In a letter to the special committee set up to consider Jeff Smulyan’s plan to take the company private, shareholder Timothy Stabosz said the offer “reeks” and the price Smulyan is offering is an “insult.”
Stabosz calls himself a “student” of the company and a longtime owner of Emmis stock. He owns about 150,000 shares. He has asked the committee to reject Smulyan’s offer. “I would strongly urge your rejection, from both a fiduciary and MORAL perspective, of Jeff’s “go private” offer for the company, which is incredibly opportunistic, cynical, disloyal, self serving, and seeks to “take away” the value of the company, just as it has the potential of being “unlocked” for ALL shareholders.”
There is so much that reeks about this offer that I don’t even know where to start. First of all, the premium is an INSULT, being a measly few percentage points above where the stock had been trading, in the days prior to the offer being made. There is SO MUCH that has been achieved with NextRadio, with that product on the cusp of its breakout period (with the potential to draw new investors attracted to the “sizzle” of its Pandora-like, Spotify-like, “new radio” aspects), that for Jeff to make this offer, just as the publicly machine is gearing up on radio stations across the country, is nothing short of a cynical attempt to put a CAP on the stock price, and deliberately deprive shareholders of the chance to have new investors flock in and drive shareholder value.
Stabosz says he’s been patient, captivated by Jeff’s enthusiasm in the conference calls, and eagerly anticipating the NextRadio rollout. “I can’t tell you how angry I am with Jeff at cutting us off at the knees. The timing COULD NOT BE WORSE, and is a shocking and categorical betrayal. Meanwhile, even if you ascribe no value to NextRadio, the company, at Jeff’s offer price, is trading at roughly a 20% free cash flow yield, which does NOT accord shareholders the value they deserve!
Stabosz says the offer should not even be brought before Emmis shareholders for consideration. “Please understand that the shareholder base is counting on you to protect our rightful interests, and that leaving us with remedies such as court-based appraisal creates undue burdens and hassles. I would hope, and have faith that your awareness of your sworn and solemn duty to ALL of Emmis’s shareholders will “shine forth,” and that you will realize, on its face, that both price, and timing, and Jeff’s privately “shopping” the company’s assets “on his own” bespeak of a wanton betrayal of HIS shareholders…..and that such betrayal should not be condoned. On the contrary, I would urge the board to CENSURE Jeff, for the deeply troubling way he has operated here, and the contempt he has shown for the outside shareholders, and his duty to us, as a purported fiduciary.”
About the letter, which Stabosz shared with Radio Ink, Smulyan told the Indianapolis Star he would not debate it in the press. “Disparaging people in the press doesn’t make sense to us. Ultimately, this is for our shareholders to decide. If this makes sense for our shareholders, this will be a private company. If it doesn’t, it won’t. I plan to continue running it to the best of my abilities.” Smulyan extended the deadline for the board to consider his offer, of $4.10 per share, until this Friday.