Bradley L. Radoff Issues Open Letter to GSE Systems’ Board of Directors to State Opposition to Proposed Sale to Pelican Energy Partners
18 Octubre 2024 - 7:15AM
Business Wire
~10% Shareholder Believes Proposed Sale
Represents an Egregious “Take Under” and Significantly Undervalues
the Company
Urges the Board to Consider Shareholders’ Best
Interests and Disclose the Company’s 2025 Projections so Investors
Can Accurately Value the Company Against the Deal Price
Bradley L. Radoff, who collectively with his affiliates owns
approximately 9.9% of the outstanding shares of GSE Systems, Inc.
(NASDAQ: GVP) (“GSE” or the “Company”), today sent the below letter
to GSE Systems’ Board of Directors (the “Board”) indicating its
opposition to the proposed
take-private merger with Pelican Energy Partners (“Pelican”).
***
GSE Systems, Inc. 6940 Columbia Gateway Drive, Suite 470
Columbia, MD 21046 Attention: The Board of Directors
October 18, 2024
Members of the Board,
I am one of GSE’s largest shareholders, with an approximately
9.9% stake in the Company. After reviewing the Company’s belated
and limited disclosures, I believe the proposed sale to Pelican
significantly undervalues the Company and
puts leadership’s interests ahead of shareholders’ best
interests.
The Board, which collectively has limited public company
experience and de minimis share ownership, appears to have allowed
the Company to develop liquidity issues that have become the basis
for what is seemingly a fire sale. Now, with this deal, the Board
is seemingly doubling down on its missteps by giving up on the
Company right as the nuclear power industry is entering a
renaissance that should be a significant tailwind for GSE and its
prospects for enhanced value creation.
Despite GSE’s apparent runway for improved financial
performance, you have refused to provide a view on the business for
2025. As a result, shareholders are unable to appropriately analyze
the Company’s prospects and evaluate a standalone future relative
to the current deal. The Board’s contention that it cannot provide
projections because management’s forecasts have historically been
unreliable simply serves as an acknowledgment of your failures when
it comes to governing the business and overseeing the executive
leadership you put in place.
With respect to your decision to deprive shareholders of
relevant information, it is highly unusual that the Company’s
definitive proxy statement for the merger did not contain
forward-looking business projections. I appear to be one of the
many shareholders who are disappointed with this insufficient
disclosure. The Company’s Form-8-K filed on October 8th, 2024 –
just two weeks prior to the shareholder vote – was purportedly only
put out in response to “demand letters alleging similar
deficiencies and/or omissions regarding the disclosures made in the
Preliminary Proxy Statement or the Definitive Proxy
Statement.”1
In the October 8th 8-K, GSE provided a mere glimpse of very
encouraging and positive projections that implied more than $0.30
of quarterly earnings for a Company that currently trades at around
$4. The projections, while incomplete, appear to show that the
Company is beginning to materially benefit from the nuclear
resurgence. Given this context, I am
calling on you to provide the market with customary disclosures
regarding the Company’s forward-looking projections so shareholders
can make the most informed decision on the transaction.
If the Company continues to provide such limited disclosures as it
did in the October 8th 8-K, then it should at least reset the
record date for the Pelican merger to enable the investment
community to sufficiently digest this new, albeit limited,
information.
While the Company’s legal counsel and bankers – who stand to
make millions if the deal goes through – may have signed off on the
disclosures to this point, the Board should know that this deal
fails the smell test. Nothing in the
merger agreement prevents you from providing more information and
transparency to shareholders. I believe your decision to
effectively keep GSE shareholders in the dark will define your
directorship at GSE and be a black mark for any of you who intend
to pursue other director opportunities. Shareholders have long
memories.
While you have trumpeted Institutional Shareholder Services’
recent report as an endorsement, I don't believe shareholders
should give it any credence. The report neglects to mention the
lack of initial projections, the magnitude of the late projections
and the recent trading activity indicating that shareholders
believe there is more value than is being offered by Pelican. In
fact, approximately 30% of the Company’s outstanding shares have
traded at or above the deal price this week.
In closing, I believe an independent GSE has significant upside
potential. The Board failed to provide projections prior to the
record date and then reluctantly offered limited disclosure just
two weeks prior to the shareholder meeting. This set of
circumstances, combined with a comical fairness opinion and
egregious transaction expenses, are very troubling. I once again
demand normal course forward projections so that shareholders, who
are the owners of the business, can fairly evaluate the Pelican
transaction.
Sincerely,
Bradley L. Radoff
***
__________________________________ 1 The Company’s Form 8-K
dated October 8, 2024.
THIS IS NOT A SOLICITATION OF AUTHORITY TO VOTE YOUR PROXY.
DO NOT SEND US YOUR PROXY CARD. MR. RADOFF IS NOT ASKING FOR YOUR
PROXY CARD AND WILL NOT ACCEPT PROXY CARDS IF SENT. MR. RADOFF IS
NOT ABLE TO VOTE YOUR PROXY, NOR DOES THIS COMMUNICATION
CONTEMPLATE SUCH AN EVENT.
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Greg Lempel greg@fondrenlp.com
GSE Systems (NASDAQ:GVP)
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