Significant Investor in AIkido Pharma Issues Open Letter to Board of Directors

Continued Destruction of Value and Poor Corporate Governance is Unacceptable
 

Company Needs a Clear Business Plan to Create Stockholder Value and to Establish Accountability to Investors or Company Should Return Capital to Stockholders

Board and Management Compensation Must be Better Aligned with Stockholder Interests

NEW YORK, June 07, 2022 (GLOBE NEWSWIRE) -- Shalom Auerbach, a significant stockholder of AIkido Pharma Inc. (NASDAQ:AIKI) beneficially owning approximately 3.4% of its common stock, today issued the following letter to members of the AIkido Pharma Inc. Board of Directors:

June 7, 2022

AIkido Pharma Inc.

One Rockefeller Plaza, 11th Floor

New York, NY 10020

Dear Members of the Board of Directors:

I am a significant stockholder of AIkido Pharma Inc. (NASDAQ:AIKI) ("AIKI" or the "Company"), beneficially owning approximately 3.4% of the Company's outstanding common stock, and have a strong interest, shared with my fellow stockholders, in seeing the Company create value for all of its stockholders.

I am deeply concerned by the Company's abysmal stock performance, poor corporate governance and lack of demonstrated accountability to stockholders. The massive destruction of stockholder value at AIKI is unacceptable, and the Board and management urgently need to either redirect the Company towards setting out a clear business plan to create stockholder value that firmly establishing accountability to investors, or to return capital to stockholders.

The Company's stock price is down 75% over the past year.1 AIKI management had approximately $77M of cash and marketable securities on its balance sheet as of year end (not even counting the Company's other "investments"), yet the Company's current market cap is approximately $24M, roughly 31% that value.2 This shows that stockholders have completely lost faith in the capability of the Company's leadership to responsibly manage the Company, let alone create value for stockholders.

Although the Company bills itself as a biotechnology company developing intellectual property assets, Company management appears to be more focused on wagering the Company's money on illiquid investments in unrelated businesses. Recent investments include an enterprise software company, an electric truck producer, a tele-health business, and a social networking company for cannabis enthusiasts. Perplexingly, the Company deposited $5 million with a fund to identify opportunities to expand the Company's core business strategies in Asia in April 2021, and incurred $800k in advisory and legal fees over the rest of the year, but had a balance of $4.2 million in the fund at year end – what did the Company actually get for those hefty fees? Even more outrageous, in 2021 the Company paid a firm led by a current director fees of $1.2M in connection with the Company's investments, and in March 2022 the Board approved a deal for the Company's CEO to buy a significant stake in that firm.3

Despite the Company's poor performance, in 2021 the Board continued to reward management with outsized compensation exclusively in cash and also paid itself exclusively in cash. Combined with directors' minimal stock ownership of less than 0.25% of the shares outstanding, the Company's compensation of its executives and directors demonstrates and perpetuates a misalignment with the best interest of stockholders.4

The Company also has markedly poor corporate governance, which serves to entrench the Board and protect directors and management from accountability to stockholders. The Company maintains a staggered Board and a long-term 4.99% poison pill that the Board has not put up to a stockholder vote. The Company also appears to make little effort to genuinely engage with stockholders around its stockholders meetings. At the 2022 annual meeting, it appears that less than 15% of the common stock outstanding actually voted "for" the election of the Company's two directors up for election, meaning that these directors were reelected with support of only a fraction the shares outstanding.5 This absurdly low turnout and voter support in my view clearly demonstrates a lack of appropriate investor engagement and concern for stockholder views.

The status quo at AIKI is unacceptable. The Board and management need to take immediate action to halt the destruction of stockholder value and gain the confidence of stockholders. In my view, the Company either needs to communicate a clear business plan to create stockholder value that firmly establishes accountability to investors, or to return capital to stockholders.

If the Company continues to show a disregard for stockholder interests and concerns, I believe that stockholders will need to consider means of holding the Board and management accountable in advance of next year's annual meeting.

I am prepared to meet with the Board to discuss my views and pathways to creating value for stockholders in the coming weeks. I look forward to hearing from you, and continuing to communicate my views to you and the Company's stockholders.

Sincerely,

Shalom Auerbach

Contact:

[email protected]

(516) 217-3721

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1 Closing price on June 7, 2021 compared to June 6, 2022.

2 See AIKI Annual Report on Form 10-K for fiscal year ended December 31, 2021. Market cap reflects closing price on June 6, 2022.

3 See AIKI Annual Report on Form 10-K for fiscal year ended December 31, 2021.

4 See AIKI 2022 proxy statement. Director ownership reflects common stock ownership not including stock options.

5 With 89,293,446 shares of common stock issued and outstanding, 3,825 shares of Series D convertible preferred stock issued and outstanding, 834 shares of Series D-1 Convertible preferred stock issued and outstanding, 11,000 shares of Series O Preferred Stock outstanding and 11,000 shares of Series P Preferred Stock outstanding and eligible to vote, Anthony Hayes received 12,213,453 votes "for" and 4,159,661 votes "withheld", and Robert Dudley received 10,958,821 votes "for" and 5,414,293 votes "withheld".