Q: Hi 5i,
Would appreciate your thoughts on Engine Capital’s letter to DND in regards to their suspicions that DND intends to issue shares.
I see Engine Capital’s efforts as a positive check to DND management but I am concerned how effective they can be.
Thank you,
Greg C.
Would appreciate your thoughts on Engine Capital’s letter to DND in regards to their suspicions that DND intends to issue shares.
I see Engine Capital’s efforts as a positive check to DND management but I am concerned how effective they can be.
Thank you,
Greg C.
5i Research Answer:
We can't really add much here. Engine does not want dilution, which is understandable, but with only 6.6% of the stock management can do what they want. We find it interesting, of course, as if DND does proceed with an issue, BUYERs of the issue can simply balk and NOT buy if they agree with Engine. Management cannot just issue shares--they need buyers with cash. Certainly the company is over-leveraged and some investors want to see debt reduced. But the company's track record is horrible: first it talked about a privatization north of $20/share, and then issued stock at $12.10. We certainly understand Engine's frustration here. Management seems to be making things up as they go and this is reflected in the anemic stock performance.