I can hear it now: "Shareholders are paying attention? And there's a competing bid for outside management?? DAMN! ......... Never mind."
The idea of "spinning off" the management function without giving shareholders a stake in the new, management company was just wrong. Cutting the shareholders pie and taking a nice, big piece without compensation --- really??? Is that even legal? That's in addition to serious conflicts of interest concerns if externalized.
They just didn't think it through.
Good work to all who spoke up...
What I can tell you most institutional investors did not like outside management. I did ask the question if management would put a cap on fees. They answered would do for a time period. it was quite clear they were getting big push back. what the heck they were not even on the road for a week yet. Manuel should just stick to what he is doing.
Two requests, no replies. Sending my requests in writing today. New bid on management agreement creates a real problem for independ. directors. New offer is clearly better than management's offer and if Management agrees to match it, who will ever believe they will not try to change it later? Hopefully institutional investors turn up some heat. Frankly at this point I favor new management even if it is external. Don't think I could ever trust existing mgmt again.
New article from SA...things could get interesting.
"The manager of more than $190B in assets, TCW Group goes public with its bid to become the external asset manager for Hercules Capital (HTGC +0.9%) at what it says are more favorable terms than those offered by the current management team.TCW made its bid on May 6, along with a request to delay the special meeting of shareholders scheduled for June. Given the short time frame, TCW felt it needed to file a preliminary proxy statement today.
According to TCW, its proposal represents shareholder savings of more than $10M per year compared to that of Hercules CEO Manuel Henriquez."
If Henriquez is an honest, forthright man, he will regret the loss of our wealth this decision has caused and retract it. I shall give him a month to come to his moral compass, and if not, sell.
HTGC Channels New Coke
Having sat through the Q1 conference call - and not having my call taken despite Manuel Henriquez's pledge to sit there all day if necessary to answer everyone's concerns on the move to external management (and then took just three calls – from the usual suspects), I have been able to distill my criticisms into five observations. 1. This is New Coke all over again. The poster child for successful internal management suddenly wants to go external. Everyone who was thrilled they'd found a comfortable, safe and high performing BDC is suddenly uncomfortable, dumping nearly 10 million shares in two days. Henriquez has severely damaged his own brand (while proclaiming he was actually defending it). Like Roberto Goizueta abandoning the hundred-year top-selling brand Coca-Cola for a sweeter New Coke, this is as boneheaded a branding disaster as I have ever seen. Fourteen years of steady returns and solid performance have been tossed, for the sake of external management. Henriquez demonstrated he has no understanding of brand – even his own. 2. Henriquez repeated claimed the market is "confused". There is no confusion in the market. It made itself quite clear. The years of sleeping well with HTGC in a portfolio are over. Henriquez has lowered it into the vast bucket of externally managed BDCs, with unpredictable performance and lower valuations. There was a reason little HTGC had a stock price premium 38% over NAV. Internal management. That he even thought for a second it would stay that way as an externally managed BDC speaks volumes - of hubris. 3. External management is NOT the same great people managing the same great way as ever. Their new mandate is to increase assets, not ROE. Assets Under Management is the name of the game for external managers. There is no bigger benchmark for them. It’s how they increase their bonuses. They are therefore in direct conflict with shareholders. Their management fees can only come from one source - the shareholders. The terrific new fee structure Henriquez touted is a teaser rate. It can be changed any time the external manager wants. And after this value-destructive move, why should anyone trust them? To say their interests will be aligned with shareholders’ is laughable. 4. HTGC will now go through a six week period of uncertainty and churn as Henriquez takes his show on the road, instead of withdrawing it outright, as the market has clearly preferred. The outcome is fore-ordained, as he has the ear of his institutional investors, who already have the same bonus structures themselves and see nothing wrong with them. After the vote, things will settle down. Herules will continue to perform well - except for the stock price. Henriquez has taken potential stock price gains off the table with this move. The dividend may rise some – but it would rise more if not for payments to his new external management firm. 5. Shame on the board.
I sold this morning. I held to understand it better but it looks no better. I think the stock is headed to $11 before the vote and decided to cut my loss now. I will still vote no for the shareholders that remain but I don't see any way it can get better.
My only surprise is none of the normal law firms have started class action suits.
I would like to see a show of hands on how many shareholders would be voting "HELL NO" if the vote were held today?
My second questions is can the current Management ever regain your trust after trying to pull this stunt?
As Warren Buffett said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Here is a very simple gauge of the quality of the last decision: Before stock is above $15, After Stock Below $13. What is wrong with that picture? Better then a 13% drop.
Sold all my shares. Will not stand for such manipulation. This is not in the best interest of the shareholders-- and the not put out by Wells Fargo agrees. Will look to get back in under new management or will find another 1st quartile BDC to invest in.
So Manny starts an advisor fee company called Hamilton because there are advantages for this and everyone else does it in the BDC community. At first the fees will be higher then the fees will decrease. We will hire more HTGC employees pay them handsomely with wonderful Bay Area perks. And new business opportunities will magically appear because Hamilton and the restructure will appeal to those in the know of such opportunities.
Once this is approved by our shareholders, we will have a rally on University Ave in traditional colonial kit and raise our tankards at the Rose and Crown in salute as we direct more resources, asset and stock options to Hamilton.
The only way I vote Yes, is if they agree to a cap on the Management Fees for the next five years that is less than or equal to what they have been running for the past two years. Protect the shareholders and we will give you the flexibility you are seeking. Otherwise it is a wealth transfer.
So he wants to take a piece of the company and we get nothing except payments to them and a big dent in our share holder value. Big NO for me.
Please all shareholders reject this proposal soundly!!! Stock would then gradually recover.
#$%$? When the stock drops 17.5% in one day heads should roll. See you in court.
I sent a note to Investor Relations ( email@example.com) yesterday, lets see if anyone has the testicular fortitude to respond.
This move is solely to satisfy the blatant and apparently insatiable personal greed of CEO Henriquez. Shareholders be damned. It's absolutely disgraceful behavior.