JANA Partners criticized Freshpet's board for initiating a large equity-linked capital raise in a fragile market, questioning the timing and necessity of the move.

When was Freshpet's capital raise announced?

Freshpet's equity-linked capital raise was announced on March 14, 2023.

How has Freshpet's stock performed in relation to its 52-week high?

Freshpet's shares are currently trading at less than 50% of their 52-week high.

What does JANA Partners suggest regarding Freshpet's board?

JANA Partners suggests that Freshpet requires significant board changes or should consider being sold.

What is the anticipated impact of the capital raise on Freshpet's stock price?

JANA Partners anticipates that Freshpet may experience a significant decline in stock price following the announcement of the capital raise.