Finance

Investors Press Synacor Board To Seek A Sale

Two Shareholders Also Call For Company To Halt Search For New CEO 6/26/2014 6:30 PM Eastern
TakeAway

Two activist shareholders are pushing the board of Synacor to halt its search for a new CEO and to seek a sale of the TV Everywhere technology specialist

Two activist investors that hold almost 10% in Synacor are urging the company’s board to halt its search for a new CEO and that Synacor immediately be put up for sale to the highest bidder.

 

JEC Capital Partners and Ratio Capital, which each hold a 4.9% stake in the maker of customer Web portals and TV Everywhere technologies, expressed that opinion in an open letter to the Synacor board on Thursday, while taking some direct shots at Jordan Levy, Synacor’s chairman.

 

The letter comes soon after JEC Capital and Ratio Capital revealed that they would seek representation on the Synacor board and provide guidance on the company’s CEO search and the strategic direction and capital structure of the company.

 

In March, Synacor announced that Ron Frankel, who has led the company since April 2001, will step down as president and CEO, but plans to stay on the board and serve as an advisor. Synacor has enlisted Mitchell James out of New York to conduct the search for Frankel’s successor.

 

“We do not believe there is a realistic chance for improvement from a change in CEO,” JEC Capital’s Michael Torok and Ratio Capital’s Bart Kool wrote in the letter to shareholders issued Thursday, following recent discussions with Levy. “We ask that you halt the search for a CEO and instead engage an investment banker to pursue strategic alternatives. We are confident that Synacor will have serious interest from multiple parties at prices far in excess of the current share price. We are also confident that the majority of Synacor's shareholders are in support of an open and formal sale process.”

 

JEC Capital and Ratio Capital also listed out its grievances with the recent performance of the company, which it views as a result of “the Board’s failure of leadership,” citing the drop of the company’s share price since it went public in February 2012, its declining revenues and cash balance, and its increased R&D spending.

 

They’re also upset that Synacor announced its CEO transition without a succession plan, “and its decision to give the outgoing CEO an above-market exit package,” and believe that Synacor has been slow to roll out new revenue-producing products.

 

They further claim that the board’s indifference toward interested buyers of Synacor are centered on Levy’s “self-interested and civic-minded agenda to maintain the headquarters of a public technology company in Buffalo, NY.”

 

Synacor has not yet offered a response or comment to the letter as of late Thursday afternoon.

 

Update: Synacor issued its reply on Friday (June 27).

 

Shares in Synacor closed at $2.69, up 16 cents (6.32%), on Thursday.

 

Synacor, which just announced an expanded TV Everywhere-related agreement with Dish Network, also provides services to Armstrong, BendBroadband (soon to become part of Telephone and Data Systems), Buckeye CableSystem, Google Fiber, CenturyLink, Cable One, Mediacom Communications, Suddenlink Communications, WideOpenWest, Surewest Communications and Verizon Communications, among others.

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