- Large shareholder urges Charge to take immediate action to
address significant underperformance
- Believes changes announced by Charge on August 29, 2023 are insufficient for substantial
value creation
NEW
YORK, Sept. 11, 2023 /PRNewswire/ -- Arena
Investors, LP (and its affiliates, collectively, "Arena"), an
institutional asset manager that, together with investment funds
managed by it, is one of the largest beneficial owners of Charge
Enterprises, Inc. (NASDAQ:CRGE) ("Charge"), today sent a letter to
the Board of Directors of Charge (the "Board") to reiterate the
urgent need for Charge to take decisive action to significantly
enhance value for its shareholders.
Responding to the press release published by Charge on
August 29, 2023, announcing certain
leadership changes and the development of a strategic plan, Arena
believes these changes are insufficient and remains deeply
concerned that Charge has neglected to address certain critical
issues.
In its letter, Arena outlined the following necessary steps for
Charge to take to improve its corporate management and operations
in order to reverse the current trend of poor performance,
including an approximately 78% decline in Charge's stock and a loss
of approximately $346M in market
capitalization in the past year:
- Elimination of a Staggered Board Structure: The entire
Board should be subject to annual elections to ensure the Board is
fully accountable to Charge's shareholders.
- Reinvigoration of the Board: The Board has
demonstrated that it is unable to operate effectively and should be
downsized to enable it to act in a nimble and decisive manner. In
order to bring relevant expertise to the Board, a number of new
directors should be elected with the appropriate skill set and a
commitment to creating value for all shareholders.
- Changes in Management/Operations: The Board should
conduct a thorough search for a permanent CEO with the help of
appropriate advisors. In addition, the Board should immediately
develop a talent acquisition strategy to hire new members of the
corporate executive management team with strong experience in,
among other areas, equity and debt financing.
- Engaging a Professional Interim Advisor: To manage this
transition period successfully, the Board should immediately engage
an experienced professional third-party interim advisor.
- Integration and Incentivization of Subsidiaries: Develop
strategies to integrate Charge's services and products across the
infrastructure operating subsidiaries while driving cost synergies
across the organization, coupled with appropriate incentive
mechanisms and performance metrics to reward those who actively
seek and implement synergy-driven collaborations.
- Revisiting General and Administrative Costs: The Board
should immediately initiate an independent review of Charge's
corporate overhead and instill a culture of fiscal
responsibility.
- Rationalize Cost of Capital: The Board and
Corporate Management should focus on securing new long-term debt
financing arrangements with the assistance of a qualified
third-party debt capital markets placement agent.
As a long-term investor committed to realizing Charge's vast
potential, Arena is confident that through stronger leadership, a
more well-balanced board, a sound financial basis, and a clear
strategy with efficient execution, Charge can drive much needed
expansion in electric vehicle charging infrastructure while
delivering substantial value to shareholders and benefits for
customers, drivers and the environment.
The full text of the letter follows:
Board of Directors
Charge Enterprises, Inc.
125 Park Avenue, 25th Floor
New York, NY 10017
Dear Members of the Board of Directors,
As conveyed to you in our letter, dated February 28, 2023 (the "February 28th Letter"), and our
letter, dated August 21, 2023 (the
"August 21st Letter"), we
are again writing to you on behalf of Arena Investors, LP and its
affiliates ("Arena" or "we") to reiterate the urgent need for
Charge Enterprises, Inc. ("Charge") to take decisive actions in
addressing the significant underperformance of Charge's stock.
Arena is a global institutional asset manager that provides
creative solutions for those seeking capital who cannot be served
by conventional institutions, and we and/or investment funds
managed by us are the beneficial owners of approximately 9.99% of
the outstanding common stock of Charge and the beneficial owners of
other securities, which, upon 61 days' notice, are convertible into
an additional 10% of the outstanding common stock of Charge. As
noted in the February 28th
Letter, the August 21st
Letter, and recent discussions with certain members of your
corporate executive management team ("Corporate Management") and
board of directors (the "Board"), this is a significant investment
for us, and we, as one of Charge's most enthusiastic shareholders,
would like to see Charge significantly enhance value for the
benefit of all shareholders through strong leadership, a
well-balanced board, a sound financial basis, a clear strategy and
efficient execution.
After reflecting on our recent conversations with both Corporate
Management and the Board, your letter, which was sent to us
immediately after your receipt of the August
21st Letter (the "Charge Letter"), and the press
release you issued on August 29, 2023
(the "August 29th Press
Release"), we remain deeply concerned that you have not addressed
certain critical issues. Therefore, we urge the Board to take
several specific actions, which we believe will significantly
enhance value for Charge's shareholders. Unless the Board
immediately addresses our concerns, we believe the current trend of
poor performance of Charge's stock price (approximately 78% decline
or a loss of approximately $346M in
market capitalization in the past year) will persist and Charge
will not establish a presence among its peers in its industry
despite Charge's potential for profitable growth.
Despite our general disappointment with your clear lack of
urgency, we were somewhat encouraged by the three points you
communicated in the Charge Letter and the August 29th Press Release, which we
have summarized below:
- You acknowledged that there is a problem today, in that
Charge's current stock price does not reflect the true value of the
business.
- You acknowledged that governance is a critical area of focus
and corporate leadership is a significant priority, and announced
the appointment of Craig Denson as
Charge's interim CEO and Amy Hanson
as the non-executive Chairperson of the Board while your search for
a permanent successor to Andrew Fox,
the former CEO, is pending.
- You communicated that you will develop strategies to integrate
Charge's services and products across the infrastructure operating
subsidiaries while driving cost synergies across the
organization.
Unfortunately, these steps are insufficient. We believe the
following actions must be taken immediately to significantly
enhance value for all Charge shareholders:
- Elimination of a Staggered Board Structure: As we
communicated to you in the February
28th Letter and the August
21st Letter, the entire Board should be subject to annual
elections to ensure the Board is fully accountable to Charge's
shareholders. The "staggered board" structure that Charge currently
has in place is inconsistent with best practices in corporate
governance. Therefore, we request that the Board call a special
meeting of Charge's shareholders to eliminate the staggered board
structure provided for in Charge's charter and require that all
directors be elected annually.
- Reinvigoration of the Board: As we noted in our previous
two letters, Charge's underperformance can be attributed, among
other things, to the gap in the skill set of the directors
comprising the Board, including the lack of sufficient expertise in
certain core areas such as corporate governance, finance,
operations, marketing, and capital markets. In addition, given the
number of directors on the Board, the Board has demonstrated that
it is unable to operate effectively and should be downsized to
enable it to act in a nimble and decisive manner. In order to bring
relevant expertise in such core areas to the Board, a number of new
directors with the appropriate skill set and a commitment to
creating value for all shareholders should be elected to the Board.
The current Board cannot conceal its under-performance by simply
adopting an "external communications strategy" as stated in the
August 29th Press Release.
We have previously suggested highly-qualified independent directors
and would like to be consulted in the process of searching for
additional director candidates with the necessary skill set. As an
initial step, we would like to be provided with a status update on
and a timeline for the search process following the completion of
the "skills matrix" by Charge's nominating and governance committee
as referenced in the Charge Letter.
- Changes in Management/Operations: Charge needs a
world-class corporate executive management team to drive
operational efficiencies and profitability. The underwhelming
performance of current Corporate Management was recently
underscored by the failure to maintain compliance with Nasdaq
listing standards. The Board should conduct a thorough search for a
permanent CEO with the help of appropriate advisors. Mr. Fox should
not participate in any capacity in the search for his replacement.
The Board should conduct the search in the most efficient manner
possible to ensure clear, long-term leadership is in place and Mr.
Denson does not have to act as the interim CEO for an extended
period. In addition, the Board should immediately develop a talent
acquisition strategy to hire new members of the corporate executive
management team with strong experience in, among other areas,
equity and debt financing. We request that you consult with us in
the CEO search process and in developing such talent acquisition
strategy so that we can be confident the new CEO and other members
of Corporate Management have the appropriate skill set to drive
forward the changes we believe are necessary.
- Engaging a Professional Interim Advisor: To manage this
transition period successfully, the Board should immediately engage
and work with an experienced professional third-party interim
advisor. Transition processes for public companies can be
challenging and working with a professional and experienced advisor
would significantly help Charge with managing this process
appropriately and avoiding any pitfalls.
- Integration and Incentivization of Subsidiaries: Beyond
operational performance, Corporate Management and the Board have
displayed questionable skills to integrate and incentivize the
subsidiaries of Charge to create value and synergies across the
business. You mentioned in the August
29th Press Release that you would develop
strategies to integrate Charge's services and products across the
infrastructure operating subsidiaries while driving cost synergies
across the organization. Such efforts are long overdue and
necessary, but they should also be coupled with appropriate
incentive mechanisms across the organization by establishing
performance metrics for subsidiary leadership and rewarding those
who actively seek and implement synergy-driven collaborations.
- Revisiting General and Administrative Costs: To ensure
there is cost discipline, the Board should immediately initiate an
independent review of Charge's corporate overhead and instill a
culture of fiscal responsibility. We request that you consult with
us during this review so that we can be confident Charge will make
any necessary expense reductions and eliminate any bloated
corporate general and administrative costs.
- Rationalize Cost of Capital: Charge's capital structure
has not been managed appropriately. The Board and Corporate
Management should focus on securing new long-term debt financing
arrangements with the assistance of a qualified third-party debt
capital markets placement firm to strive to rationalize its cost of
capital. This will allow Charge to allocate its capital to growth
and innovation opportunities and increase its valuation.
We note that establishing an "external communications strategy"
as referenced in the August
29th Press Release would be helpful, as
transparent communication would help to build trust and reduce the
perceived risk associated with investing in Charge. However,
enhanced communications are not a substitute for necessary actions.
It is not clear to us whether any meaningful action is being taken
by the Board and Corporate Management in relation to any of the
above matters and we feel compelled to share this letter publicly
in an attempt to prevent any further destruction of value due to
your failure to take decisive actions in a timely manner. The
constructive action items we outline in this letter are in the best
interests of Charge and all its shareholders. We urge you to take
necessary actions promptly and look forward to your response and
constructive dialogue with us for the next phase in Charge's
evolution.
We would like to clarify again that a certain number of our
shares were recently included in a resale registration statement
filed by Charge only to fulfill Charge's contractual obligation,
and we remain a long-term investor in Charge committed to realizing
the company's vast potential for value creation. Meanwhile, we must
continue to reserve all options and rights afforded to us as one of
Charge's largest shareholders.
Sincerely,
Lawrence Cutler
Arena Investors, LP
About Arena Investors, LP
Arena Investors, LP is an
institutional asset manager founded in partnership with
The Westaim Corporation (TSXV: WED). With approximately
$3.5 billion of assets under
management as of December 31, 2022,
and a team of over 100 employees in offices globally, Arena
provides creative solutions for those seeking capital in special
situations. The firm brings individuals with decades of experience,
a track record of comfort with complexity, the ability to deliver
within time constraints, and the flexibility to engage in
transactions that cannot be addressed by banks and other
conventional financial institutions.
See www.arenaco.com for more information.
Media Contact
Prosek Partners
Josh Clarkson / Forrest Gitlin
pro-arena@prosek.com
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