180 Degree Capital Corp. Issues Public Letter to Employees and Common Stockholders of Comscore, Inc.
180 Degree Capital Corp. (NASDAQ: TURN) has initiated a campaign urging the resignation of Brent Rosenthal from SCOR's Board of Directors, demanding a board member with capital markets success to defend common shareholder rights. With a 6% stake in SCOR, 180 seeks transparency in the potential for a special dividend and advocates for reduced board fees and a smaller board size due to perceived excessive compensation. The firm argues that current compensation structures favor board members over common shareholders and threatens legal action if fiduciary duties are disregarded. 180 believes that converting preferred dividends to common stock could unlock value for all stakeholders.
- SCOR's management has reported operational improvements.
- 180 believes SCOR's stock is undervalued relative to its fundamentals.
- Brent Rosenthal's compensation is viewed as excessive given the stock's decline by over 50%.
- The Board has faced criticism for a lack of transparency regarding a special dividend.
- Current governance practices may hinder shareholder value due to overrepresentation of Preferred Stockholders.
- 180 demands resignation of Brent Rosenthal from the SCOR’s Board of Directors to be replaced by a director with a track record of success in capital markets and who will defend common shareholder rights, and absent resignation demands immediate removal as Lead Independent Director.
- 180 seeks further reduction in board fees, a reduction in the size of SCOR’s Board, and shifting of board fees by representatives appointed by the Preferred Stockholders. 180 believes that SCOR’s Board compensation after recent changes remains egregious.
- 180 requests transparency on processes that SCOR’s Board will use if a special dividend is called. Puts SCOR’s Directors on notice regarding their fiduciary duty to common stockholders as required under Delaware law.
- 180 suggests that the Preferred Stockholders can unlock value for all stakeholders by converting special dividend into common stock at the existing Series B Convertible Preferred Stock conversion price of
$2.47 per share.
MONTCLAIR, N.J., March 06, 2023 (GLOBE NEWSWIRE) -- 180 Degree Capital Corp. (NASDAQ:TURN) (“180”), today issued the following letter to Common Stockholders and employees of Comscore, Inc. (“SCOR” or the “Company”).
To the Employees and Common Stockholders of SCOR,
180 Degree Capital Corp. and its managed accounts own approximately 5.5 million shares of common stock, or
We much prefer our communications with leadership at our portfolio holdings to remain private, collegial, and collaborative. Until recently, the Board and management maintained an open, albeit largely passive and noncommittal dialogue with us regarding the Company. Unfortunately, the Board has chosen to disregard our recent request to meet with the chairs of the Nominating and Compensation Committees, and it remains noncommittal in addressing key outstanding issues at the Company. So, enough is enough. A simple “No” to our private letter would have been more professional than ignoring the Company’s third-largest shareholder. To be clear, we believe Cerberus, Charter, and Liberty Media/Qurate (collectively the “Preferred Stockholders”) are value-add strategic investors and partners, but their refusal to tackle obvious overhangs to the common stock has caused it to decline in value by over
We are therefore writing to you today, the hardworking employees and the common stockholders of SCOR, because 180 believes the Board (particularly certain representatives of the Preferred Stockholders and its Lead Independent Director) are hurting your welfare and impairing the ability to create value for all stakeholders by prioritizing their own self-interests over the interests of those to whom they owe a fiduciary duty. Specifically, we want to highlight some of the major problems at SCOR:
- SCOR’s outsized director compensation amounts to a self-serving cash grab from SCOR’s balance sheet. We believe this cash should be used to build SCOR’s business through investing in its greatest asset, its employees, not as a means to enrich directors.
- Furthermore, SCOR’s Board continues to refuse to provide transparency regarding how it will deliberate over a request for a special dividend from the Preferred Stockholders. We have asked; they have ignored us. So, in light of being unable to get answers on the dividend process, we will make it clear what we believe are the obligations of Board members and we will consider legal options should SCOR’s Board act in an inappropriate manner. We all deserve better from SCOR’s Board, and we are here to help ensure that happens.
We hope you will independently decide to echo our call to hold SCOR’s Board accountable and urge it to immediately embrace the following action items to restore investor confidence and ensure SCOR’s precious cash is allocated to employees who are focused on building the business. When you reflect on how many different ways the Preferred Stockholders (and selected Board members) get paid, we believe it will become obvious as to why they favor the status quo, and why the common shareholder is an afterthought and treated with such disregard.
1. Further reduce Board compensation to market rates. For those who do not commonly read SEC filings, we thought it would be eye-opening to look at how much SCOR’s Board paid themselves in 2021:1
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Total ($) |
| Nana Banerjee | 72,694 | 333,333 | 406,027 |
| Charles Fisher | 3,150 | 83,334 | 86,484 |
| Itzhak Fisher | 54,417 | 333,333 | 387,750 |
| Irwin Gotlieb | 42,500 | 497,785 | 540,285 |
| Jacques Kerrest | 19,167 | 247,786 | 266,953 |
| David Kline | 42,139 | 333,333 | 375,472 |
| Pierre Liduena | 63,382 | 312,501 | 375,883 |
| Kathi Love | 75,767 | 497,785 | 573,552 |
| John Martin | 11,308 | 247,786 | 259,094 |
| Marty Patterson | 54,078 | 333,333 | 387,411 |
| Brent Rosenthal | 151,750 | 724,419 | 876,169 |
| Brian Wendling | 50,944 | 333,333 | 384,277 |
| Total | 641,296 | 4,278,061 | 4,919,357 |
| Prior year catch up | 1,553,650 | 1,553,650 | |
| Total 2021-22 Comp. | 641,296 | 2,724,411 | 3,365,707 |
| Est. 2023 Comp. Based on 2/28/23 Announced Reductions2 | 715,500 | 1,575,000 | 2,290,500 |
Sign us up for that: generate dreadful returns, but pay ourselves top compensation. While we understand approximately
To that end, and as further discussed below, we believe Mr. Rosenthal should immediately resign from SCOR’s Board or at least be removed as Lead Independent Director. He should be replaced with a shareholder representative who has relevant capital markets experience and whom every common shareholder would have confidence that such person would be a fiduciary to all stakeholders. By the way, if one of our designees were elected or appointed to SCOR’s Board, we would gladly take no compensation.
We raised Board compensation as an issue in a private letter to SCOR’s Board in December 2022 and were pleased to see a reduction in compensation for directors starting March 1, 2023. While it is a start, this
The egregious director compensation is even more evident when compared with companies classified under the same GICS industry as SCOR and with market capitalizations of under
Total compensation for SCOR’s Board should be at or below the median compensation of comparable public companies, particularly given the destruction in value overseen by this Board. This Board is making money off the broken backs of SCOR employees. They fire you and they pay themselves. We believe this is greedy and tone-deaf in light of recent restructuring activity, and is ultimately, reprehensible. Recent actions are just a start, they simply do not go far enough, and should be dealt with before SCOR files its 2023 proxy statement.
2. Shift Board compensation for employees of Preferred Stockholders and/or reduce the size of SCOR’s Board. David Kline and Pierre-Andre Liduena are employees of Charter Communications and Marty Patterson and Brian Wendling are employees of Liberty Media Corporation and Qurate Retail, Inc. Both Charter and Qurate are owners of preferred stock, and as such, collectively receive approximately
If the Preferred Stockholders are not willing to waive compensation, another solution would be to decrease the number of preferred representatives on SCOR’s Board. This step would send a powerful and clear message that leadership is serious about allocating cash to the business rather than Preferred Stockholders, while keeping preferred stockholder representation proportional to how it is today. Right now, SCOR has a Board of ten members, which we believe is inappropriate and out of touch with reality given its sub-
3. Accelerate the overhaul of SCOR’s Board. We were generally pleased to see the appointment of Leslie Gillin to SCOR’s Board, as she appears to bring a wealth of relevant experience to the table. That said, we are perplexed as to why her recent appointment could not have been made in conjunction with the resignations of stale directors that are less relevant to the bright future of the Company. More specifically, we question why Mr. Rosenthal is still on SCOR’s Board and serving as Lead Independent Director. Mr. Rosenthal has served on SCOR’s Board and its predecessor companies since 2008. The company's financial results under his directorship speak for themselves; an abject failure. So as far as we can tell, Mr. Rosenthal brings neither real strategic nor financial expertise to the table. Consider the fact that Mr. Rosenthal was a member of SCOR’s Board at the time it decided it was a good idea to borrow
On a separate, but relevant note, as we have stated multiple times in the past, as CEO, Mr. Carpenter should be a member of SCOR’s Board. We remain perplexed as to why the Board has refused to make this appointment. Perhaps the Preferred Stockholders and SCOR’s Board want to control this company for themselves, and common stockholders and employees are nothing more than minions getting in the way of stealing the Company and its cash from the good work generated by the employees. While we would hate to think that actually is the case, unless the Board takes immediate action, we are left to conclude the Board just wants the status quo to continue. It’s been great for them, after all.
4. Eliminate staggered voting for Board directors. We clearly believe Mr. Rosenthal should not be on SCOR’s Board, but stockholders do not even have the opportunity to express this opinion through voting until 2024’s annual meeting because SCOR maintains the insulated and outdated practice of offering staggered 3-year terms to directors. With the upcoming proxy and annual meeting, we request that SCOR remove staggered terms for its directors and let its stockholders vote annually regarding the full slate of who should represent their interests on SCOR’s Board.
5. Provide clarity as to the Board’s process and responsibilities for the consideration of a request for the preferred stock special dividend. As SCOR’s leadership readily admits, and is abundantly clear as evidenced by the line of questions at the Needham Growth Conference in January 2023, the uncertainty and ambiguity around how SCOR would deal with the demand of the special dividend available to Preferred Stockholders is the single biggest drag on SCOR’s common stock price. We’re not debating what we know to be true from SCOR’s SEC filings, that is, the Preferred Stockholders have the right to call for the special dividend. But given the conflicts of interest inherent to this contemplated situation, we think it behooves the Board to remove the ambiguity surrounding the process it will adhere to. We would think it wise to proactively have in place a robust and well-communicated process, especially as, in our view, the board’s actions here would be subject to scrutiny under Delaware’s entire fairness standard. So, if the special dividend is called, who votes? Are representatives appointed by the Preferred Stockholders recused? Does approval of the special dividend require a majority vote, or does it have to be unanimous? We demand answers.
SEC filings enumerate ways that SCOR could be forced to pursue to pay the special dividend, such as taking on additional debt, if it does not have that level of cash available at the time such dividend is called.
But ultimately, we don’t think a special dividend will be called any time soon. The math behind this conclusion seems clear to us and, in our estimation, clear to management. While SCOR’s business is improving (and we’re thrilled to see it), there should be no scenario in which SCOR’s Board could approve paying a material special dividend, unless such improvement is wildly beyond what SCOR’s management has communicated as its expectations. Our conclusion is based on the following points:
A. SCOR’s management recently presented its outlook for 2023 as follows:
“Based on current trends and expectations, we believe 2023 revenue will increase low to mid single digits over 2022, driven by continued growth in Cross Platform Solutions from our local and national TV offerings and growth in Digital Ad Solutions as we focus on product integrations and new product innovation. We expect an adjusted EBITDA margin in the double digits for 2022.”
To be clear, on the merits of its own fundamentals and the work Mr. Carpenter and the rest of the SCOR team have been able to accomplish, we believe SCOR’s common stock is materially undervalued. At .75x enterprise value to Revenue, the business is being priced as if it is a leveraged steel company in the middle of a recession, rather than having the majority of its revenues recurring and derived from proprietary and valuable data services. We believe the common stock should be a minimum of
At the high end of the guidance for revenue, SCOR could generate approximately
B. Following the next preferred dividend payment, the Preferred Stockholders could call a special dividend of
“(A) the Company shall not, and shall not be required to, incur any such Debt Financing in an amount that would cause the Company’s Leverage Ratio to be more than 3.00:1.00, determined on a Pro Forma Basis after giving effect to the incurrence of such Debt Financing and the payment of such Special Dividend, and (B) such Debt Financing shall (1) reflect financing and other terms consistent with leveraged finance market practice for non-distressed transactions of this type, taking into account the Company’s LTM Adjusted EBITDA at such time and pro forma total leverage ratio and secured leverage ratio for the transaction and other attributes of the Company as compared to other similarly situated borrowers incurring similar amounts of Indebtedness at such time (provided that the Company shall not agree in the definitive agreement of such Debt Financing to any restrictions on the payment of cash dividends and/or distributions in respect of the Preferred Stock, subject to conditions no more restrictive to the borrower thereunder than the absence of any continuing “event of default” (or similar term used in the definitive documentation for the Debt Financing)), (2) be obtained without any equity or equity-linked features, and (3) have a maturity date of at least three years after the incurrence of such Debt Financing….”
In today’s market, we would be surprised if SCOR could secure debt that would meet the requirements above under terms that would include interest rates less than 10
C. Upon any Preferred Stockholder’s written request, SCOR must take all actions reasonably necessary to pay such an amount “equal to the highest dividend that the Board determines can be paid at that time subject to the limitations imposed under Delaware law.” Section 170 of Delaware General Corporate Law (the “DGCL”) states that dividends may be paid either:
1. Out of the corporation’s surplus, or
2. If there is no such surplus, out of its net profits for the fiscal year in which the dividend is declares and/or the preceding fiscal year.
The term “surplus” generally means the excess of the corporation’s total assets over the sum of the total liabilities and capital of the corporation. If the test for a lawful distribution or dividend is not met, the directors face personal liability under Section 174 of the DGCL. While the surplus test would likely be met on a technical basis with total stockholder equity as of December 31, 2022, of approximately
Based on these points above, we are unable to derive a scenario with current information whereby the independent, non-interested directors would be in a position as fiduciaries of SCOR’s business to approve a special dividend anytime soon. And in the context of the special dividend, time is on our side. The special dividend right will continue to amortize down with each normal dividend payment. Mr. Carpenter and his management team have made substantial progress repositioning the business for profitable growth. If a special dividend is declared, we believe it would only be because the business is exceeding all current expectations, which are positive in their own right, but not enough to support such a large payout to the Preferred Stockholders on their own.
That brings us to a point that, while touched on above, warrants further delving into. We have asked, but have thus far been stonewalled by SCOR’s Board, for a clear understanding of whom the Board considers independent and non-interested with regard to deliberations on a special dividend should it be called by the Preferred Stockholders. Is the answer really that ambiguous? We think it is not. SCOR’s Board has six members who are appointed by the Preferred Stockholders. SCOR’s Board should confirm that these directors would not partake in deliberations around the ability to declare a special dividend if called. If there are any other conflicts of interest, those need to be disclosed and included in this analysis. Common stockholders deserve to understand who would be making the decision with regard to their fiduciary interests in SCOR.
SCOR’s Board needs to be forthright with its stockholders and its management team. Mr. Carpenter needs to be able to put to rest concerns about a potential special dividend payment that would compromise the ability of SCOR to operate and grow. This transparency will go a long way to assuage near-term concerns of all stakeholders of SCOR, including its employees and common stockholders who thus far have been left to dream up conspiracy theories in the absence of what should be straightforward communication from SCOR’s Board.
To reiterate and to be clear, we believe there is no scenario where the special dividend should be called and paid in the immediate future. If one is called, and SCOR’s Board, or subset of the Board, approves such payment, we would likely seek to enforce our rights as stockholders under Delaware law and pursue any and all remedies that are available for common stockholders should such decision not comply with the fiduciary duties of the Board.
We’ve focused our discussion above on steps we believe SCOR’s Board can take for the benefit of employees and common stockholders. There are also clear steps that we believe the Preferred Stockholders can take that would benefit themselves along with all stakeholders of SCOR.
- Take the special dividend in stock at the preferred conversion price of
$2.47 per share. The preferred holders continuously hide behind the notion that they care about the common equity because their preferred is convertible into common stock at$2.47 per share. Most of their actions to date show they don’t care about the common stock. They seem to be taking the position of, “This was the deal the Board agreed to and we didn’t do anything wrong.” SCOR’s employees and common stockholders had no say in that deal and its terms. Thus, we are asking the Preferred Stockholders to align themselves with common stockholders and convert the special dividend at$2.47 per share, matching the preferred stock conversion terms they agreed to two years ago. Doing so would indicate to all stakeholders that the Preferred Stockholders believe the common stock is undervalued at its current price and believe that significant appreciation can occur from that price. 180 has experience with a similar situation that resulted in value creation for all stakeholders of TheStreet, Inc. (“TST”) when it led a transformative financing and invested capital at a substantial premium to the closing stock price rather than a discount. This decision was based on the expectation that the removal of a preferred stock overhang (not dissimilar to SCOR’s situation) would result in meaningful appreciation of the stock well above the price we paid for it. The closing price of TST’s stock before the transaction was$0.93 per share. We invested at$1.10 . The day of the announcement of the investment the stock closed at$1.25 . We ended up working with the board of TST to sell the company for aggregate net proceeds to stockholders of$2.62 per share. Every stakeholder in TST benefited from this transaction. The same can happen at SCOR if the Preferred Stockholders are willing to “see the forest for the trees.” If the Preferred Stockholders do nothing, they will have the personal track record of overseeing a stock that has collapsed57% under their watch. Or they can easily unlock the latent value in the stock by removing an overhang at terms that would most likely benefit common and Preferred Stockholders alike. In such a scenario, we would expect SCOR shares to climb well above the Preferred Shareholder’s$2.47 effective purchase price, not including dividends paid to date, thereby making the preferred shares significantly more valuable than they are today. Employees have suffered the most from the damage created by the Preferred Stockholders. They could unlock value tomorrow and be heroes to every stakeholder. - A collateral benefit to this action would be the potential inclusion in the Russell 2000 Index. Last year, we wrote to the Preferred Stockholders in public and private letters about the potential negative impact should SCOR be removed from the Russell 2000 Index. As a refresher, the inclusion in the Russell Indices is based on market capitalization as determined by outstanding common stock. Preferred stock does not count in the calculation. Had the Preferred Stockholders converted their stock prior to the measurement deadline last year, SCOR would have remained in the Index. They did not take such action and SCOR was removed from the Russell 2000 Index. We are again at a crossroads whereby the Preferred Stockholders can put SCOR in position to be included in this year’s rebalancing, but only if the Preferred Stockholders take action well before the last day of April 2023 when the Russell rankings are set. Preferred Stockholders: Do the right thing, which ultimately will benefit you more than anyone. The Preferred Stockholders need to think about the employees of SCOR who truly desire and need a higher common stock price to reward them for all their hard work. Have some common sense.
While we are aware that the directors of SCOR who were appointed by the Preferred Stockholders may not have unilateral control over these decisions, it behooves the Board to negotiate a plan to align interests and reduce balance sheet complexity. New investors simply will not be drawn to SCOR’s improving business under new management led by Mr. Carpenter, and with assistance from Mr. Banerjee, until corporate governance concerns are assuaged.
We recognize that because of the ownership structure of SCOR, changing out the Board through an expensive proxy fight would likely prove a waste of our and SCOR’s resources. That will not stop us from fighting for what is right and holding the holders and Board members accountable for their unacceptable oversight of this company. That doesn’t mean stockholders couldn’t use the Delaware Chancery Court which has already ruled on matters relating to the role of board members appointed by Preferred Stockholders. We hope it doesn’t come to this. It is up to our company’s Board to take the right steps to benefit you, SCOR’s hardworking employees and long-suffering common stockholders. SCOR’s Board has overseen a
We have talked about many of these topics for a good while and need to see immediate and meaningful action. Employees should expect a lot more than what SCOR’s Board has given them and deserve to be rewarded for their good results with an equity price that is materially higher. We aren't going away, and if this Board continues to stand in the way of unlocking shareholder value, this will only be the start of louder efforts. We encourage other common stockholders and employees to voice their opinions and desire for change, as staying silent enables SCOR’s Board and Preferred Stockholders to maintain the status quo to the detriment of common stockholders and employees. Things need to be fixed, now.
This is a great company with terrific employees and great data assets. We believe SCOR’s common stock is woefully mispriced due to the Board’s lack of urgency to adequately deal with the overhangs we have discussed with them for a very long time. It is time SCOR’s Board worked as hard as the employees have to unlock value for the common stock.
We look forward to seeing our suggestions acted upon and are available to discuss the contents of this letter at any time. Staying silent and doing nothing is simply unacceptable. Act.
| Best Regards, | |
| /s/ Kevin M. Rendino | /s/ Daniel B. Wolfe |
| Kevin M. Rendino | Daniel B. Wolfe |
| Chief Executive Officer | President |
About 180 Degree Capital Corp.
180 Degree Capital Corp. is a publicly traded registered closed-end fund focused on investing in and providing value-added assistance through constructive activism to what we believe are substantially undervalued small, publicly traded companies that have potential for significant turnarounds. Our goal is that the result of our constructive activism leads to a reversal in direction for the share price of these investee companies, i.e., a 180-degree turn. Detailed information about 180 and its holdings can be found on its website at www.180degreecapital.com.
Press Contact:
Daniel B. Wolfe
Robert E. Bigelow
180 Degree Capital Corp.
973-746-4500
ir@180degreecapital.com
Mo Shafroth
Peaks Strategies
mshafroth@peaksstrategies.com
Forward-Looking Statements
This press release and the attached letter may contain statements of a forward-looking nature relating to future events. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect the 180’s current beliefs, are based upon public information provided in many cases by the Company, and a number of important factors could cause actual results to differ materially from those expressed in this press release. Please see the Company's securities filings filed with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with the Company's business and other significant factors that could affect the Company's actual results. Except as otherwise required by federal securities laws, 180 undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. The reference and link to the website www.180degreecapital.com has been provided as a convenience, and the information contained on such website is not incorporated by reference into this press release. 180 is not responsible for the contents of third-party websites.
Board Compensation Analysis
| Ticker | Total Director Comp in 2021 ($) | Number of Directors | Average Comp. Per Director |
| SCOR | 3,365,707 | 9 | 373,967 |
| AUD | 1,990,955 | 9 | 221,217 |
| GCI | 1,907,500 | 10 | 190,750 |
| TRUE | 1,874,602 | 8 | 234,325 |
| FUBO | 1,808,897 | 6 | 301,483 |
| CCO | 1,753,295 | 10 | 175,330 |
| CDLX | 1,638,728 | 8 | 204,841 |
| EVC | 1,515,755 | 7 | 216,536 |
| SKLZ | 1,434,968 | 6 | 239,161 |
| LEE | 1,393,333 | 9 | 154,815 |
| CMLS | 1,385,491 | 7 | 197,927 |
| NCMI | 1,140,080 | 8 | 142,510 |
| DHX | 1,133,359 | 8 | 141,670 |
| MCS | 1,102,656 | 9 | 122,517 |
| EEX | 1,035,467 | 9 | 115,052 |
| LVO | 996,592 | 8 | 124,574 |
| EVER | 834,980 | 9 | 92,776 |
| TSQ | 775,000 | 6 | 129,167 |
| HHS | 751,380 | 5 | 150,276 |
| RDI | 739,111 | 5 | 147,822 |
| CIDM | 725,000 | 5 | 145,000 |
| LTRPA | 707,507 | 8 | 88,438 |
| BBGI | 671,882 | 9 | 74,654 |
| CREX | 630,929 | 4 | 157,732 |
| CURI | 552,979 | 8 | 69,122 |
| BTN | 497,467 | 7 | 71,067 |
| LYLT | 439,571 | 4 | 109,893 |
| SGA | 371,293 | 8 | 46,412 |
| FLNT | 365,003 | 7 | 52,143 |
| IZEA | 284,079 | 6 | 47,347 |
| TZOO | 268,400 | 5 | 53,680 |
| MCHX | 248,400 | 4 | 62,100 |
| GAIA | 220,902 | 7 | 31,557 |
| SALM | 184,500 | 7 | 26,357 |
| PALT | 94,000 | 5 | 18,800 |
| DJCO | 10,000 | 4 | 2,500 |
| Average | 968,049 | 7 | 131,487 |
| Median | 763,190 | 7 | 126,870 |
| Source: Bloomberg |
1 Source: SCOR’s 2022 Proxy Statement.
2 Source: SCOR’s Form 8-K, filed on February 28, 2023.
FAQ
What actions is 180 Degree Capital Corp. taking regarding SCOR's Board?
Why does 180 Degree Capital Corp. want a reduction in SCOR's Board fees?
What does 180 Degree Capital Corp. suggest regarding the potential special dividend from SCOR?
How much of SCOR's stock does 180 Degree Capital Corp. own?
What has been the trend in SCOR's stock price according to 180 Degree Capital Corp.?
