Believes the Board’s Plan to Reincorporate in
Delaware and Eliminate Cumulative Voting is Designed to Protect
Underperforming Directors at Shareholders’ Expense
Highlights Daktronics’ Attempt to Deflect from
Shareholders’ Calls to Immediately Declassify the Board
Shares that Alta Fox Has Filed a Preliminary
Proxy Statement to Solicit Shareholder Votes AGAINST the Company’s Reincorporation Proposal at
the Upcoming Special Meeting
Alta Fox Capital Management, LLC (together with its affiliates,
“Alta Fox” or “we”), the largest shareholder of Daktronics, Inc.
(NASDAQ: DAKT) (“Daktronics” or the “Company”) based on its
beneficial ownership interest on a fully converted basis of 11.7%
of the Company’s outstanding shares, today announced that it has
filed a lawsuit against the Company and Chairman, President and
Chief Executive Officer Reece A. Kurtenbach in the United States
District Court for the District of South Dakota.
The suit is in response to Daktronics’ recently called Special
Meeting of Shareholders (the “Special Meeting”) to reincorporate
from South Dakota to Delaware (the “Reincorporation Proposal").
Alta Fox has also filed a preliminary proxy statement (reviewable
here) to solicit shareholder votes AGAINST the Reincorporation Proposal.
Tellingly, the Company’s preliminary proxy statement reveals that
the principal reason for reincorporation is to eliminate cumulative
voting, a statutory right for all shareholders of companies
incorporated in South Dakota. The Reincorporation Proposal appears
to be in response to Alta Fox’s publicly disclosed plan to nominate
highly qualified candidates for election to the Board of Directors
(the “Board”).1 In our view, the Board’s objective is to use a
change in the Company’s jurisdiction to eliminate shareholders’
long-standing rights under South Dakota law and prevent the Board
from being held to account.
Alta Fox believes the timing of the Reincorporation Proposal
reveals that the Board’s intent is to weaken shareholder rights, as
evidenced by the following facts:
- Daktronics only called the Special Meeting to put forth the
Reincorporation Proposal after Alta Fox publicly stated our plan to
nominate new director candidates for election and after we reminded
the Company of our unassailable right to call a special
meeting.2,3 Daktronics, which has been a South Dakota company
since its founding in 1968, could have chosen to reincorporate at
any point over the past 57 years. Only now, in response to a major
shareholder challenge, has the Board decided this is a priority –
likely because the Board knows that with cumulative voting, Alta
Fox would have an even greater chance of successfully electing new
directors.
- The Company’s Reincorporation Proposal is just the latest
tactic in its lengthy history of rejecting governance best
practices. In defiance of shareholder calls for improvement,
the Board retains staggered director elections; a poison pill,
which the Board enacted and subsequently strengthened without a
shareholder vote; and a combined Chair and CEO role. More than two
years after the Company’s disclosure of a going concern notice from
its auditors, the Board’s Audit Committee still includes four
directors who oversaw the poor financial planning and inadequate
internal controls that led to the notice.4 Under the Board’s
supervision, the Company suffers from a nepotistic culture led by
an underperforming second-generation CEO, one of three named
executive officers from the same family.
- The Special Meeting agenda does not include proposals that
would truly modernize Daktronics’ governance. Although the
Board had the option of putting forth a proposal to immediately
declassify itself or redeem its unilaterally adopted poison pill,
it did not. Daktronics’ promises to finally adopt proxy access and
a majority voting standard for director elections are mere
distractions from the Company’s anti-shareholder agenda – both can
be easily implemented without fleeing South Dakota for
Delaware.
- There is no urgency to the Company’s Reincorporation
Proposal, nor any reason for shareholders to endure the expense of
this special meeting. The Board has the option of including the
Reincorporation Proposal on the agenda for Daktronics’ next annual
meeting. In calling this Special Meeting, the Board has
demonstrated a concerning level of comfort wasting Company
resources to shield itself from the consequences of its
mistakes.
In its misguided attempts to defend itself, the Board chose to
mislead investors about the value of Alta Fox's convertible
securities and publicly smear its largest shareholder – the very
benefactor that provided critical financing in the Company’s time
of need.5 Based on feedback and public statements from other
shareholders, it is clear that there are widely held concerns
regarding the Company’s long-term underperformance, capital
allocation blunders and history of shareholder-unfriendly
governance.6 As we have said previously, we are supportive of
actions that actually enhance Daktronics’ governance.7 Alta Fox is
committed to continuing to push for the governance reforms that
Daktronics desperately needs and ensuring that the rights of all
shareholders are upheld.
If Alta Fox prevails in our lawsuit, or if Daktronics rescinds
the Reincorporation Proposal, we plan to immediately call a special
meeting at which we will seek shareholder approval to:
- Immediately declassify the Board, so that all directors stand
for election annually and are accountable to shareholders.
- Remove the Company’s poison pill, which unfairly restricts
shareholder rights.
- Elect independent, highly qualified directors who will ensure
that Daktronics is managed in the best interests of all
shareholders – not just the Kurtenbach family.
***
Alta Fox encourages Daktronics stakeholders to
visit www.FixDaktronics.com to review our presentation exposing how
poor governance and a private family business mentality have driven
massive underperformance for shareholders.
About Alta Fox
Founded in 2018 by Connor Haley, Alta Fox is a Texas-based
alternative asset management firm that employs a long-term focused
investment strategy to pursue exceptional risk-adjusted returns for
a diverse group of institutions and qualified individual clients.
Alta Fox focuses on identifying often overlooked and
under-the-radar opportunities across asset classes, market
capitalization ranges and sectors. Learn more by visiting
www.AltaFoxCapital.com.
Certain Information Concerning the
Participants
Alta Fox Opportunities Fund, LP (“Alta Fox Opportunities”),
together with the other participants named herein (collectively,
“Alta Fox”), has filed a preliminary proxy statement and an
accompanying BLUE proxy card with the Securities and Exchange
Commission (“SEC”) and intends to solicit votes in connection with
their opposition to proposals to be presented at a special meeting
of shareholders of Daktronics, Inc., a South Dakota corporation
(the “Company”).
ALTA FOX STRONGLY ADVISES ALL SHAREHOLDERS OF THE COMPANY TO
READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS, INCLUDING ITS
BLUE PROXY CARD, AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO
CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION,
THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF
THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY
SOLICITOR.
The participants in the proxy solicitation are expected to be
Alta Fox Opportunities, Alta Fox GenPar, LP (“Alta Fox GP”), Alta
Fox Equity, LLC (“Alta Fox LLC”), Alta Fox Capital Management, LLC
(“Alta Fox Capital”) and P. Connor Haley (collectively, the
“Participants”).
As of the date hereof, Alta Fox Opportunities directly
beneficially owns 5,933,019 shares of Common Stock, no par value
(the “Common Stock”), of the Company. Alta Fox Capital, as the
investment manager of Alta Fox Opportunities, may be deemed to
beneficially own the 5,933,019 shares of Common Stock beneficially
owned by Alta Fox Opportunities. Alta Fox GP, as the general
partner of Alta Fox Opportunities, may be deemed to beneficially
own the 5,933,019 shares of Common Stock beneficially owned by Alta
Fox Opportunities. Alta Fox LLC, as the general partner of Alta Fox
GP, may be deemed to beneficially own the 5,933,019 shares of
Common Stock beneficially owned by Alta Fox Opportunities. Mr.
Haley, as the sole owner, member and manager of each of Alta Fox
Capital and Alta Fox LLC, may be deemed to beneficially own the
5,933,019 shares of Common Stock beneficially owned by Alta Fox
Opportunities.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
The information herein contains “forward-looking statements.”
Specific forward-looking statements can be identified by the fact
that they do not relate strictly to historical or current facts and
include, without limitation, words such as “may,” “will,”
“expects,” “intends,” “believes,” “anticipates,” “plans,”
“estimates,” “projects,” “potential,” “targets,” “forecasts,”
“seeks,” “could,” “should” or the negative of such terms or other
variations on such terms or comparable terminology. Similarly,
statements that describe our objectives, plans or goals are
forward-looking. Forward-looking statements relate to future events
or future performance and involve known and unknown risks,
uncertainties, and other factors that may cause actual results,
levels of activity, performance or achievements or those of the
industry to be materially different from those expressed or implied
by any forward-looking statements. Daktronics, Inc., a South Dakota
corporation, has also identified additional risks relating to its
business in its public filings with the Securities and Exchange
Commission (the “SEC”). Alta Fox Capital Management, LLC (together
with its affiliates, “Alta Fox”), has based these forward-looking
statements on current expectations, assumptions, estimates,
beliefs, and projections. While Alta Fox believes these
expectations, assumptions, estimates, and projections are
reasonable, such forward-looking statements are only predictions
and involve known and unknown risks and uncertainties, many of
which involve factors or circumstances that are beyond Alta Fox’s
control. There can be no assurance that any idea or assumption
herein is, or will be proven, correct. If one or more of the risks
or uncertainties materialize, or if the underlying assumptions of
Alta Fox described herein prove to be incorrect, the actual results
may vary materially from outcomes indicated by these statements.
Accordingly, forward-looking statements should not be regarded as a
representation by Alta Fox that the future plans, estimates or
expectations contemplated will ever be achieved. You should not
rely upon forward-looking statements as a prediction of actual
results and actual results may vary materially from what is
expressed in or indicated by the forward-looking statements. Except
to the extent required by applicable law, Alta Fox will not
undertake and specifically declines any obligation to disclose the
results of any revisions that may be made to any projected results
or forward-looking statements herein to reflect events or
circumstances after the date of such projected results or
statements or to reflect the occurrence of anticipated or
unanticipated events.
Certain statements and information included herein have been
sourced from third parties. Alta Fox does not make any
representations regarding the accuracy, completeness or timeliness
of such third party statements or information. Except as may be
expressly set forth herein, permission to cite such statements or
information has neither been sought nor obtained from such third
parties. Any such statements or information should not be viewed as
an indication of support from such third parties for the views
expressed herein.
1 Alta Fox press release dated December 10, 2024. Link. 2 Alta
Fox press release dated December 10, 2024. Link. 3 Alta Fox press
release dated December 11, 2024. Link. 4 The Company’s definitive
proxy statement for its 2024 annual meeting. Link. 5 The Company’s
statement dated November 8, 2024, implied that the value of Alta
Fox’s promissory note is based on face value or a Black Scholes
model. For Alta Fox and likely any other shareholder, the value of
the in-the-money convertible securities is the market value of the
converted shares (approximately $79.5 million). Link. 6 Breach
Inlet Capital, LP press release dated December 17, 2024. Link.
Anchor Capital Advisors, LLC press release dated January 27, 2025.
Link. Breach Inlet Capital, LP press release dated February 4,
2025. Link. 7 Alta Fox press release dated December 10, 2024.
Link.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20250204828929/en/
For Shareholders: Alta Fox Investor Relations
ir@altafoxcapital.com or Okapi Partners Bruce Goldfarb / Chuck
Garske, 212-297-0720 info@okapipartners.com For Media: Longacre
Square Partners Kate Sylvester / Bela Kirpalani, 646-386-0091
altafox@longacresquare.com
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