The Donerail Group Releases Correspondences That Expose the Turtle Beach Board’s Lack of Credibility
The Donerail Group LP, a significant shareholder of Turtle Beach Corporation (NASDAQ: HEAR), owns approximately 8.5% of its shares and is advocating for a complete board change due to perceived poor governance and underperformance. They assert that the current board has failed in operational and strategic management, as evidenced by a 65% decline in share value, dwindling revenue growth, and halved EBITDA margins. The Donerail Group also alleges that the board has not adequately engaged with potential acquirers and urges shareholders to vote for their proposed slate of directors using the WHITE proxy card.
- Donerail Group owns 8.5% of Turtle Beach shares, indicating significant shareholder influence.
- Donerail aims to replace the board with qualified candidates focused on shareholder interests.
- Turtle Beach shares have declined over 65%, indicating substantial underperformance.
- Total shareholder return has underperformed its peers by more than 200%.
- EBITDA margin has reduced by 50%, reflecting decreasing profitability.
- Revenue growth has stagnated at 0%, raising concerns about future financial health.
- The company has written down over $100 million in past investments, signaling significant financial missteps.
Believes That Shareholders Will Read Written Correspondence and Recognize the Current Board is Entrenched and Refused Potential
Notes Turtle Beach Alleges Donerail Has Made “Omissions” Regarding Engagement, So Donerail Is Compelled to Release Emails and Private Letter to Correct the Record
Reinforces That Change is Badly Needed and Urges Shareholders to Vote the WHITE Proxy Card TODAY to Elect Donerail’s Full Slate of Highly Qualified Directors
***
Dear Fellow Shareholders,
Today is an important day for all
When the current CEO,
- The Company’s total shareholder return (TSR) has underperformed its own industry peer set by more than
- EBITDA margin, a widely regarded metric for corporate profitability, has been cut in half2
- Revenue growth has slowed to
- The Company has written down more than
We believe that shareholders should have no doubt: the current leadership team has failed shareholders, and the current Board has simply not held management accountable. The Board needs a full reset with highly qualified directors who are committed to ensuring the best interests of shareholders are paramount at
In addition to the critical function of selecting Company leadership, Turtle Beach’s Board is also responsible for engaging with bona fide potential acquirors of the Company to explore whether immediate, certain, and attractive risk-adjusted value can be achieved for shareholders.
We believe that there are multiple parties that would be willing to acquire
As has been reported publicly, we have historically made attempts to acquire the entirety of
Rather than attempt to address each of the Board’s misstatements about us, we believe that shareholders deserve the right to judge for themselves who has been misstating the record.
As such, we are including with this press release the following correspondences with
-
A private letter that we sent to a subset of the Board in
August 2021 that comprehensively details our efforts to acquire the Company over the summer of 2021; and
- Emails that we sent to the Company and its representatives this past winter in which we requested to sign an NDA to receive confidential information.
We encourage all shareholders to read these emails and assess for yourselves if i) we attempted to put our best foot forward; ii) if you, as a shareholder, would have wanted the Board to engage with us in a constructive fashion; and iii) if this is the Board that you want to be watching out for your interests.
If, after reading these emails, it is not yet clear that the current Board is highly conflicted and entrenched, we would encourage you to pay special attention to the information that we will be releasing in the coming weeks. We believe that by the Annual Meeting on
As one of the largest shareholders of the Company, we have partnered up with another large shareholder of
Such candidates represent the best and brightest in their fields and have historical experience in video game operations, marketing, brand-building, capital allocation and M&A. Importantly, each prospective member of the Board brings a commitment to integrity and transparency. Please feel free to learn more about each of our nominees to the Board at www.ResetTurtleBeach.com.
Today is the day to vote for change, and we encourage you to do so immediately herein:
We urge you to vote the WHITE proxy card to send the message to Turtle Beach Corporation’s leadership and Board that shareholders deserve better. Vote the WHITE proxy card TODAY to support a superior slate of highly qualified individuals, who will be better stewards of your investment. Please vote each and every WHITE proxy card you receive, as you may own shares in more than one account. If you voted a Blue card from
Sincerely,
Managing Partner
The emails below include the more notable interactions between Donerail, the Company, and its representatives regarding Donerail’s
From: Wyatt, William
Sent:
To: Hung, Yie-Hsin
Cc: [REDACTED]
Subject: RE: Donerail: NB LOI to Acquire Turtle Beach
Yie-Hsin,
As we have committed to do, please find attached an NDA for your counsel’s review. Executing this NDA will allow us to progress in our acquisition efforts to acquire the Company at an attractive price for all shareholders.
To show a sign of good faith, we chose to take the Turtle Beach NDA template that you have previously provided us and edit it appropriately. To expedite matters and minimize unproductive back-and-forth, we have requested Olshan to revise your document in accordance with precedent NDAs that Olshan has seen whereby a shareholder is interested in both i) potentially acquiring the company; and ii) keen to reserve the right to nominate directors at an upcoming annual meeting. They have done so.
Nothing in this document should be out of the ordinary, and if you have any questions, [REDACTED] should feel free to direct to them to [REDACTED].
In response to Mr. Song’s additional requests found in his
Unfortunately, the Company’s proven willingness to publish select information that we have provided – in a presumed effort to discredit our offer – has now limited the amount of information that we can provide to you ahead of an NDA being signed. I’m sure you understand. In the spirit of being productive and answering a question where we can, however, we are willing to detail that our expected diligence period for operational matters will be less than 30 days.
Lastly, as it relates to our revised offer, we admit that we do find ourselves in a highly regrettable position. As you know, we have not been supportive of certain actions of this Board and its representatives since we began engagement. This earned distrust of the Board married with the clear recognition that your largest shareholders have reported confusion about actions you are (or aren’t) taking to optimize shareholder value mandates that we require public clarity before allocating the meaningful time, energy and resources in our effort to acquire the Company.
This Board publicly announcing that a transparent and robust Strategic Review process is underway is the only thing that will afford us the confidence to enter into this NDA with you and to negotiate a transaction in good faith.
Our revised offer price stands at a
Since that news,
We are standing by to expeditiously move forward subject to the above, and our entire team has allocated the time to work over the holidays to quickly complete diligence, negotiate and announce a transaction.
Will
***
From: Wyatt, William
Sent:
To: Hung, Yie-Hsin
Cc: [REDACTED]
Subject: Re: Donerail: NB LOI to Acquire Turtle Beach
Circling back on the below request.
As noted, we are keen to enter the data room, we believe time is of the essence, and we are anxiously awaiting the opportunity to finalize our diligence and negotiate and announce a transaction.
We continue to stand by - please let us know if anything is requested from us.
Will
***
From: Song, Steve
Sent:
To: Wyatt, William
Cc: [REDACTED]
Subject: RE: Donerail: NB LOI to Acquire Turtle Beach
Will,
The Board of
- Additional details of your financing plan to acquire the Company, including a breakdown of expected sources of funds that would be dedicated towards an acquisition of the Company and their amounts, that in the aggregate, provide sufficient funding for the equity purchase price of the proposal (a customary sources and uses table). Please attach any unredacted documentation that provide support of such financing plan.
- The identities and contact information of the parties providing each component of financing, so that the financing plan as laid out above can be verified.
- Proposed timeline (that further describes “as promptly as practicable”) to complete your due diligence and to consummate a transaction, including a description of any material conditions affecting your timing.
- An unredacted request list you need to complete your due diligence, that provides further detail behind the high-level topics that were listed in the proposal.
- The resources (including any external consultants and advisors) you are planning to utilize as part of your due diligence, if any, beyond the legal counsel information provided in the proposal letter.
- A description of any other contingencies that may impact Donerail’s ability and/or willingness to continue dialogue with the Company as an acquirer and consummate the acquisition according to the terms laid out in your proposal
Best regards,
BofA Team
***
From: Wyatt, William
Sent:
To: Song, Steve
Cc: [REDACTED]
Subject: Re: Donerail: NB LOI to Acquire Turtle Beach
Steve,
As I said in my email from
We are forced to provide you this information only under an NDA given the Board’s historic publishing of past information provided, without receiving our consent. I’m sure you understand our concerns.
As you know, in the signing an NDA, we are willingly restricting ourselves in many uncomfortable ways. We do this to highlight our desire to acquire the Company. Moreover, we offered up a revised version of the Turtle Beach NDA, rather than sending you our own draft, to both expedite engagement and create a clear path forward to acquire the Company.
In your response this morning, you simply cut and pasted your previous request, which is not productive. Are we to interpret this action as a sign that you are unwilling to sign an NDA with us, even though we can provide you this information immediately after the signing of such NDA?
Thanks
Will
***
From: Song, Steve
Sent:
To: Wyatt, William
Cc: [REDACTED]
Subject: RE: Donerail: NB LOI to Acquire Turtle Beach
Will,
The Board continues to ask for BofA’s assistance in assessing Donerail’s LOI. Per our previous emails to you on 12/20/21,
Sincerely,
The BofA Team
***
From: Wyatt, William
Date:
To: Song, Steve,
Cc: [REDACTED]
Subject: RE: Donerail: NB LOI to Acquire Turtle Beach
As you know, prior to your involvement Steve, we worked with one of your colleagues, [REDACTED], on this exact exercise with his colleague [REDACTED] and [REDACTED] had similar questions to the ones you have recently posed in an effort to educate the Board about our credibility, and we answered them all comprehensively and completely.
In doing so, we introduced [REDACTED] to a number of our potential financing partners, and we provided support documentation. (You are aware of [REDACTED] efforts because one of the financing documents that we presented to them was the redacted document that you just chose to publish without our authorization.) All information was presented in full to the Board months ago.
Following this process, we were informed that the Board had approved our financing package as “credible” and “fundable” in a multi-person conference call, and [REDACTED] requested that we increase our offer from
As it stands now, you are requesting that we begin an entire process anew.
Why do we need to do this? What has changed at the Board level to suddenly require the Board to re-interrogate our ability as an acquiror, only months after a banker on your team (that was much more senior than you at Bank of America) had already vetted us as an acquirer?
***
From: Steele, Robert - GCIB SF
Sent:
To: Wyatt, William; Song, Steve;
Cc: [REDACTED]
Subject: RE: Donerail: NB LOI to Acquire Turtle Beach
Will,
We want to clarify that in
To expedite the process of learning more about your financing plan,
The Board again requests that you provide the other items that were previously requested:
* Proposed timeline (that further describes “as promptly as practicable”) to complete your due diligence and to consummate a transaction, including a description of any material conditions affecting your timing.
* An unredacted request list you need to complete your due diligence, that provides further detail behind the high-level topics that were listed in the proposal.
* The resources (including any external consultants and advisors) you are planning to utilize as part of your due diligence, if any, beyond the legal counsel information provided in the proposal letter.
* A description of any other contingencies that may impact Donerail’s ability and/or willingness to continue dialogue with the Company as an acquirer and consummate the acquisition according to the terms laid out in your proposal.
Sincerely
The BofA Team
***
From: Wyatt, William
Sent:
To: Hung, Yie-Hsin
Cc: [REDACTED]
Subject: Re: Donerail: NB LOI to Acquire Turtle Beach
Yie-Hsin,
The assertions that Rob has made in his email below are categorically false, and in fact, we had multiple people on the phone with [REDACTED] over the summer that would also confirm that Rob is misrepresenting the communication from Bank of America over the summer.
This is now the second time that he has lied in writing, with evidentiary support against him, and his integrity and reputation have been severely and irreparably damaged.
As such, we direct this to you.
For the third time, we will provide you any and all information requested following the signing of an NDA. Please sign the NDA, return it to us for signature, and we can move forward.
Thank you.
***
From: Wyatt, William
Sent:
To: Hung, Yie-Hsin
Cc: [REDACTED]
Subject: RE: Donerail: NB LOI to Acquire Turtle Beach
Yie-Hsin –
This email is a follow-up to the email that I sent three days ago that you have yet to respond to.
We have become aware that your financial representatives at Bank of America have, without asking our approval, begun reaching out to certain investment partners of ours to meet. Proactively contacting financing partners without receiving consent to do so is yet another highly atypical action that this Board and its representatives have taken as it relates to our proposal to acquire the Company.
I’m happy to note that should you have requested our consent to contact any investment partner of ours, we would have gladly assessed such a request in good faith, as we have done in the past. (In fact, as you know, over the summer when your advisors requested to speak with certain parties, we agreed to that request and actually arranged the meetings ourselves.)
That notwithstanding, it is my regret to inform you that given this Board’s historical decision to release private information to the public without the consent of us or our financing partners, as you and the balance of this Board chose to do with the release of a redacted co-investment document that was previously provided to you, neither of the two parties that you have contacted thus far have a desire to speak to you or your advisors without an NDA in place.
It is a shame that, as we have shown in the past, such conversations were once readily available, but the recent decisions made by you and the other Board members have engendered such a gross distrust in the marketplace that an NDA is needed to have any type of conversation.
As such, we’ll now request for the fourth time: please sign the NDA, return it to us for signature, and we can move forward.
Thank you.
***
From:
Sent:
To: Wyatt, William
Cc: [REDACTED]
Subject: RE: Donerail: NB LOI to Acquire Turtle Beach
Please see attached on behalf of the Board.
Best regards,
Tony
***
From: Wyatt, William
Sent:
To: Hung, Yie-Hsin
Cc: [REDACTED]
Subject: RE: Donerail: NB LOI to Acquire Turtle Beach
Yie-Hsin –
We have received the Board’s (re-iterated) request to exclude the Board from i) any communication regarding our proposal; ii) from any communication regarding our legal concerns; and iii) from any communication regarding any “other matter”.
It is now noted that
First and foremost, we believe that it is the Board’s duty to serve shareholders and that it is categorically inappropriate to request that all communication from a large shareholder be outsourced to personnel outside the Company. Engaging with shareholders to protect their interests in extreme circumstances is, quite frankly, part of the exact work that you are paid (quite handsomely) to do.
Secondly, as we have mentioned before, given the evidence that exists that the Company’s own representatives are, at times, intentionally misrepresenting key facts to you and the rest of the Board regarding our involvement and our intentions – a matter that is being handled separately – we have no choice but to continue to direct communication to you in an effort to ensure full transparency, expediency and Board accountability. I’m sure you understand.
Separately, upon receiving Tony’s email yesterday, we were quickly able to consult and assess your counsel’s revised prospective path forward. After we reviewed, we do suggest reverting focus back on the signing of the prior NDA that the Board of
That NDA, as you know, was provided by Bank of America after our financing structure and package was deemed “credible” and “fundable” by one of the most senior bankers at the bank, after his team’s review. As you know, upon receiving that NDA from the Turtle Beach Board, we spent the time and energy to review it with our legal team, assessed precedent language to ensure we were inserting appropriate and on-market clauses, and while the signing of that NDA would create meaningful restrictions for us as shareholders, we find it to be far more comprehensive in nature and constructive to our bidding effort than the one paragraph document that your counsel sent through last night.
We’d choose to pursue that path.
To be sure, while the truncated document that was sent through yesterday was straight-forward enough, it appears that in the creation of this new, one-paragraph partial confidentiality agreement, your counsel missed precisely the concern that had our financing partners and us worried in the first place: there exists meaningful doubt that this Board is willing to allow Donerail access to the information that it needs to consummate a transaction, and breaking apart the NDA that
Said differently, the very fact that you would seek to break apart the NDA into smaller, individually negotiated documents to execute at various times, only heightens the level of concern that we – and our financing partners – should have regarding this Board’s intentions.
As such, we’ll ask for a fifth time: please sign the NDA that you have previously provided to us – and that we have sent back to you. I have reattached it here for your convenience.
Lastly, I would be remiss not to ensure that we highlight a very important matter that seems to be missed by you and the balance of the Board.
Signing an NDA with us to allow us access to confidential information in an effort to solidify our financing is something that, we believe, the vast majority of
While our business model is unique, we do not believe that
Further, while you have information regarding the financial wherewithal of [REDACTED], please note the below investment firms that are current fee-paying clients of ours or have contractual commitments to us and have expressed a desire to partner with us on transactions exactly like the one contemplated by our proposal. This should further detail our proximity to large pools of capital. As we have stated before, we are willing to provide you with all contact details for these parties upon the signing of this NDA.
- Alternative Investment Firm:
- Single Family Office: >
- Large Asset Manager: >
- Large Asset Manager: >
We believe that if shareholders were aware of this information, as you are, that this Board would be encouraged to take all steps necessary to provide us with the information needed to cement our financing and proposal. It is simply impractical to say that we do not have the appropriate access to the capital needed to consummate this transaction.
Again, we encourage you to sign the NDA and allow us access as expeditiously as possible.
Sincere thanks,
Will
Nb – do you mind providing us with Kelly Thompson’s email address? We do not have it, and it’s critical to ensure that she has transparency and accountability to this dialogue, as well. Please forward this email to her. Thanks!
[End]
Despite the five separate, explicit requests by Donerail to have a comprehensive NDA be signed, no NDA was ever executed.
We urge you to vote the WHITE proxy card to send the message to Turtle Beach Corporation’s leadership and Board that shareholders deserve better. Vote the WHITE proxy card TODAY to support a superior slate of highly qualified individuals, who will be better stewards of your investment. Please vote each and every WHITE proxy card you receive, as you may own shares in more than one account. If you voted a Blue card from
About Donerail
1 Per Bloomberg. Proxy peer group includes 2021
2 Per the Company’s
3 Per the Company’s
4 Per the Company’s 2016 10-K related to its
View source version on businesswire.com: https://www.businesswire.com/news/home/20220429005172/en/
For Media:
gmarose@longacresquare.com / aareopagita@longacresquare.com
For Investors:
jferguson@saratogaproxy.com / jmills@saratogaproxy.com
Source:
FAQ
What is the current shareholder ownership in Turtle Beach Corporation (HEAR)?
What are the main issues highlighted by Donerail regarding Turtle Beach's board?
How has Turtle Beach's stock performance been under the current board?
What specific financial metrics indicate Turtle Beach's underperformance?
What action is Donerail urging shareholders to take?
