Wynnefield Capital Expresses Concern that TechPrecision is Neglecting its Duties by Failing to Explain Proposed Acquisition of Votaw Precision Technologies to Stockholders
NEW YORK, Dec. 19, 2023 /PRNewswire/ -- Wynnefield Capital and its affiliates, collectively the largest institutional stockholder of TechPrecision Corporation (NASDAQ:TPCS) with a 4.5% beneficial ownership interest, today issued the following public letter to the Company's Board of Directors.
***
Wynnefield Capital Concerned TechPrecision is Ignoring its Duty to Stockholders by Failing to Explain Proposed Acquisition of Votaw Precision Technologies.
Dear Board of Directors,
Wynnefield Capital and its affiliates (collectively, "Wynnefield") own 393,857 shares of common stock, or 4.5%, of TechPrecision Corporation (NASDAQ:TPCS) ("TechPrecision" or the "Company") as of September 30, 2023. Wynnefield is TechPrecision's largest institutional stockholder, according to Bloomberg.
Wynnefield acknowledges the Board of Directors recent issuance of Votaw Precision Technologies' ("Votaw") select, unaudited quarterly financials for the fiscal year ending October 31, 2023. However, that data alone will not placate existing TechPrecision stockholder interests in divulging critical information about the Votaw transaction. The Board of Directors' unwillingness to disclose funding structure for its proposed Votaw transaction continues to amplify a serious lack of transparency. Wynnefield is alarmed by this Board of Directors' disregard for its duties to ALL stockholders and its contribution to stockholder value destruction.
Since the proposed acquisition on November 29, 2023, TPCS shares declined by 20.8% to $5.15 (a new 52-wk low) and declined by 37.8% for the year-to-date period ending December 18, 2023. The Board of Directors' "Ivory Tower" mentality is simply out-of-touch with TechPrecision OWNERS and flies in the face of accepted corporate governance practices.
The Board of Directors also took the unusual step stating in the Stock Purchase Agreement terms that the "Buyer's obligation to consummate the Contemplated Transactions is not in any way contingent upon or otherwise subject to Buyer's consummation of any financing arrangements." Further analysis indicates significant dilution for existing stockholders, including a potential Change-in-Control. A highly leveraged balance sheet with little margin of safety to pay its financial obligations is also a concern. A lower share price increases the risk of even more potential dilution.
Wynnefield hopes the Board of Directors is not attempting to paper-over its failed STADCO turnaround or side-stepping existing stockholders by accepting highly dilutive financing terms that is harmful to stockholders. Wynnefield would see this as unfathomable stockholder retribution for an unfavored Board of Directors (see the Company's Current Report on Form 8k with the Securities and Exchange Commission on September 13, 2023).
We also question the Earnout Payment terms that reward the Seller an incremental $15.8 million for a meager EBITDA increase of $1.85 million to $14.1 million from 12.25 million. Given Votaw's FY2H23 EBITDA of approximately $6.0 million, a large earnout payment is more "in the bag" than an aspirational target that protects stockholders.
Lastly, on December 11, 2023, Occidental Petroleum Corp. ("Occidental") announced its intention to acquire CrownRock. While it is a large company, Occidental's Board of Directors followed two highly relevant corporate governance best practices by: 1) scheduling a conference call (with Q&A) for the same morning as the announcement and 2) explaining how the transaction would be funded. We applaud their stockholder friendly philosophy and embrace of best corporate governance practices unlike the Company's Board of Directors.
The Board of Directors' decision to remain silent has created tremendous uncertainty for existing stockholders, resulting in the continuing destruction of stockholder value. Wynnefield is concerned that the Board of Directors is purposely keeping stockholders in the dark because of what they already know. Wynnefield encourages the Board of Directors to address the Votaw transaction in more detail with the following considerations:
- EXPLAIN the strategic direction and reasoning behind this transaction.
- DETAIL claimed synergies amounting to "annual savings of several million dollars in overhead and millions of dollars in CAPEX over the coming years".
- DISCUSS current financing details for this transaction.
- COMMIT to allow existing TechPrecision stockholders to vote on the Votaw acquisition.
Respectfully yours,
Nelson J. Obus, Founder Robert D. Straus, Portfolio Manager
***
Media:
Daniel Yunger
Kekst CNC
[email protected]
View original content:SOURCE Wynnefield Capital