Small Cap Activist Newsletter: Issue 2

Browning West Files Lawsuit Against Gildan

Browning West is a large holder of Gildan (~5%), and is filing this lawsuit to ensure the annual meeting occurs without delay. According to Browning West, the company has pursued “a strategy of entrenchment, obfuscation and disparagement of dissenting shareholders”. Browning West is looking to replace eight directors, and reinstate the former CEO.

Settlement in the FAST Acquisition Case

Shareholders which backed the FAST Acquisition entity, namely led by Bulldog Investors, had sued the sponsors and related entities and individuals for attempting to keep a termination fee received in conjunction with pursuing a deal. Shareholders argued, among other things, that the fee was their asset, not an asset of the sponsors. This has been a very controversial litigation area and the subject of much debate, however a lay person would likely acknowledge a failed deal should not benefit the sponsors at the expense of shareholders. This action was settled for over $12m.

Findell Capital Nominates Three Directors to Opportun Financial

Findell is not a common activist so we note this with particular interest, combined with the fact that one of the directors nominated (Tomlinson) disclosed the purchase of call options, which is a rare but positive sign of alignment from a director nominee. Findell has been touting the stock through multiple letters and interviews. Defensively, it appears the company has recently appointed two new board members which were not recommended by shareholders.

Erez Nominates Two Candidates to Whitestone

First time activist Erez is running a slate against Whitestone, in which it argues the company is subscale and suffering from poor capital allocation decisions and needs to be fixed. The manager of Erez (Bruce Schanzer) is notable in that he took in similar feedback, settled with two activists simultaneously during his tenure running Cedar Realty, and parlayed this into a highly successful sale outcome for shareholders. His change in career to activist investor makes him one to watch.

Echo Lake Issues Letter to Neurometrix

Recurring activist investor Echo Lake has identified ten reasons to fire the incumbent CEO. The company trades at a significant discount to net cash, and Echo Lake owns close to 7% of the company.

• Senior Director, Corporate Activism

• Managing Director, Activist Investment Firm

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