STUDIO CITY, CA, July 16, 2019 (GLOBE NEWSWIRE) -- Tix Corporation (TIXC),
PROTECT THE VALUE OF YOUR INVESTMENT IN TIX FROM AN INEXPERIENCED AND UNQUALIFIED ACTIVIST STOCKHOLDER
July 16, 2019
Dear Fellow Stockholders,
Tix Corporation (“Tix” or the “Company”) has been the target of an ongoing activist campaign over the past 2-plus years by an inexperienced and unqualified activist stockholder, Mr. Haren S. Bhakta (individually, “Mr. Bhakta”) and his fund HSB Capital Partners, L.P. (“HSB”), whose interests are not aligned with, and who has a total disregard for, the interests of Tix stockholders at large. In the latest episode of their misguided value destroying campaign, HSB and Mr. Bhakta are seeking to gain control of the Board of Directors of Tix (the “Board”) by attempting to nominate four unqualified individuals for election to the Board at the 2019 annual meeting of stockholders: Haren Bhakta, Palak Bhakta, John Buckingham and Michael Fisk.
HSB is a recently formed fund which apparently fancies itself as an activist fund notwithstanding its complete lack of sophistication and experience waging successful activist campaigns or producing any positive results in creating short or long-term value for Tix or any other company or group of stockholders. Likewise, Mr. Bhakta, the controlling member of HSB, also lacks any relevant market-wide or industry specific experience and has no strategy for promoting any short or long-term value creation for Tix. Indeed, the only track record HSB and Mr. Bhakta do have is a history of destroying the value of your investment in Tix. Despite having no sophistication, experience or qualifications and consistently demonstrating that they are more concerned with pursuing their own activist agenda than the value of your investment in Tix, HSB and Mr. Bhakta are now seeking to take control of the Company without paying anything for it.
The incumbent Board and management of Tix are superiorly better qualified to oversee the execution of the Company’s strategy and are far better suited to represent the best interest of every Tix stockholder than HSB’s hand-picked, unqualified nominees. This update is extremely important for stockholders to review, as the Board believes that HSB’s actions are not in the best interests of the stockholders and pose serious risk to the Company and the value of your investment in Tix.
Why You Should Ignore HSB
- Mr. Bhakta and HSB’s three additional director nominees, Messrs. Bhakta, Buckingham and Fisk have no expertise or background in any facet of Tix’s business. They have neither retail, nor ticketing, nor operational experience, nor do they have any knowledge of the Las Vegas entertainment or real estate markets and related contacts. Tix’s management on the other hand has decades of such experience and track record.
- Tix’s business depends on relationships between key Las Vegas entertainment executives, show producers, and real estate professionals. As previously disclosed in our annual reports, the success of Tix’s ticketing business depends, in significant part, on Tix’s ability to maintain, renew and create these important relationships. Tix’s management and Board have developed and maintained such Las Vegas relationships over the past 26 years while HSB and Mr. Bhakta have no relationships or contacts with any existing or potential executives, agents or clients.
- HSB’s and Mr. Bhakta’s interests are not aligned with other stockholders. Their value destructive actions towards the Company, its stockholders and employees over the past 2+ years are a testament to their total disregard for any interests other than their own and their willingness to cause you and the Company significant financial and other harm to achieve their misguided goals.
- HSB’s incomplete and deficient notice. Tix previously informed HSB that HSB’s notice purporting to nominate its principal, Mr. Bhakta, and three other unqualified individuals, is incomplete and deficient pursuant to the Tix bylaws and gave HSB every opportunity to take corrective action, which it has not done. Stockholders should be aware that any vote with respect to HSB’s nominees may not be counted at our 2019 annual meeting of stockholders, anticipated to be held in September.
Tix’s current leadership team has taken the appropriate steps to ensure a successful future for the Company by using their relationships and market knowledge to survive a downturn in the Las Vegas market and pursue value-maximizing transactions and partnerships to best position the Company. The Company’s recent performance speaks volumes about the current leadership’s capabilities, especially in the toughest of market conditions.
The current leadership of Tix own a substantial amount of the Company’s outstanding stock, making their interests aligned with all other stockholders. There are no individuals who want to ensure strong long-term performance of Tix stock price more than your current leadership team.
You may be contacted by, receive a letter from or see a press release issued by Mr. Bhakta or HSB. Tix urges you to disregard all communications and materials received from Mr. Bhakta, HSB or their affiliates.
Tix Has Returned to Profitability
Management Continues to Increase Revenue Drivers and
Reduce Operating Expenses
Tix has significant business momentum and the right strategy to create long-term, sustainable stockholder value. For example, in late 2017 MGM Resorts International (“MGM”) opened its own ticket booths at five locations along the Las Vegas Strip in direct competition with our Tix4Tonight booths. Concurrently, MGM stopped Tix4Tonight booths from selling tickets to their fifty percent owned Cirque du Soleil shows, so as to offer them exclusively. In response, your Board and management team engaged in prolonged negotiations with MGM and Cirque du Soleil, which ultimately resulted in the resumption of ticket sales for the Cirque du Soleil shows by Tix4Tonight and the creation of new, stronger five-year agreement with MGM and Cirque du Soleil. This significant achievement has had an immediate positive impact on Tix’s overall performance and will continue to drive long-term, strong results for the Company.
Tix is constantly searching for new drivers of revenue and will continue to take all necessary steps to maximize stockholder returns. Just last week, Tix announced its new business partnership, TixRez, that will sell and market activities from all over the world via its online platform that has been in development by our partner for approximately three years.
Furthermore, management of Tix have significantly improved the Company’s performance, despite the challenging Las Vegas market conditions. For example, Tix has generated positive Adjusted EBITDA for eight of the last nine months, including the months prior to the return of the Cirque du Soleil tickets (Note:Adjusted EBITDA excludes all expenses related to the actions taken against the interests of the Company and its stockholders by Mr. Bhakta and HSB.)
The Company reported positive net income of $50,000 in the first quarter of 2019, compared to a net loss of ($717,000) in the prior year period. Cash flows from operations improved to $137,000 in the first quarter of 2019, compared to cash used in operations of ($639,000) in the prior year period, and the Company’s stock has increased approximately 200% this year since reporting the return of the MGM Cirque du Soleil shows and profitable operations.
Management anticipates sequential quarterly improvement in operating income and cash flows throughout the remainder of this year. Unfortunately, this improved outlook may well be negatively impacted by the actions of Mr. Bhakta and HSB (again, as described below), as has our recent performance.
HSB’s Nominees are Unqualified to Serve on the Tix Board
All of HSB’s nominees lack the requisite experience or qualifications to contribute positively given their complete lack of experience in Las Vegas entertainment, ticketing and retail operations and in many other relevant areas of expertise necessary to effectively serve Tix’s stockholders. Tix has always been open to the idea of adding new directors who can drive share value, but HSB’s nominees are not capable of doing so. Mr. Bhakta’s four director nominees are: himself, a former stockbroker and sole member of his recently started HSB fund, Palak Bhakta, an intellectual property lawyer, John Buckingham, a marketing professor, and Michael Fisk, a marketing consultant with a background in marketing for film companies.
Mr. Bhakta and HSB Have a History of Destructive Actions
That Caused Tix Significant Expenses and Hurt Its Bottom Line
During the past two-plus years, Mr. Bhakta’s and HSB’s actions towards Tix, its employees, management and business have caused the Company to incur significant expenses, which have undermined the Company’s bottom line performance, together with lost opportunity costs arising from these distractions. For example:
- In early 2017, Mr. Bhakta sent a series of increasingly belligerent communications to Tix requesting that he be granted seats on your Board. While management was in the process of communicating with Mr. Bhakta, he took numerous actions demonstrating that he would not be an appropriate member of the Board. Those actions included, among other things: Mr. Bhakta’s spying on Tix’s booths and the Tix Las Vegas office; misrepresenting himself as a job applicant at Tix’s Las Vegas office without an appointment; and harassing Tix employees, both in person and through social media.
- Mr. Bhakta has publicly claimed that he intentionally triggered the Tix net-operating-loss rights plan, endangering an important corporate asset and illustrating no understanding of the ramifications for him. Incredibly, Mr. Bhakta believed that the plan would allow him to purchase more shares of Tix at an extremely low price and, then, actually “dared” the Board to activate the plan. Tix issued a press release explaining to Mr. Bhakta that triggering the plan would effectively wipe out Mr. Bhakta and HSB, who would have been barred from purchasing any additional shares. In our view, these reckless and illogical actions by Mr. Bhakta were damaging to all stockholders and show his lack of sophistication, business acumen and comprehension of corporate law, amongst other things.
Mr. Bhakta and HSB Have Made Repeated False and Misleading Statements
In a letter to Tix stockholders, Mr. Bhakta recently asserted that HSB is a deep value fund, whose “investment process is characterized by rigorous research, which includes extensive consultations with industry executives, operators, customers and competitors.”i HSB’s letter demonstrates otherwise. Consider the following:
- Mr. Bhakta would have you believe that he has a plan to improve performance at Tix, but he has never presented an actionable plan to improve Tix’s performance.
- Mr. Bhakta asserts that closing our Studio City office can save a significant amount of annual expenses, however Mr. Bhakta does not and cannot detail or explain how these projected “savings” would materialize because they are illusory. Closing the Studio City office and moving those operations to Las Vegas, would require Tix to expand office space and add new employees in Las Vegas. Our previous analysis of this option (prior to Mr. Bhakta’s suggestion) demonstrated negligible cost savings and the potential of losing some of Tix’s most experienced staff during such a transition. The cost of having to attract, train and retain a new staff would far exceed any minor savings from rent, and it would detract from the progress made by the current team. Also, it should be noted that Tix has historically operated many businesses that were not Las Vegas based. For example, Tix will operate TixRez, the Company’s recently announced venture with a global footprint, from its Studio City office.
- Mr. Bhakta again showed a lack of understanding of Tix’s business when he ridiculed Tix management for not having a substantial online ticket sale business. He ignored the fact that many of the major shows in Las Vegas refused to allow Tix to sell their tickets online until quite recently. This only occurred because of the sustained efforts of the Tix management team to obtain as many shows online as possible, which efforts are ongoing on a daily basis. Tix’s online ticket sale site, Tix4Tonight.com now offers most of the Las Vegas shows, tours and attractions at competitive online pricing.
- Mr. Bhakta has asserted that the Board and management are not accountable to stockholders. Nothing could be further from the truth as the Board and management hold a significant ownership interest in the Company, ensuring the alignment of the Board and management’s interests with those of all other stockholders. The Board and management are laser focused in increasing stockholder value and are engaged with and receptive to productive suggestions and input from its stockholder base.
- Mr. Bhakta has asserted to Tix stockholders that he has 10 years’ experience in the financial services industry and “a stellar track record working for some of the world’s most prestigious financial institutions like Morgan Stanley and Merrill Lynch.”ii He was employed by those institutions as a stockbroker, not as an analyst or portfolio manager, and has no experience as a board member of a public company or managing public companies, and no experience or relationships whatsoever in Tix’s business, industry or Las Vegas.
- Mr. Bhakta would have you believe that HSB is more than it is. HSB appears to have only one member, Mr. Bhakta. HSB does not appear to have any employees, offices (HSB’s mailing address is a family-owned motel in Southern California), website, or significant holdings outside of Tix stock, which it acquired as a transfer from Mr. Bhakta’s wife’s personal stock trading account. HSB and Mr. Bhakta have no track record of producing any positive results in creating short or long-term value for any company or group of stockholders.
HSB is Attempting to Seize Control of Tix Without Paying For It
As previously noted, management has achieved significant progress increasing performance, while reducing expenses. Despite the actions of Mr. Bhakta and HSB, Tix’s financial health has improved substantially and the prospects for the Company are favorable. As a profitable (adjusted EBITDA), debt-free company with significant cash reserves, Tix is emerging successfully from the business challenges in the Las Vegas market. Under the circumstances, it is plain to see why Mr. Bhakta and HSB would like to seize control of Tix without paying anything for it.
Neither Mr. Bhakta nor HSB’s three additional nominees, Palak Bhakta, John Buckingham and Michael Fisk, have any background or experience that is relevant to Tix’s operations. None of them have ever operated a retail business; none have any contacts in the Las Vegas entertainment community; nor any background specific to ticket sales whatsoever. For Tix stockholders, the biggest risk resulting from a takeover of Tix by HSB would be that major Las Vegas shows and resorts lose confidence in Tix’s ability to handle their ticket sales and may simply stop supplying Tix with their tickets.
For all of the above these reasons, among others, you should discard any communications or materials sent to you by Mr. Bhakta, HSB or their agents.
Tix thanks you again for your continued support.
Tix shall endeavor to keep you informed.
Chief Executive Officer
About Tix Corporation
Tix Corporation (TIXC) provides discount ticketing services. It currently operates nine discount ticket stores in Las Vegas under its Tix4Tonight marquee and its online ticket sales site, www.tix4tonight.com, which offers up to a 50 percent discount for shows, concerts, attractions, and tours, as well as discount dining and shopping offers.
Safe Harbor Statement
Except for the historical information contained herein, certain matters discussed in this press release are forward-looking statements which involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements about our future revenues and financial position. These forward-looking statements are based on expectations and assumptions as of the date of this press release and are subject to numerous risks and uncertainties which could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties are discussed in the Company's filings with the OTC Markets. The Company assumes no obligation to update these forward-looking statements. A copy of the Company’s reports for the twelve months ended December 31, 2018, can be found on the Company website at www.tixcorp.com or www.otcmarkets.com.
Steve Handy, CFO, (818)761-1002
i HSB Capital Partners, L.P. HSB Capital Partners, L.P. Press Release, 01 July 2019. https://www.otcmarkets.com/stock/TIXC/news