Ancora Sends Open Letter to the Board of Directors of Green Plains Regarding the Apparent Misconduct and Evident Failings of 15-Year CEO Todd Becker
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Questions How Mr. Becker and His Direct Reports Were Allowed to Sell Millions of Dollars of Stock Halfway Through a Disastrous Second Quarter Prior to Updating Disclosures to Inform the Market of the Material Impact of the Tragic Wood River Plant Explosion
Releases July 11th Letter to the Board, Which Raised Concerns About Mr. Becker’s Curiously-Timed Stock Sales, Lack of Operational and Safety Acumen, Outdated Leadership Style and Shocking Claim of Being Insulated from Shareholder Accountability
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August 7, 2023
Green Plains Inc.
The Board of Directors
1811 Aksarben Drive
Subject: Follow-Up to Unaddressed July 11th Letter Regarding Todd Becker’s Apparent Misconduct and Evident Underperformance
Members of the Board of Directors,
Ancora Holdings Group, LLC (together with its affiliates, “Ancora” or “we”) owns nearly
Our July 11th letter, which followed extensive diligence and our own investigation, raised concerns about Mr. Becker’s curiously-timed stock sales, lack of operational and safety acumen, outdated leadership style and shocking claims of being insulated from shareholder accountability by BlackRock, Inc., which is the Company’s largest investor and a major partner on the Fluid Quip Technologies, LLC (“Fluid Quip”) transaction. In the letter, we expressed trepidation about Mr. Becker leading Green Plains down a path of value destruction and squandering the seemingly strong position the Company held at the start of 2023. Now that the Company has disclosed dismal second quarter results that include an incomprehensible loss of
This would not be the first time that shareholders have suffered the consequences of Mr. Becker masquerading as a commodities trader. In the fourth quarter of 2021, his errant hedging and trading likely cost the Company
After seeing Green Plains’ abysmal second quarter results, we find it outrageous that the Board allowed the window to be opened – roughly halfway into the period and ahead of updated disclosures – to allow Mr. Becker and direct reports to sell millions of dollars in shares. We assume Mr. Becker and his reports had enough data by then to determine that Green Plains would miss expectations for the second quarter, particularly given the ultimate magnitude of the Company’s losses. We also question if management had material non-public information pertaining to botched hedges and the sizable impact of the Wood River plant explosion in April. The Company’s 10-Q for the first quarter stated “[w]e do not currently believe the incident will have a material impact on our consolidated financial statements,” and Chief Financial Officer Jim Stark told shareholders on a May conference call to expect a “minor impact.” Nevertheless, Mr. Becker said last week the “significant impact of our
When we first asked Mr. Becker about the timing of his approximately
While Mr. Becker is a talented marketer and salesman, he clearly lacks the forecasting abilities, operational acumen, safety pedigree and judgement to lead Green Plains going forward. As the Company’s value has declined over the past two years, it has routinely missed analysts’ consensus targets while failing to meet goals to integrate Fluid Quip across 11 facilities (now it is a mere seven) and losing talent to competitors. Our interviews with more than 20 recently departed employees suggest that management’s errors in execution stem, in large part, from Mr. Becker’s “old boys club” culture and desire to run Green Plains like a wet mill.
Although Mr. Becker has probably told you we are focused on short-term returns, the reality is we are a long-term investor in Green Plains, and we intend to remain one. We are passionate about the Company and know it has exceptional assets that can produce tremendous value for customers, shareholders and other stakeholders. However, Mr. Becker is on track to destroy a great deal of that value as a result of his hubris. Each of you probably knows deep down that his risk-filled vision far exceeds his ability.
In closing, rather than waste valuable time, we urge you to take one of the following steps to protect shareholders’ interests:
- Announce a succession plan to replace Mr. Becker, whose role can be filled on an interim basis by one of the experienced operators on the Board or within the organization. We believe that this is the right preliminary anecdote to Mr. Becker’s poisonous leadership. From there, the Board can take the time to interview internal and external candidates and work with a nationally-recognized search firm to find a true operator to lead Green Plains.
- Form a special committee of independent directors to run a disclosed review of strategic alternatives, including off-take transactions and sale options. If the Board wants to take the risk of keeping Mr. Becker for any extended period, it owes it to shareholders to run a review process that evaluates near-term opportunities to maximize value relative to the long-term potential offered by management’s plan. There is no need to wait for the outcome of the internalization of Green Plains Partners LP when shareholders face such large risks today. We have been contacted by parties who are interested in having conversations with the Company, but have been rebuffed. One of these parties is a Fortune 10 business with immense resources to compensate Green Plains’ shareholders and accelerate the Company’s mission.
In addition to taking one of the aforementioned steps, the Board should authorize the Audit Committee to commence a disclosed, independent investigation into management’s stock sales and potential violations of corporate policies (which we have worked with leading litigation counsel to review). The Board also needs to take the logical step of forming a Risk Management and Hedging Committee to ensure shareholders do not suffer more from under-supervised forays into trading. We believe it will be a failure in oversight on the part of the Board if it does not investigate Mr. Becker and management. We do not see how Ancora, or other shareholders we have heard from, can get comfortable with Mr. Becker remaining in place without the Board taking decisive action.
If you would like to speak prior to our scheduled meeting, we will make ourselves available.
Sincerely,
Frederick D. DiSanto |
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James Chadwick |
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Chairman and Chief Executive Officer |
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President |
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Ancora Holdings Group LLC |
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Ancora Alternatives LLC |
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APPENDIX A
July 11, 2023
Sent via E-mail
c/o Corporate Secretary
Green Plains Inc.
1811 Aksarben Drive
Attn: The Independent Members of the Board of Directors
Subject: The Urgent Need to Install an Operationally-Focused CEO or Initiate a Review of Strategic Alternatives
Independent Members of the Board of Directors (the “Board”):
Ancora Holdings Group, LLC (together with its affiliates, “Ancora” or “we”) is a top shareholder of Green Plains Inc. (“Green Plains” or the “Company”), with a beneficial ownership of approximately
Unfortunately for Green Plains’ shareholders, a lot has changed – for the worse – over the past six months. The Company’s setbacks and lapses lead us to believe that Mr. Becker, who has a trading and sales background, is ill-suited to continue serving as Chief Executive Officer. Based on direct interactions and a recent evaluation of Mr. Becker, we have concluded he lacks the alignment, operational experience and judgement to continue leading a risky, years-long transformation in the public market. As the Board is well aware, Mr. Becker owns the timeline for Green Plains’ transformation program, including advancing up the J curve for higher protein concentrations with better unit economics and commercializing adjacent products, including clean sugar from the Fluid Quip Technologies, LLC (“Fluid Quip”) acquisition. On both accounts and in terms of the significant delays in completing conversions, Mr. Becker has clearly failed. We, therefore, urge the Board to either replace Mr. Becker with a qualified operator or publicly commit to reviewing strategic alternatives. Please note that we have spoken to several strategic acquirers, including ones who would submit all-cash offers at large premiums if Green Plains ran a legitimate process that invited proposals.
Although Mr. Becker’s view of us seems to have soured and he will likely tell you to dismiss our views, regardless of our status as a top shareholder, we do not see how the Board can ignore the following:
- Since acquiring a substantial stake in Fluid Quip in 2021, management has consistently failed to meet its own timelines for production milestones and strategic initiatives. After announcing it expected to realize the full benefits of Green Plains’ new strategy in 2024, management had to delay the timeline until 2025. It is equally disappointing that (i.) plans to achieve higher protein concentrations have not materialized yet, (ii.) partnerships with Riverence and Novozymes have not yet produced meaningful benefits, (iii.) clean sugar appears to be well behind schedule, and (iv.) Fluid Quip’s MSC technology is only being rolled out at eight or nine of the Company’s 11 facilities, rather than at all facilities as initially envisioned.
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Over the past nine quarters, Green Plains has missed analysts’ consensus estimates seven times – indicating management’s inability to set reliable guidance and establish credibility with Wall Street. We find it very concerning that management put up such disappointing results with the tailwind of strong ethanol fundamentals at its back. As detailed in the following chart, Green Plains’ current consensus EBITDA has consistently dropped since this time last year, including a
50% + decline in expected 2023 EBITDA.EBITDA 2023 % Change 2024 % Change 2025 % Change 5/9/2023 $144.8 $332.1 $461.6 4/28/2023 $199.6 -
27.5% $344.1 -
3.5% $462.0 -
0.1% 2/28/2023 $215.3 -
32.7% $352.0 -
5.7% $467.4 -
1.2% 1/31/2023 $240.7 -
39.8% $361.6 -
8.2% $480.3 -
3.9% 12/31/2022 $251.3 -
42.4% $367.6 -
9.7% $489.3 -
5.7% 6/30/2022 $319.8 -
54.7% $426.0 -
22.0% $521.5 -
11.5% -
There has been a concerning uptick in employee turnover and leadership – forcing shareholders to question whether Mr. Becker can maintain a collegial, productive culture. We have interviewed more than 20 former employees, each of whom departed from Green Plains during Mr. Becker’s tenure as Chief Executive Officer. A number of employees, particularly female employees, were uncomfortable with Mr. Becker’s “old boys club” culture and desire to run Green Plains like a wet mill. It is not lost on anyone that Green Plains’ leadership team is
90% male, with no ethnic diversity and only a lone female executive in a legal role. - The death and injuries at the Wood River ethanol plant are suggestive of management’s inattentiveness to workplace safety. Given that the Company publicly stated it was running a full investigation in April, we question why an update to shareholders and stakeholders has yet to come. A full list of remedial actions and new safety practices should have been communicated by now.
On top of these issues, Mr. Becker has sold shares multiple times in recent months—demonstrating an apparent lack of confidence in Green Plains’ prospects. We can only assume Mr. Becker took the opportunity to cash in because he feels insulated from accountability and inspection. To that point, he has repeatedly indicated to us that his relationship with Blackrock, Inc. (“Blackrock”) would prevent any investor from winning a proxy contest. We doubt Blackrock would appreciate Mr. Becker saying he “has Blackrock” and talking about the world’s largest asset manager like it is in his back pocket. He is evidently unaware that Blackrock’s conflict group would have to handle voting decisions pertaining to a contested election at Green Plains in light of the Fluid Quip partnership. He is also seemingly unaware of his extremely unimpressive
As part of our interviewing process and discussions with interested strategic parties, we also learned that Mr. Becker is likely the primary reason an off-take transaction was not consummated with [REDACTED]. We further believe he is the primary impediment to a credible review of all alternatives (either due to unrealistic valuation expectations or just general lack of alignment with shareholders, as evidenced by his selling of shares multiple times in May 2023). The insider selling is particularly troubling, as just days before selling shares, Mr. Becker expressed confidence that the Company will generate a commercial customer for clean sugar in the next six months. That event actually transpiring could potentially be a game changer for the Company. The divergence between what Mr. Becker’s does and says has gotten old. This latest contradiction is more of the same from Mr. Becker, who seems more akin to carnival barker than a Chief Executive Officer.
In our view, Mr. Becker’s background as a trader and salesman – rather than a true operator – is ill-suited for a complex, ongoing transformation. Ancora, which intends to remain a long-term shareholder of Green Plains, is not alone in believing the Company needs to either replace Mr. Becker or finally run an alternatives process to objectively evaluate the significant interest from strategic acquirers. This is why we firmly believe the points laid out in this letter must be taken very seriously by the Board and discussed in Executive Session.
As offered in the past, we welcome the opportunity to present our analysis to the Board, and we are eager to provide recommendations to enhance shareholder and stakeholder value.
Sincerely,
Frederick D. DiSanto |
James Chadwick |
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Chairman and Chief Executive Officer |
President |
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Ancora Holdings Group LLC |
Ancora Alternatives LLC |
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About Ancora
Founded in 2003, Ancora Holdings Group, LLC offers integrated investment advisory, wealth management and retirement plan services to individuals and institutions across
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Longacre Square Partners
Greg Marose / Scott Deveau, 646-386-0091
ancora@longacresquare.com
Source: Ancora Holdings Group, LLC
FAQ
Who sold millions of dollars of stock during the second quarter?
What was the impact of the Wood River plant explosion?
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