David Hall, Founder of Velodyne Lidar, Calls for SPAC-Appointed Director Michael Dee and Christopher Thomas to Step Down from the Board
Believes the Board and Management Team is Fostering an Anti-Stockholder Culture That is Resulting in Insular Corporate Governance and Troubling Underperformance
Asserts that the Board Lacks the Required Expertise and Does Not Have a Coherent Strategic Plan to Confront the Significant Challenges Facing Velodyne Lidar
Contends Adding Eric Singer – An Independent Director with Strong Public Company Experience – to the Board Will Help Fix the Issues Plaguing Velodyne Lidar
David Hall, the beneficial owner of approximately 98,951,541 shares or 52.2% of the outstanding common stock of Velodyne Lidar, Inc. (NASDAQ:VLDR) ("Velodyne Lidar" or the "Company"), today issued the following letter to stockholders in connection with his and Marta Hall's decision to nominate a highly-qualified and independent director candidate for election to the Company's Board of Directors (the "Board") at the 2021 Annual Meeting of Stockholders (the "Annual Meeting"):
Fellow Stockholders,
As the founder of Velodyne Lidar, I have always put the Company's best interests first. This operating philosophy helped guide my actions and decisions as I led Velodyne Lidar to many years of high growth and success, cementing the Company's position at the forefront of lidar technology invention and innovation. It gives me great concern to see this commitment now fade in the boardroom and c-suite of the Company I built. I will not stand idly by and watch the Board squander Velodyne Lidar's bright future with what I believe is a lack of strategic focus and poor corporate governance. That is why Marta and I have nominated Eric Singer – a highly-qualified and independent individual – for election to Velodyne Lidar's Board.
The Current Board and Management Team Have Repeatedly Rebuffed Our Input and are Fostering an Anti-Stockholder Culture from the Top
Since the Company decided to go public via a merger with a special purpose acquisition company ("SPAC") in 2020 with Anand Gopalan as the Chief Executive Officer, Marta and I have tried to work cooperatively with the new Board and management team, despite their complete disregard for our decades of experience. Unfortunately, the Board has opted to preside over a series of concerning anti-stockholder actions that include:
- Amending Dr. Gopalan's employment agreement to increase his compensation despite knowing the Company would miss its 2020 stated projections.
- Transitioning Christopher Thomas from a Class I director to a Class II director in an apparent attempt to avoid having him stand for re-election.
- Censuring two stockholder aligned directors – Marta and myself – based on an opaque, secret investigation into frivolous claims. This seemingly retaliatory move followed our attempt to hold Dr. Gopalan more accountable for the Company's weak performance and reconstitute the Board with more experienced and highly-qualified public company directors.
- Removing me as Chairman of the Board and terminating Marta's employment as Chief Marketing Officer without reasonable justification.
Taken together, these decisions are an affront to stockholders. It appears that Dr. Gopalan and his boardroom allies are more focused on advancing their own self-serving agenda than delivering stockholder value. Perhaps this is why they have spent the past several months trying to silence the Company's largest stockholders in the boardroom.
We Believe the Board Lacks the Required Expertise and Does Not Have a Coherent Strategic Plan to Confront the Significant Challenges Facing Velodyne Lidar
Marta and I have repeatedly expressed our belief that Velodyne Lidar is at a critical juncture at this point in time. We voiced our grave concerns regarding the Company's plunging product sales, departure of key R&D personnel, significant loss of market share to competitors, the serious risk of theft of IP in China and the Company's overall poor financial performance. We believe that the Board has allowed stagnation in innovation to persist, resulting in a lack of new product offerings to meet evolving market demand. Additionally, we believe the Board has overconcentrated limited company resources on executive compensation when capital should instead be invested in research and development.
Sadly, the Board and management appear content blaming their own failings on the COVID-19 pandemic. While a convenient scapegoat, the reality is that similar lidar companies have been thriving during the pandemic. Luminar Technologies reported that its revenues for the first quarter of 2021 increased 37% over the first quarter of 2020, and Ouster reported a revenue increase of 187% over the first quarter of 2020.
Velodyne Lidar operates in an industry characterized by rapidly changing technology, short product life cycles, evolving industry standards, changes in customer needs, growing competition and new product introductions. The Company's future growth is dependent not only on the continued success of its existing products but also the successful introduction of new products under a coherent strategy. As disclosed by Velodyne Lidar, the average selling price of existing lidar sensors will continue to decline by as much as 20% in 2021, so the Company's ability to introduce new products that adapt to changing technology and anticipate future standards is critical to improve its prospects for growth.
In order to maintain its competitive position and take advantage of consolidation opportunities, the Board should have a singular strategic focus. But rather than increasing focus on the addition of new research and development personnel to keep pace with innovation, the current Board instead opted to increase G&A expenses significantly. G&A expenses increased by 59% for the three months ended March 31, 2021 from the comparable period of 2020. This is in the face of Velodyne Lidar's 35% decline in product revenues for the comparable periods of March 31, 2020 to March 31, 2021.
In our view, the status quo at Velodyne Lidar is unacceptable. Poor leadership and weak financial performance are not a recipe for success in the public markets. Stockholders deserve a Board that is committed to honoring its fiduciary duties and focusing on value creation. We believe the Company and its stockholders will benefit from directors with real business management experience, as well as firm knowledge of corporate governance principles.
Our Solution: Refresh Velodyne Lidar's Management Team and Add Ethical Directors with Public Company and High Growth Tech Experience to the Boardroom
We firmly believe that refreshing Velodyne Lidar's management team and adding new directors with strong corporate governance pedigrees will help to realign the Board's priorities away from rewarding insiders and toward respecting stockholders. For the majority of the incumbent directors, Velodyne Lidar is their first public company Board experience. Adding a credible and independently minded director to the Board is especially important in the wake of the Board's failure to retain experienced directors, poor performance and the decision to manipulate the corporate machinery.
It is our view that our fellow stockholders would benefit from the immediate replacement of directors Michael Dee and Christopher Thomas. Mr. Dee not only lacks relevant skillsets to serve on the Board but is now deeply embroiled in litigation at PureCycle Technologies, Inc., relating to his role as Chief Financial Officer following its merger with a SPAC with disastrous results. We suspect that Mr. Thomas and the rest of the Board orchestrated the resignation of Mr. Graf and appointment of Mr. Thomas to place Mr. Thomas into a new class of directors whose term would not expire until 2022, because he otherwise faced a possible contested election that could have resulted in him being voted off the Board by stockholders at the 2021 Annual Meeting. This manipulation of the Company's governance structure to entrench a director for another year is the epitome of poor corporate governance and warrants his immediate resignation.
In stark contrast to these directors, our director candidate Eric Singer is widely recognized as a stockholder champion, proven investor and respected board member in the technology sector. He possesses impressive acumen in the areas of corporate governance, capital allocation, operations optimization and strategic planning. Mr. Singer has a strong track record of holding management teams accountable to help drive greater value for stockholders, which is why we have the utmost confidence in his ability to help fix the boardroom issues that are plaguing Velodyne Lidar.
While we do not plan to solicit votes for Mr. Singer's election at the Annual Meeting, I intend to vote all shares that I beneficially own, for Mr. Singer's election.
Sincerely,
David Hall
Founder of Velodyne Lidar, Inc.
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Eric Singer Biography
Eric Singer is the Founder and Managing Member of VIEX Capital Advisors. In addition to a long track record as a successful investor in technology companies, Mr. Singer has substantial experience serving on public boards and in assisting them in creating and expanding shareholder value. Mr. Singer currently serves as Lead Independent Director of A10 Networks, an application controller and firewall cloud security company, and as Executive Chairman of Immersion Corporation, a premier licensing company focused on the creation, design, development, and licensing of innovative haptic technologies. Previously, Mr. Singer served on the boards of directors of Quantum Corporation, RhythmOne plc, Numerex Corp., YuMe, Inc., Support.com, Meru Networks, PLX Technology, Inc., and Sigma Designs, Inc., among other public companies.
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