Company’s Board, Led by Chairman John Fox, Has
Failed to Address OneSpan’s Persistent and Significant Valuation
Discount to Peers
Believes Board Lacks Relevant Skill Sets to
Drive Successful Transformation of OneSpan into a Pure-Play
Software Company and Has Overseen Long Periods of Underperformance
and Misguided Capital Allocation
OneSpan Has Apparently Ignored Inbounds from
Interested Parties Regarding Potential Strategic Transactions
Legion Partners’ Nominees Possess Strong
Technology Industry, Corporate Governance and Strategic Expertise
Needed to Push for a Comprehensive Strategic Review of OneSpan that
Could Create Value Above $43 Per Share
Legion Partners Asset Management, LLC, which, together with its
affiliates (collectively, “Legion Partners”), beneficially owns
2,773,946 shares of common stock of OneSpan Inc. (“OneSpan” or the
“Company”) (Nasdaq: OSPN), representing approximately 6.8% of the
outstanding stock, today issued an open letter to stockholders. In
the letter, Legion Partners announced it has nominated four
highly-qualified independent directors for election to the
Company’s Board of Directors (the “Board”) at the Company’s 2021
annual meeting of stockholders: Sarika Garg, Sagar Gupta, Michael
J. McConnell and Rinki Sethi. Legion Partners also outlined its
concerns with the Company’s persistent and significant valuation
discount to its peers, poor corporate governance, and misguided
capital allocation, and detailed its belief that the Company should
undergo a comprehensive strategic review that could return
significant value to stockholders.
Legion Partners is the second-largest institutional stockholder
of OneSpan. Since its initial investment in April 2018, Legion
Partners has sought to collaborate with the Board and management
team on matters including financial disclosures, investor
communications, Board refreshment, asset divestitures, capital
allocation and other governance matters. After 30+ meetings with
the Board and management team over nearly three years, Legion
Partners has lost confidence in the Board’s ability to successfully
lead the Company’s transformation to a cloud-first recurring
revenue software company. Leadership and oversight that better fits
the Company’s business model and is aligned with long-term
shareholders is particularly critical at this juncture, thus
warranting significant Board change.
Key concerns highlighted in the letter include:
- Long-Term TSR Underperformance and Undervaluation –
OneSpan’s total shareholder returns have severely lagged peers and
indices over multiple time periods, leading to a worst-in-class
valuation among public cybersecurity companies and other direct
software peers.
- Long-Tenured Directors Lack Relevant Skillsets – the
Board has defensively added new directors over the past two years
and only this week announced the long overdue retirement of Michael
P. Cullinane after serving for 22 years, likely to offset our
impending nomination and its 2021 guidance that was not well
received by the market given the 2.6% drop in the stock the next
trading day. No other long-tenured incumbent independent director
in a key Board leadership position has stepped down, despite these
individuals lacking skillsets needed to transform OneSpan into a
pure play modern software company.
- Failure to Take Strategic Action – based on credible
market sources, the Board has apparently ignored inbound inquiries
from parties interested in strategic transactions. According to
Legion Partners’ valuation analysis, OneSpan shares are worth $43
assuming 13.5x EV / ARR plus modest values for the remaining
non-recurring components. However, Legion Partners believes this
value is being overlooked by the market given the poor optics
caused by the legacy Hardware segment, which if sold, could help
rerate OneSpan’s stock price.
- Poor Capital Allocation– the Board has overseen a long
history of M&A failures and questionable judgment on capital
allocation priorities, presenting a key risk for shareholders given
the Company’s large, idle cash balance.
A full copy of the letter can be found here:
https://protectonespan.com/
* * *
About Legion Partners
Legion Partners is a value-oriented investment manager based in
Los Angeles, with a satellite office in Sacramento, CA. Legion
Partners seeks to invest in high-quality businesses that are
temporarily trading at a discount, utilizing deep fundamental
research and long-term shareholder engagement. Legion Partners
manages a concentrated portfolio of North American small-cap
equities on behalf of some of the world’s largest institutional and
HNW investors.
CERTAIN INFORMATION CONCERNING THE
PARTICIPANTS
Legion Partners Holdings, LLC, a Delaware limited liability
company (“Legion Partners Holdings”), together with the other
participants named herein, intend to file a preliminary proxy
statement and accompanying WHITE proxy card with the Securities and
Exchange Commission (“SEC”) to be used to solicit votes for the
election of its slate of highly-qualified director nominees at the
2021 annual meeting of stockholders of OneSpan Inc., a Delaware
corporation (the “Company”).
LEGION PARTNERS HOLDINGS STRONGLY ADVISES ALL STOCKHOLDERS OF
THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS
AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON
THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE
PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE
PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY
SOLICITOR.
The participants in the proxy solicitation are anticipated to be
Legion Partners Holdings, Legion Partners, L.P. I, a Delaware
limited partnership (“Legion Partners I”), Legion Partners, L.P.
II, a Delaware limited partnership (“Legion Partners II”), Legion
Partners Offshore I SP I, a segregated portfolio company of Legion
Partners Offshore Opportunities SPC I, a company organized under
the laws of the Cayman Islands (“Legion Partners Offshore I”),
Legion Partners, LLC, a Delaware limited liability company (“Legion
Partners GP”), Legion Partners Asset Management, LLC, a Delaware
limited liability company (“Legion Partners Asset Management”),
Christopher S. Kiper, Raymond T. White, Sarika Garg, Sagar Gupta,
Michael J. McConnell and Rinki Sethi.
As of the date hereof, Legion Partners I directly beneficially
owns 2,168,979 shares of Common Stock, par value $0.001 par value
per share, of the Company (the “Common Stock”). As of the date
hereof, Legion Partners II directly beneficially owns 120,249
shares of Common Stock. As of the date hereof, Legion Partners
Offshore I directly beneficially owns 484,518 shares of Common
Stock. As the general partner of each of Legion Partners I and
Legion Partners II, Legion Partners GP may be deemed to
beneficially own the 2,289,228 shares of Common Stock beneficially
owned in the aggregate by Legion Partners I and Legion Partners II.
As the investment advisor of each of Legion Partners I, Legion
Partners II and Legion Partners Offshore I, Legion Partners Asset
Management may be deemed to beneficially own the 2,773,746 shares
of Common Stock beneficially owned in the aggregate by Legion
Partners I, Legion Partners II and Legion Partners Offshore I. As
of the date hereof, Legion Partners Holdings directly beneficially
owns 200 shares of common stock and, as the sole member of each of
Legion Partners Asset Management and Legion Partners GP, Legion
Partners Holdings may also be deemed to beneficially own the
2,773,746 shares of Common Stock beneficially owned in the
aggregate by Legion Partners I, Legion Partners II and Legion
Partners Offshore I. As a managing director of Legion Partners
Asset Management and managing member of Legion Partners Holdings,
each of Messrs. Kiper and white may be deemed to beneficially own
the 2,773,746 shares of Common Stock beneficially owned in the
aggregate by Legion Partners I, Legion Partners II and Legion
Partners Offshore I. As of the date hereof, Mr. McConnell directly
beneficially owns 6,000 shares of Common Stock. As of the date
hereof, none of Mr. Gupta or Mses. Garg and Sethi own beneficially
or of record any securities of the Company.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210225005692/en/
Media Contact: Sloane & Company Joe Germani / Dan
Zacchei jgermani@sloanepr.com / dzacchei@sloanepr.com
Investor Contact: Saratoga Proxy Consulting LLC John
Ferguson / Joe Mills (212) 257-1311 info@saratogaproxy.com
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