Investors owning over 40% of the issued and outstanding shares of Leaf Group Ltd. ("Leaf Group" or the "Company") (NYSE: LEAF) – including Osmium Partners LLC, PEAK6 Investments LLC, Boyle Capital Opportunity Fund, LP, Oak Management Corp., Generation Capital Partners II LP, Generation Partners II LLC, Spectrum Equity Investors V, L.P. and Spectrum V Investment Managers’ Fund, L.P. (together, the "Investor Group") – today issued the following statement:
"We expect Leaf Group’s management, including its CEO, Sean Moriarty, to address the following critical topics during today’s H.C. Wainwright 22nd Annual Global Investment Conference. We encourage conference attendees to raise these questions if they are not proactively discussed during the Company’s prepared remarks:
- Do you respect the views of your shareholders and, if so, which of your shareholders are providing input that Leaf Group should remain an independent public company? Why do you believe that 60% of the Company’s shareholders – all of whom have invested millions of capital in the Company – are wrong about the need for change and that you and the Board are right?
- What should prospective investors make of the Board showing a lack of engagement with a 40% ownership group in addition to the other top shareholders that have contacted you? If a majority of shareholders are ignored, how should prospective smaller shareholders feel they will be treated by a board and management team that ignores, disadvantages and is adversarial to owners of the Company?
- Can you provide an example of another company that successfully resisted a call for change from 60% of the shareholders and, after opposing their views, was nevertheless able to rebuild credibility and create value for shareholders?
- The Company referred to its former Board member, Charles "Lanny" Baker, as an independent director during the time he was Chairman of the Company’s Strategic Review Committee and a member of the Audit Committee. When challenged on this determination by this Investor Group, Mr. Baker was removed from the Audit Committee and has now resigned from the Board. When the Board added Mr. Baker to the Audit Committee, did it know he was ineligible under NYSE rules because he was not independent? If they did not know that, why did they not know that? Why did it take a shareholder to point out the direct violation of the NYSE rule? Would the Company ever have realized this violation and material misstatement on its own? How did the Nominating and Corporate Governance Committee of the Board miss it?
- How should prospective investors judge the past execution of management and the future prospects when Society6 and its closest comp, Redbubble, were tied in revenue in 2015 as Mr. Moriarty took over as CEO? Since that time:
- Redbubble now has a market value of $800 million vs. a market cap of $130 million for Leaf Group
- Redbubble trades at a valuation of 2.00x EV/Sale vs. a valuation of 0.60x EV/Sales for Leaf Group – a persistent discount that has existed for years
- Redbubble generates in excess of $2 million in revenue per employee vs. revenue per employee of $350,000 for Leaf Group
- Redbubble is estimated to achieve EBITDA margins of 10-15% in the current year vs. the 5% EBITDA margins for Leaf Group projected in its guidance for 2022
- Did management expect that Redbubble would dramatically outperform Society6? If not, what has Redbubble done well that Society6 has failed to do?
- How does the Board think about shareholder alignment when the entire Board owns less than 4% of Leaf Group stock while shareholders have been diluted by nearly 50% and have lost 49% of their investment over Mr. Moriarty’s tenure?"
For more information, please visit www.LiberateLeaf.Group.
About Osmium Partners
We seek to generate strong, risk-adjusted returns by investing in undervalued, small capitalization companies across equity markets. Our Osmium 8 research process is based on eight simple factors involving factors such as balance sheet strength, aligned interests, attractive reinvestment opportunities, a low valuation, and reasonable growth prospects. As engaged owners, we actively discuss corporate strategy and capital structure with management teams and boards of directors. We prefer to conduct these discussions in private, but we will publicly debate important items with all shareholders when appropriate.
PEAK6 uses technology to find a better way of doing things. The company's first tech-based solution was developed in 1997 to optimize options trading and, over the past two decades, the same formula has been used across a range of industries, asset classes and business stages to consistently deliver superior results. Today, PEAK6 seeks transformational opportunities to provide capital and strategic support to entrepreneurs and forward-thinking businesses, helping to unlock potential and activate what is into what ought to be. PEAK6's core brands include: PEAK6 Capital Management, Apex Clearing, National Flood Services and Evil Geniuses. Learn more at www.PEAK6.com or follow us on LinkedIn.
About Boyle Capital Opportunity Fund
Boyle Capital Opportunity Fund, LP is a value-oriented investment partnership. We manage a focused portfolio of deeply undervalued securities and actively engage with the company's management and board of directors to unlock shareholder value over the long-term.
About Oak Investment Partners
Oak Investment Partners was founded in 1978. Since that time, the firm has invested $9 billion in over 525 companies around the world, earning the trust of entrepreneurs with a senior team that delivers steady guidance, deep domain expertise and a consistent investment philosophy. We are involved in the formation of companies, fund spinouts of operating divisions and technology assets, and provide growth equity to mid- and late-stage private businesses and to public companies through PIPE investments. These companies are concentrated in the five major sectors that fuel the most disruptive growth in our world today: Information Technology, FinTech, Internet and Consumer, Healthcare Services, and Clean Energy.
About Generation Partners
Founded in 1995, Generation Partners provides equity capital to growth companies through buyout and growth equity investments.
About Spectrum Equity
Spectrum Equity is a leading growth equity firm providing capital and strategic support to innovative companies in the information economy. For over 25 years, the firm has partnered with proven entrepreneurs and management teams to build long-term value in market-leading internet, software and information services companies. Representative investments include Ancestry, Bats Global Markets, Definitive Healthcare, GoodRx, Grubhub, Lynda.com, Origami Risk, SurveyMonkey and Verafin. For more information, including a complete list of portfolio investments, visit www.spectrumequity.com.