Shares of DAVIDsTEA fell to a 12-month low of $2.30 final week following a proxy struggle, board resignations and a shareholder’s lawsuit searching for to take away co-founder Herschel Segal as govt chair. The firm operates 240 tea outlets within the U.S. and Canada.
Shares had been $30 when the corporate went public in 2015 and had been buying and selling at $5.60 a yr in the past Tuesday.
In December 2017 the corporate introduced it was contemplating strategic options together with refinancing and restructuring. Losses tripled forward of a vicious proxy struggle that culminated in June with the exit of chief govt Joel Silver. Segal, who initiated the proxy battle, resigned from the board final March on phrase the corporate was contemplating a sale. In response he recruited a slate of seven potential administrators to exchange the present board. He prevailed, however within the weeks since he grew to become govt chair two members of the newly elected board have resigned. These embrace lead director M. William Cleman and Roland Walton, former president of Tim Hortons Canada. Neither commented publicly on their choice.
In late July, three Highland Consumer Fund partnerships, which collectively personal 12.eight % of the Montréal-based firm, filed go well with in Quebec Superior Court naming Segal and his funding agency, Rainy Day Investments (RDI), which owns 46.four % of DAVIDsTEA.
Segal says the lawsuit is with out benefit. He mentioned that the corporate, which isn’t named as a defendant, will defend its administrators and administration crew, in accordance to reviews within the Financial Post.
The Highland Funds are managed by Porchlight Equity Management. Porchlight Senior Managing Director Peter Cornetta, in an Aug. 7 press launch, wrote “it is surprising and disheartening that two newly minted directors who were nominees of Mr. Segal have suddenly resigned in quick succession, following a hotly contested shareholders’ meeting held only weeks ago.”
The resignations “raise concerns about the loss of their respective experience and fears that their resignations indicate a dysfunctional relationship between the independent directors and Mr. Segal,” mentioned Cornetta.
“Considering the efforts undertaken by Mr. Segal to reconstitute the board, and his achieving this, the remaining directors of DAVIDsTEA owe shareholders an explanation as to what went wrong,” wrote Cornetta, explaining “that’s why we have gone public with our request.”
Segal didn’t reply, and the submitting to take away Segal and elect a brand new board adopted. Segal known as the go well with a distraction and pledged that the corporate will turn out to be worthwhile inside a yr. He mentioned he intends to deal with its Canadian roots.