Q4 2022 180 Degree Capital Corp Earnings Call
Participants
Daniel Wolfe; President, CFO & Chief Compliance Officer; 180 Degree Capital Corp.
Kevin Rendino; Chairman & CEO; 180 Degree Capital Corp.
Adam Waldo; Analyst; Lismore Partners
Presentation
Operator
Q&A session has started. The recording has started.
Daniel Wolfe
Good morning, and welcome to 180 Degree Capital Corp's fourth-quarter 2022 financial results update call. This is Daniel Wolfe, President, Portfolio Manager of 180 Degree Capital. Kevin Rendino, our Chief Executive Officer and Portfolio Manager and I would like to welcome you to our call this morning. (Conference Instructions)
I would like to remind participants that this call is being recorded, and then we are referring to a slide deck that we have posted on our Investor Relations website at ir.180degreecapital.com under financial results. Please turn to our Safe Harbor statement on slide 2.
This presentation may contain statements of a forward-looking nature relating to future events. Statements contained in this presentation that are forward looking events -- are forward-looking statements are intended to be made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect the company's current beliefs, and a number of important factors could cause actual results to differ materially from those expressed herein.
Please see the company's filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with the company's business that could affect the company's actual results. Except as otherwise required by federal securities laws, the 180 Degree Capital Corp. undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties.
I would now like to turn the call over to Kevin.
Kevin Rendino
Thanks, Daniel. Good morning, everyone. After five years of consistent outperformance, 2022 was a difficult year for 180. On slide 3, we show summary. The fourth quarter was challenging for the entire company when taking into consideration the entire portfolio, specifically the legacy private portfolio that came from Harris & Harris, our predecessor company.
December itself was challenging for the public portfolio, given the frenzy tax loss selling of many of our holdings. Our NAV declined to $6.32. 71% of that decline was due to the private portfolio, which as many of you know, we simply have had no control over. That was led by Quantum and AgBiome. The [balance] was due to a decline in the value of our public holdings, namely Synchronoss, Arena Group, Comscore, Ascent, and Parabellum. We'll have more on those later.
Let's turn to slide 4, which may be the most important slide in the deck, and I'm going to be blunt here. So while the month -- fourth quarter and year were disappointing to me, let's understand where we are as we start 2023. The sins of Harris & Harris are almost done, if not totally done, hidden during the 180 shareholders. We've undergone over the last five years before last year a slow and methodical business transformation.
We have mitigated the dampening effects of Harris & Harris portfolio by generating nearly $3.50 of gains in our public portfolio since we started. While it's almost unconscionable that the private portfolio in a bull market has had $1.80 of losses through the end of last year, it is what it is. But it's over and as of February 24, we now have a total of $9.5 million in private holdings, but it's really $7 million if you remove the TARA milestone payment, which in and of itself is about $2.5 million.
So the private portfolio now is less than 10% of our NAV. When 180 started, I said it was our goal to have 100% of the assets in public related assets for transparency purposes. We are now 90% of the way there, $6.5 million ex TARA is the remaining value of our private portfolio, given the write-downs that we took in the fourth quarter to clear the decks as we think through the next five years.
Slide 5 is a different version chart to show you how far we have come in remaking the business. We finally have a balance sheet where we control over 90% of the assets, you could see here. Now our year in 2023 was disappointing as it related to the public holdings, and we own that. But unlike the last six years, it will be nice to have our performance in the future dictated solely from our strategy of picking public microcap stocks without having to fight the massive headwind of a private portfolio that not only didn't carry its weight in the last six years but actually hurt us.
To show you how linked our future now is to our core competency of picking public stocks. Let's look at the impact our public portfolio has had on our NAV in 2023, keeping the private portfolio stagnant. Year to date, our book value has climbed as of February 24, to $7.08 on the back of a 14.8% gain in our public portfolio. Our NAV would now be up 12%.
If this was the case, when we started in 2017, a 14% increase in our public stock picking would have had just a 2.9% increase in our NAV. You can see now our NAV growth is more directly linked to our public stocks rather than having an esoteric private portfolio impacted. It's easier, we think, for shareholders to judge how we're doing, and we'll be much more transparent in the next five years than we were even in the last five. We're finally changed the company the way we always wanted to when we first started.
Slipping -- skipping ahead to slide 6, you can see the dip in our cash and public securities here. It was indeed a rough quarter for our stock picking with a 7.6% decline versus a similar increase for the Russell Microcap Index. I'd encourage everyone to read our shareholder letter where we take a deep dive into the markets, our holdings, and all the rest. We review 2022, and we provide insight into 2023.
We struggled last year amidst a risk-off environment with Russian war with Ukraine; subsequent higher rates to combat inflation due to a messy supply chain, which was caused by COVID. We were wrong in thinking that our holdings would perform better, given their low valuations to start, and for the most part, good fundamentals, except for the case of Quantum. We were wrong. The messier the capital structure, the more investors couldn't wait to sell, which is one reason why names like Synchronous and Arena underperform, not only in most of 2022, but certainly in the fourth quarter.
Then the fourth quarter came, especially December, and I haven't seen tax loss selling like that in a very long time. And unfortunately, we were the recipients of it. It wasn't enough that Synchronoss got cut in half during the course of the year, it got cut in half in one month in December as tax loss selling was ramping.
With 2022 in the rear view and our sights on 2023 being here now, being pollyannish isn't part of our thinking as we acknowledge that rates are materially higher than they were just 12 months ago. And this increase will no doubt have a dampening effect on global growth rates as well as equity valuations.
That said, here's a nutshell of our views, which we will -- which we support in our shareholder letter from a number of charts and research, if you happen to read the letter. One, our overall view is inflation peaked, and the multitude of fed rate hikes have already had a significant effect in lowering inflation. Two, we believe we are already in some sort of recession, given real GDP has declined for more than two quarters in a row already.
Three, we do not believe we are headed for a financial Armageddon like we had in 2008. In 2008, we had $1.3 trillion of subprime mortgage assets on the balance sheets of banks and insurance companies. That financial leverage simply doesn't exist like it did in the past. We believe stock price valuations have significantly discounted dire economic outlooks that are not occurring currently, and in fact, may never occur.
We believe we are headed to a normal environment where the market can no longer rely on free money and quantitative easing and 0% interest rates. Stocks will have competition from the bond market, and we do expect multiples as a whole to contract. But bubbles will continue to be popped, slower growth rates will inevitably occur, and companies with real revenues and real cash flow can still prosper.
For the time being, we believe rightly so, gone are the gold rush days when talking heads, financial thieves, and children pontificate endlessly on how things have changed and how we are in a new world order with these individuals arguing for an entirely new investment landscape. So we think back to the basics scenario where companies are being judged based on real cash flow and real revenues will come to exist and be more important in the next five years than it was in the last five years.
Slide 7 shows our quarterly performance for every timeframe. Obviously, we didn't get the job done in 2022, we were down every quarter. The calendar turned on January 1, and our 14.9% performance to start the year, double that of the benchmark. We're off to a good start, but it is what it is, nothing but a start. We know how quickly things can change. But at least, I'm sitting here today. I'm happy that we're up 14.8% than down 14.8% like we actually were in the first quarter of last year as you can see from that chart.
On slide 8, here the sources and changes for our assets in Q4 as you can see. $1.27 or 71% of the decline came from our legacy portfolio.
Slide 9 shows our '22 year-to-date numbers, not pretty. A public performance of left alone was not competitive, but if left alone, would have caused our NAV to drop only 28% versus where it ended up at the end of the year. Layer on more than a dollar of losses in the private portfolio for the year and you get was a very difficult year.
As you can see on slide 10, obviously, while last quarter and last year were substandard, we have enjoyed significant outperformance from our public holdings. And while it would have been nice to get some help from our private portfolio, it hurt us to the tune of $1.80 per share. The good news, and I really cannot emphasize this enough, our private portfolio is now valued at roughly $0.65 per share rather than comprised of over $5 a share of NAV just six years ago.
Slide 11, the performance of every stock we owned in Q4. You can see Arena Group, Synchronoss, Ascent, Parabellum, and Comscore led the way with significant declines. To say a few words about each of our holdings that stood out in the past quarter, please turn to slide 12. On December 13, 2022, Arena announced the acquisition of Men's Journal using a new debt facility from B. Riley to fund the acquisition. The facility was meant to be a bridge to completion of an equity or other type of financing as it has terms that include increases in the interest rate quarterly starting in March '23.
With the lack of transparency and confusion, unfortunately, Arena stock subsequently collapsed from approximately $16 to $10.61 at the end of the quarter. As it turns out, we like the transaction, it was the funding piece that was a little bothersome to the street.
Comscore continued to improve -- to show improved financial results for Q3 and announced the negotiation of a data deal with Charter to provide lower costs, increase data access, and a longer term of form of exclusivity with regards to the agreement. But that said, the stock was unable to recover from the collapse that started earlier in the year, due primarily to continued ambiguity around the potential for the special dividend to be called by the preferred stockholders and other concerning corporate governance matters.
Cerberus did continue buying SCOR's common stock in the open market, with large purchases of 1.5 shares at $1.10. The company does report tonight. We truly believe in the business. We are on the cusp of ramping up our activism, if in fact we don't see improvements from the corporate governance, from the Board of Directors that we intend to see when they report their results tonight.
In terms of -- we did have a couple of names of help. Potbelly continues to provide strong results across all financial and shop-level metrics. They also provided a strong guide for Q4 and announced the signing of four additional shop development deals with existing franchisees.
Commercial Vehicle Group was up in the quarter. They continue to show the improvements made by management through renegotiation of contracts and the streamlining of their business. They reported new business wins, continued strong free cash flow that allowed the company pay down debt near the top end of the guidance.
And Alta Group reported results that exceeded all analyst expectations and guidance with continued strong performance across all of its businesses. The company also notes that it continues to be constrained on its rental fleet and has not seen any in demand at all.
The next set of slides starting on slide 15 show our performance for calendar '22, which tells the picture of each of our holdings. We also include on slide 16, as we do every quarter, a snapshot of each of our holdings since the day we started. And clearly, while '22 was an underperforming year, the six years we have been at this have yielded significant outperformance.
All of which leads to slide 21, the complete look at what we have done. I'd say last year knocked out three numbers down -- three-year numbers down, but we did very little to our five-year performance numbers and our inception numbers. Fortunately, this year is off to a better start. So we hope to be able to report a much different picture than this chart would dictate -- depict when we visit with you after Q1 of this year.
And finally, to reiterate, we've undergone a significant business transformation that is essentially complete, albeit not necessarily the way we would have wanted the last piece to fall by taking write-downs in AgBiome and Quantum. And remember, between Daniel and I, we own 8% of TURN. Our full team, including the Board, owns 10% of the company. We're economically aligned with our shareholder, and nobody feels the pain of '22 more than we do. It is also over. And as we begin 2023 and the next five years, I'm thankful and (inaudible) many of the private holdings as we did when we first started.
Instead of having $50 million of private holdings to worry about and which we couldn't control, we are essentially down to $6.5 million. The decks are cleared, and our performance now will be dictated by our primary focus of picking small microcap stocks with Graham and Dodd focused and an active spend.
Daniel, why don't I turn it over to you now?
Daniel Wolfe
Thank you, Kevin. So as Kevin just mentioned, our business transformation really is almost complete. And if you turn to slide 22, I am really looking forward to the day when we actually no longer have this slide as part of our shareholder update call.
This quarter, we wrote down the value of our holdings in AgBiome due primarily to declines in the value of public comparable companies. HALE.life has been written down to zero following its management's continued and endless failure to raise capital.
Following these write-downs, 180's remaining private portfolio has only one material position, which is AgBiome. The total assets of the remaining portfolio, as Kevin said, is approximately $9.5 million, and of that, $2.4 million are payments we expect to receive from the sale of TARA to Valo Health with $1.1 million to be paid in April '23 and $1.3 million in April '24. The remaining legacy companies make up approximately 1.5% of our net assets as of December 2022 and less as of today with the appreciation in our public holdings.
There really isn't anything else worth discussing relating to these assets, so I'm going to move on. Please turn to slide 23. For Q4 '22, our regular operating expenses equaled approximately $800,000 versus approximately $750,000 in Q4 '21. The main increase year over year relates to admin and operating expenses, which include our marketing efforts, that I'll discuss in detail on the next slide.
We'll maintain a lean cost structure outside of fixed expenses for being a public company, focusing on our expenses on activities designed solely to enhance our investment performance or to increase our revenues for managing outside capital. As that has been the case since Kevin and I took over [running] in 180, we have been consistent in saying that the management team will only participate in the bonus pool, if our performance warrants it. Needless to say our performance for '22 didn't warrant a bonus pool, and thus, no performance-based bonuses are accrued or paid as of the end of Q -- '22.
In addition, no new bonus pools to be accrued until we overcome a high watermark set by our public holdings and payment of that, historically, deferred portion of prior bonus pools will require the same with respect to each year that they were established. Our management team and Board are acutely aware that we are in business to serve our shareholders.
Please turn to slide 24. As I mentioned some of the increased year-over-year expenses relates to our marketing efforts with peak strategies, we showed you last quarter some of the efforts that we had. And as you can see on this slide, peaks have done a great job in getting us in front of leading financial journalists to help increase the exposure of TURN. We continue to pursue these opportunities with earnest.
Please turn to slide 25 and 26. We provide these slides each quarter that enable our shareholders to look at the trend of our total expenses and compensation-related expenses as percentage of net assets. This year, the percentage is increased primarily because of the decline in net assets. We continue to anticipate reductions in our operating expenses as a percentage of net assets will be based on growth in our net assets rather than further reductions in our expenses. We remain committed to treating every dollar of shareholder money with the utmost care and consideration.
Please turn to slide 27. Here, we present our scorecard for Q4 '22 based on certain metrics that we track throughout the year. While '22 is difficult, we believe we are well positioned to grow value for our shareholders across all these metrics over time, as we have done during the prior five years of 180's existence.
Please turn to slide 28. As of the end of Q4 '22, TURN traded at 84% of NAV. Our securities of publicly traded companies in cash and other assets, net of liabilities were $5.41 per share. Stock price is $5.28. Best, you -- if we receive a 100% credit for the value of these assets, the market is ascribing a negative $0.13 per share or negative $1.35 million to our legacy private portfolio as of the end of the year.
Now if you take an update this analysis through February 23, '23, given the discussion earlier in this letter. Using solely changes in value of Level 1 or our publicly traded holdings or assets that are valued using Level 1 or publicly traded based information, TURN traded approximately 75% of NAV.
Our securities of publicly traded stock, cash, and other assets were about $6.16 per share. Our stock price was $5.28. If we receive a 100% credit, similar analysis, the market is ascribing value approximately negative $0.89 per share and negative $9.2 million to our legacy private portfolio.
As Kevin mentioned earlier and I talked about earlier, I'll remind you that $2.4 million of this legacy product portfolio are payments from the sale of TARA to Valo Health. And we expect to receive the first $1.1 million in April '23. We received 200 -- the first $250,000 in December '22.
Given how painful the market has been in '22, we think the current construct of our balance sheet has provided really a true floor to our share price. While none of '22 has been fun, had 20 -- 2017 to '21 not occurred, our share price would be nowhere near where it is trading today.
Now please turn to slide 29, and I'd like to end with examining this discount to our stock trades that with respect to NAV and a little more detail. The chart shows our stock price versus NAV over time. With the NAV that's being used in the denominator, that is the prior quarter disclosed NAV. And you notice the most abrupt jumps or declines occur when the new end-of-quarter NAV is used in the calculation.
As 180's assets are now comprised substantially of publicly traded investments, the NAV is much easier for shareholders to estimate, particularly relative to our share price. We also believe that it will be easier for us going forward to provide a closer look at our business at various points of the year outside of our normal reporting cycle.
While it is still very early in '23 and the performance of the quarter and the full year may be materially different than as what we've listed as of February 23, we are encouraged by the start of '23 and thought it important to provide the interim update to shareholders and that we separately from our normal earnings release.
As we can see from this chart, our stock trading discounts NAV expanded during -- due to growth in our NAV rather than declines in our stock price. Our belief in the increased ability to understand where our NAV is at a more frequent basis will aid in our continuing quest to narrow the discount between our stock price and NAV.
That said, we focus on what we control and can control. And that is increasing 180 Degree Capital Corp's NAV. If we are able to do that, the stock price should follow as it has in our six-year history for the benefit of shareholders. If we give that, we certainly do not believe TURN stock price reflects the appropriate value of 180. And as you've seen us do in prior quarters and similar situations, management looks forward to adding to our ownership of 180 in open windows for such purposes.
We would now like to open the call for questions.
Question and Answer Session
Daniel Wolfe
(Conference Instructions) [Brian Alexis]
Can we hear you, Brian?
Can you hear me?
Daniel Wolfe
Yeah, now we can hear you, Brian.
Oh, there we go. I guess I can turn off my mute. Question for you on the Parabellum. I read in your letter that there's a capital raising deadline of now-ish for the pending acquisition and then the target can decide what they want to do. I'm just assuming, let's say that it doesn't work with them, I think you have roughly another eight months or so to -- or Parabellum has eight months to find an acquisition target.
Can you just say what would happen to the TURN balance sheet as you guys were the SPAC sponsor? If nothing happens, the SPAC gets redeemed, how -- what's the readthrough? How do we think about that scenario?
Daniel Wolfe
Yeah. So thanks for question, Brian. So obviously, I can't speak too much on Parabellum and the specifics really into, except for what is publicly known, as you mentioned there is that ability -- it's not an automatic determination in terms of if the Board of the target EnOcean wants to pursue different alternatives and terminate the business combination agreement, so that -- and that deadline for having the capital commitment is today. There hasn't been anything announced publicly regarding that, so I can't -- again can't speak in specifics.
If at the end of the day this transaction does not go forward, from a technical perspective, the SPAC is able to extend its life through September. And then -- but to do that, the sponsors would have to put in approximately $185 per month -- $185,000 per month. And so I think that would have -- that's a decision that would have to be made if EnOcean were to terminate the agreement or we were to terminate the agreement with EnOcean.
But if at the end of the day under the scenario where the SPAC was shut down and the trust distributed, then the result to TURN's balance sheet would be a de minimis amount of capital potentially coming back depending on how much is left in the operating account at the end of the day. Right now, we have it valued at about $2.7 million.So in a downside scenario, it would be approximately $0.27 impact to NAV.
Got it. Then --
Kevin Rendino
What I would say there, Brian, -- hang on, one second. It's a good company in a very difficult market for everything, funding, the debt markets, SPACs, raising capital, so there's been a back and forth in terms of trying to find the right value for the business. And it will either be an agreement or there will not be. I wouldn't take it as if you don't see an announcement by the end of the day, that it's over. You can always have extensions. And there's a give and take always -- a back and forth between investors and the Board.
So it's still a work in progress. We hope to be able to conclude on something. But as Daniel said, if we don't, this will have been a waste of time, but it will -- and the waste of time will have been $2.7 million, as Daniel pointed out.
Got it. Then, if I could ask one more on D-Wave. Hard not to notice the volume on February 6, are you guys able to share anything about your position at D-Wave as of today?
Kevin Rendino
No, you know that we can't share with you. Unless what our ownership stake in a particular deck, no, can't do that.
Daniel Wolfe
Thanks, Brian.
Kevin Rendino
But Brian, (multiple speakers) I will say one other thing to Daniel --
Operator
Q&A session is over.
Daniel Wolfe
So sorry, I hit the wrong button there.
Operator
Q&A session has started. This line is now on hold. This line is now off hold.
Kevin Rendino
(technical difficulty) information on where we are periodically during the course of the year because we now know what we own, and we can value what we own because they all trade on the NASDAQ and the New York and the rest. But as it relates to specifically sharing with folks outside of Form 13-D or 13-G filings, we can't and probably won't ever provide what we're doing in the middle of a quarter with regards to our position. That just wouldn't make any sense.
Now if we exited it and we were a filer, you'd probably see that. But we don't -- we're not going to get ourselves in a situation where we're showing our hand when we don't have to show our hand. So that's kind of the professional answer, Brian, to your question.
Okay. Daniel, go ahead.
Daniel Wolfe
Sorry about that. Sorry, everybody. I think we're back on.
Adam Waldo.
Adam Waldo
Hi, good morning, Kevin and Daniel. Thanks very much for taking my questions. I hope you can hear me okay.
Kevin Rendino
Yes, we can.
Adam Waldo
So I apologize. I got on the call little bit late. You may have covered this in your prepared remarks, but two topics, AgBiome write-down and Comscore activism.
On AgBiome write-down, there's a bit of a sizable write-down, obviously. And I wonder if you can provide a little more color on the factors that drove the size of that write down. And then conversely, what factors you see going forward that might lead to a write-up? And then I'll follow up on Comscore.
Kevin Rendino
So Daniel, let me attack AgBiome, then you go ahead. There's two reasons -- look when you do an analysis of any of our private holdings, the analysis encompasses a number of factors. It could be the last raise that the company did. But if you're outside of a raise then you have to look at the company profiles and you do an options pricing methodology with regards to it. And clearly, 2022 was a difficult year for the Ag space. And as such as you're looking at AgBiome and you're a year remove from doing a deal, you have to value it differently than you did starting the year.
Daniel, is anything else there?
Daniel Wolfe
No, you (inaudible)
Kevin Rendino
Yeah. And I don't know what to say. I mean, they need to run the business better. I mean that's the best way for me to phrase it, Adam. It's the whole frustrating part about all this stuff is, I don't know, I can't control it. We have no say other than we could -- we speak to the Board. We speak to the management team, but inevitably, we can't control anything. And they've got a lot of work to do to improve their business model. They have a Board that would more than love for them to be public, but are they really ready to be public? I mean, that's all the question. There was a challenging year for the industry. And obviously, you could see from -- our market was a challenging year for AgBiome, that's really all we can say on it.
Adam Waldo
In terms of Comscore --
Kevin Rendino
Okay, so
Adam Waldo
Go ahead.
Kevin Rendino
Sorry, I was just --
Adam Waldo
If I may say -- so the bulk of (inaudible) was operating performance revenue wasn't discount rate because of backup in interest rates and Fed funds and so forth, it was mainly operating performance for the company was the principal driver.
Daniel Wolfe
Well, now that's --
Kevin Rendino
Multiple of Comscore, also.
Daniel Wolfe
Yeah. So the option pricing model do include, and it's actually not discount rate base, it's actually when interest rates go up, the volatility -- and volatility also goes up. You can actually see the option pricing models have an opposite impact. it really comes down to, as Kevin said, when you have a company that has have financing as over a year out under ASC 820, which is the accounting standard for determining fair value, you need to incorporate other factors into the termination because there's been a long time since that price and the valuation was set. And so when you look at both the some of the inputs that we had around the company, but mostly related to the performance of comparable related companies, again, it was a pretty difficult year for most ag-companies, especially small tech-- small cap, as we know. And that being incorporated into value and determination of value led to the significant decrease in value.
Adam Waldo
Okay. So if I'm hearing you properly, gents, it's really more multiple compression in the comp set rather than way of target operating performance of the business.
Daniel Wolfe
It's still a relatively early-stage company. You're right. I mean, (multiple speakers) some products on the market, it's not -- and they're not -- the actual operating performance isn't out there, right? But they do have some products there on the market, but it's early stage. And if you look at -- if you look at just the weather, right, a lot of their stuff, they develop fungicides. That's one of their main products that's on the market. For fungicides, you need wet weather. And if you look at just the weather from last year, it was difficult in some of the main growing areas.
So there's -- that's not to say that they don't have really interesting products and capabilities and there is the opportunity for growth into the future. But '22 was a difficult year.
Kevin Rendino
And needless to say, as it relates to come in public, this market is not about idea stocks. We don't need $1 billion ideas right now. We're in a risk-off environment where that's the last thing on investors' attention and so names like this just get pushed, pushed, pushed to the back of the line, if in fact, there actually is a line.
Obviously, disappointing. We have a high regard -- had a high regard for the company and it's just one other -- just another reason why it's hard for me to ascertain how Harris & Harris existed for as long as it did with names like this. Because we -- as Daniel said, it is early stage, and how long we've owned it? Daniel, how long we own this?
Daniel Wolfe
AgBiome is 2014, if I remember correctly.
Kevin Rendino
It's nine years of early stage. D-Wave was funded in '19 and in -- yeah, I can't believe I'm saying this, was in 1999.
Daniel Wolfe
I was -- the D-Wave was founded in 1999. We invested in D-Wave in 2000 -- actually, I take back what I said earlier about AgBiome. We invested -- our initial investment in AgBiome was in '13, and our initial investment in D-Wave, I believe, was in 2006 or 2007.
Kevin Rendino
It's insane that the company existed for as long as it did. Then, we inevitably would have ended up as a zero, if it didn't change the stripes. On Comscore, Adam, it's business that it's a real franchise. The Board has done some good things. They hire Jon Carpenter. They've been buyers of their own stock in the open market, board members specifically, service as well. Initiated a cost-improvement program, which should help their EBITDA margins; investing in the right areas; and so they've done some good things.
Here's where the issue is. Number one, it's a 10-person Board, which is completely unwieldy and out of pocket for a company of this size, just too big. The compensation in 2021 was $4.1 million paid to the Board. Now some of that was payback from '20 to the unconscionable amount of capital.
When I was on the Board of a company, The Street, we didn't get paid. I don't think. We took zero cash from the company because our economic incentive was a 17% ownership stake that we had in The Street. Well, some of the preferred holders which have two [CT], they're actually paying themselves as well. That bothers me. And that needs to change.
You have a lead independent director, who's has been there for 15 years, who hasn't added a day of value in the 15 years that he has been there. And he made $900,000 in 2021, as disgraceful and egregious. And they're not addressing the issue of the preferred, where it is dominating the capital structure. There's a special dividend out there, which the company is entitled, which the preferred holders can call except they can't call it because it would put the company at risk.
And the company doesn't necessarily acknowledge this. They don't really discuss it, and they're in a weird spot because they can't say, we can't pay it on the one hand, except on the other hand, they can't pay it. And the special dividend is not going to be called that everyone thinks they're going to call the special dividend.
So there's a number of things at the Board level, which need to be fixed and altered. There's more alignment that the preferred shareholders could make with the common shareholders to show that they are aligned with the common shareholders.
And we're going to press -- we're going to get more aggressive in some of our commentary, if we don't see some significant changes. We're done talking about the things that we think they should be doing; we're going to start demanding that they do certain things. And if that means writing a public letter, then we'll write a public letter. I'm hopeful we don't have to do it, and the Board will operate properly.
They need to shrink the size of the Board. They need to shrink the comp, that's paid to the Board. They need to deal with the special dividend because you can't have a board that's paying themselves over $1 million, and then telling the CEO to fire a bunch of people or hold people's comps that left in inflation. It just -- it doesn't work.
So the people that have been disadvantaged here are the employees of Comscore. And the Board, it has a responsibility to not serve preferred shareholders or responsibilities to common shareholders. And we're going to make sure that they were aware of their responsibilities.
So it's a completely egregiously mispriced business like $1.16 makes zero sense to me. Zero. It's worth three times that amount now, but the Board's got to basically deliver on enhanced corporate governance practices. They are just behind the eight ball here, so we'll see if they do it. Well, hopefully, will. Time will tell. But we're activist for a reason. We're never going to be able to run a proxy contest.
I'm the first person that -- we're not going to waste our shareholders' money by launching a proxy contest we can never win. But we'll make their lives a little more difficult by being very bold in letters written to common shareholders and the employees, if they don't change your stripes. Long-winded answer, but that's our answer.
Daniel Wolfe
And maybe the only thing I would add that is, look, we've had a good dialogue with them. They have done a number of things that we have suggested, and they have been somewhat responsive. It's really these remaining topics that we think is there -- if they actually focus on and work to resolve, that should unlock value for everyone.
Adam Waldo
Right. So thank you for the helpful comments. And Kevin, thanks for clarifying about a potential proxy contest. You're, obviously, under Delaware corporate law, the Board's obligation is to the common shareholders above the preferred. Could you envision some sort of contingency litigation around fiduciary? Do you hear what other forms might activism take the side [letter writing]?
Kevin Rendino
Yeah, the proxy contest, probably not going to do. The Delaware courts have been very emphatic about what the obligations are of Board members that is they are there to facilitate the rights and represent the rights of common shareholders. They haven't really done anything to violate the rights.
What would have they done? There's nothing to see them over yet, but we haven't -- we're watching. And if they cross the line, then litigation is an open possibility, like I said to Daniel's point, we've had a good dialogue with the Board. But the dialogue has stopped being a dialogue because they're not addressing certain things that need to be addressed.
They've addressed a lot of other things. They need to keep addressing the issues that are playing the -- there's no reason, given the results, why this share price is $1.16. It was three times the price in April of last year. Three times. Nothing's changed. As a matter of fact, the business is better.
But what happened last year, it was -- way better. What happened last year, if you remember is they -- because the preferred is not calculated as equity according to Russell, and so they, unfortunately, ran through to the downside where the market cap levels were to remain in the Russell.
And we kept sending them notes, convert some of your referred. Because you convert its common at some economic interest to you. We weren't asking them to lose economics here. But if you do that, your market cap will be higher because now because obviously common is calculated as equity, you can retain your status in the Russell, they just completely ignored it. Ignored it. Ignored it. Ignore it. The stock went from $3 to basically $1.50 as a result of the Russell -- being kicked out of the Russell.
So we're not going to allow them to disregard the things that are important to this equity price, which is dealing with the preferred, dealing with the special dividend, talking about it, being transparent about it. They're just ignoring it but hoping it will go away. It's not going to go away. And $1.15 proves it that it's not going to go away because we've had a rally in the market and the stock has done nothing.
So we're on it. Litigation potentially possible, no proxy contest, but public letters for sure. And if that embarrasses certain members of the Board. So be it. Clean up your act or you're going to get a letter from a big shareholder.
Adam Waldo
Okay. Thanks very much. And keep your chin up, guys.
Daniel Wolfe
Thanks, Adam.
Kevin Rendino
Thanks, Adam. Have a good year.
Daniel Wolfe
(Conference Instructions) I am not seeing any other questions in the queue.
Kevin Rendino
So look, thanks, everyone, it's a -- it was good five years and then a bad last year. There's no getting around that. I promise you full transparency when we got here. That means when it's good, it's bad, you're going to get the same level of transparency. We don't hide behind bad performance. We had bad performance in our public portfolio last year for the first time since we arrived, and that was disappointing.
And while we also had hits in our private portfolio, which was completely disappointing and not helpful in 2022, as I said, our business transformation is now 90% complete. $50 million worth of assets that we had in private holdings when we started is now down to $6.5 million. And so as we stare down the next five or 10 years, our performance is going to be dictated by the public stock picking that we do here. And that's going to drive our NAV unlike it has in the past five or six years where the private portfolio is still dominated. It was the great majority of our assets for more than half of the last six years, that's no longer the case.
So that's not to suggest we're going to have outperformance that's going to take blood, sweat, and tears, and a lot of hard work, but the good news for us is, I no longer have to spend a ton of time worrying about which private portfolio may or may not hurt us this quarter.
We've had some wins in the private portfolio throughout [AGL] and Petra. But for the most part, as you can see in the slides, $1.80 of losses in the last six years has been nothing short of a tremendous headwind that no longer exist as this as we stare out the next five years. And with added transparency, should leave to a narrowing of the discount.
And remember, at the end of the day, the more that we build scale, the more opportunities we'll have to return capital back to shareholders, whether that's share repurchase or dividends. And if the discount never narrows, then we can always close it down and give all the money back to shareholders. That's not for today's discussion but as we think through the next five years, we do have a chance to make a lot of money here for our shareholders. And we think the dislocation of the equity markets in 2022 is going to serve us well as we look out the next three years.
So thank you for your time today. We look forward to chatting with you about our Q1 results. If anybody has any questions, you know where to find us. Please email or call, we're happy to jump on the phone with you and discuss whatever it is that you want to discuss, so thanks.
Daniel Wolfe
Thanks, everyone. You can now disconnect.
Operator
Goodbye.