Legion Partners Nominates Four Highly-Qualified Independent Candidates for Election to the OneSpan Board
Legion Partners Asset Management, owning 6.8% of OneSpan's stock, has issued an open letter to shareholders nominating four independent director candidates for election. They criticize OneSpan’s valuation issues, lack of corporate governance, and poor capital allocation practices. Legion Partners emphasizes the need for a strategic review to enhance shareholder value. They express loss of confidence in the current Board after numerous attempts to engage. The letter highlights underperformance, lack of relevant skills among long-tenured directors, and missed strategic opportunities as key concerns.
- Nomination of four independent directors could lead to improved governance.
- Legion Partners is a significant institutional investor, indicating confidence in potential improvements.
- OneSpan's total shareholder returns have lagged behind peers.
- The Board's long-tenured members lack the skills needed for a strategic transformation.
- Ignored inquiries for strategic transactions may limit growth potential.
- Ongoing poor capital allocation poses risks due to a large idle cash balance.
Legion Partners Asset Management, LLC, which, together with its affiliates (collectively, “Legion Partners”), beneficially owns 2,773,946 shares of common stock of OneSpan Inc. (“OneSpan” or the “Company”) (Nasdaq: OSPN), representing approximately
Legion Partners is the second-largest institutional stockholder of OneSpan. Since its initial investment in April 2018, Legion Partners has sought to collaborate with the Board and management team on matters including financial disclosures, investor communications, Board refreshment, asset divestitures, capital allocation and other governance matters. After 30+ meetings with the Board and management team over nearly three years, Legion Partners has lost confidence in the Board’s ability to successfully lead the Company’s transformation to a cloud-first recurring revenue software company. Leadership and oversight that better fits the Company’s business model and is aligned with long-term shareholders is particularly critical at this juncture, thus warranting significant Board change.
Key concerns highlighted in the letter include:
- Long-Term TSR Underperformance and Undervaluation – OneSpan’s total shareholder returns have severely lagged peers and indices over multiple time periods, leading to a worst-in-class valuation among public cybersecurity companies and other direct software peers.
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Long-Tenured Directors Lack Relevant Skillsets – the Board has defensively added new directors over the past two years and only this week announced the long overdue retirement of Michael P. Cullinane after serving for 22 years, likely to offset our impending nomination and its 2021 guidance that was not well received by the market given the
2.6% drop in the stock the next trading day. No other long-tenured incumbent independent director in a key Board leadership position has stepped down, despite these individuals lacking skillsets needed to transform OneSpan into a pure play modern software company. -
Failure to Take Strategic Action – based on credible market sources, the Board has apparently ignored inbound inquiries from parties interested in strategic transactions. According to Legion Partners’ valuation analysis, OneSpan shares are worth
$43 assuming 13.5x EV / ARR plus modest values for the remaining non-recurring components. However, Legion Partners believes this value is being overlooked by the market given the poor optics caused by the legacy Hardware segment, which if sold, could help rerate OneSpan’s stock price. - Poor Capital Allocation– the Board has overseen a long history of M&A failures and questionable judgment on capital allocation priorities, presenting a key risk for shareholders given the Company’s large, idle cash balance.
A full copy of the letter can be found here: https://protectonespan.com/
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About Legion Partners
Legion Partners is a value-oriented investment manager based in Los Angeles, with a satellite office in Sacramento, CA. Legion Partners seeks to invest in high-quality businesses that are temporarily trading at a discount, utilizing deep fundamental research and long-term shareholder engagement. Legion Partners manages a concentrated portfolio of North American small-cap equities on behalf of some of the world’s largest institutional and HNW investors.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
Legion Partners Holdings, LLC, a Delaware limited liability company (“Legion Partners Holdings”), together with the other participants named herein, intend to file a preliminary proxy statement and accompanying WHITE proxy card with the Securities and Exchange Commission (“SEC”) to be used to solicit votes for the election of its slate of highly-qualified director nominees at the 2021 annual meeting of stockholders of OneSpan Inc., a Delaware corporation (the “Company”).
LEGION PARTNERS HOLDINGS STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR.
The participants in the proxy solicitation are anticipated to be Legion Partners Holdings, Legion Partners, L.P. I, a Delaware limited partnership (“Legion Partners I”), Legion Partners, L.P. II, a Delaware limited partnership (“Legion Partners II”), Legion Partners Offshore I SP I, a segregated portfolio company of Legion Partners Offshore Opportunities SPC I, a company organized under the laws of the Cayman Islands (“Legion Partners Offshore I”), Legion Partners, LLC, a Delaware limited liability company (“Legion Partners GP”), Legion Partners Asset Management, LLC, a Delaware limited liability company (“Legion Partners Asset Management”), Christopher S. Kiper, Raymond T. White, Sarika Garg, Sagar Gupta, Michael J. McConnell and Rinki Sethi.
As of the date hereof, Legion Partners I directly beneficially owns 2,168,979 shares of Common Stock, par value
View source version on businesswire.com: https://www.businesswire.com/news/home/20210225005692/en/
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