Cannell Capital: Strategic Initiatives A Must

Cannell Capital: Strategic Initiatives A Must

Is a strategic overhaul in store for EVINE Live (EVLV)? One of EVINE Live’s biggest shareholders said revamping the company’s strategic initiatives remains a possibility.

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Cannell Capital said it now holds an 8.1% ownership stake in EVINE Live (formerly ValueVision). And as such, Cannell “reserves the right to discuss various views and opinions with respect to the company and its business plans with the company or the members of its senior management.”

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ValueVision revamps management

The company today known as EVINE Live once was ValueVision, a multichannel electronics retailer operating as ShopHQ. And last year, ValueVision made a series of management changes that reshaped the company and accelerated its transformation into EVINE Live.

On May 20, 2014, ValueVision reported $158 million in net sales in the first quarter of 2014, a 1% year-over-year decrease. ValueVision’s share price also fell that day from $5.63 to $3.65.

Many shareholders were unhappy at that time, including the Clinton Group, an activist shareholder that pushed for management changes after ValueVision’s 1Q14 earnings release. ValueVision pointed out the Clinton Group wanted to “replace six [of ValueVision’s] directors with [its] own nominees without presenting a clear strategy to create shareholder value.”

Although some shareholders supported the Clinton Group, others did not. One of the key opponents included Cannell, which disclosed a 5.6% ownership stake in ValueVision on June 3. Cannell even wrote a letter to ValueVision’s Board of Directors, expressing “outrage that you stiffed … shareholders with a $3,000,000 bill … for public relations and legal advisors to defend [ValueVision] from the Clinton Group’s request.”

Later that month, ValueVision ousted half of its board and unanimously appointed Mark Bozek as its new CEO. And together, these moves drove the launch of EVINE Live.

ValueVision becomes EVINE Live

ValueVision officially changed its name to EVINE Live on Nov. 20. The company said the move represented “an important next step in [its] long-term strategy to become a true digital commerce company.”

Unlike ValueVision, EVINE Live would “focus on all things digital.” EVINE Live’s brands would offer customers multiple ways to shop and interact via TV, online and on mobile devices in various merchandise categories, including home, beauty, health & fitness, fashion & accessories, jewelry & watches and consumer electronics.

To further its mission, EVINE Live launched a new digital retail brand on Feb. 13, 2015, fully transitioning to an all digital company. New proprietary brands that debuted following the announcement included Lisa Vanderpump Estate Jewelry, FrescoWare by Scotto and Peace & Love Jewelry by Nancy Davis.

With these moves, EVINE Live made a bold statement — it was ready to transform the worlds of entertainment and retail and drive greater engagement with its customers via digital media. The moves helped the company increase its share price too.

EVINE Live recorded $162.3 million in net revenue in the third quarter of 2015, up 3% year over year. In addition, the company’s 3Q15 online net sales, active customer count and average purchase frequency rose year over year, all positive signs for the company’s future shareholder value.

Cannell’s semi-passive approach

Cannell employs a “long/short, market-neutral strategy” with its investments. It acknowledges that many of its investments are passive; however, the company also noted it will take active positions and approach businesses “on ways to enhance shareholder value, including the sale of a company.”

Given Cannell’s increased ownership in EVINE Live, does that mean an EVINE Live sale is on the docket? Not necessarily, but Cannell now holds a greater voice in the company’s management discussions.

Going forward, Cannell could become involved in EVINE Live discussions that range from “ordinary day-to-day business operations to matters such as nominees for representation on [EVINE Live’s] board of directors, senior management decisions and extraordinary business transactions.” In addition, Cannell “reserves the right to take such action as [it] may deem necessary from time to time to seek to maximize the value of the (company’s) shares.”

Bottom line

EVINE Live has two goals for 4Q15 and beyond: increase brand awareness and broaden its distribution footprint. And with last year’s management changes, the company has already “laid a solid foundation for top line growth and profitability.”

Cannell could help EVINE Live drive growth in a rapidly expanding global entertainment and media market. PwC has predicted global entertainment and media sector revenues will rise from $1.74 trillion last year to $2.23 trillion by 2019. Also, PwC pointed out today’s consumers want “more flexibility, freedom and convenience in when and how they consume their preferred content,” something that EVINE Live is poised to deliver for years to come.

EVINE Live’s share price has hit a wall, and a rebound appears inevitable. On Dec. 4, EVINE Live’s share price hit a one-year low of $1.85, but Cannell’s increased involvement in EVINE Live could put the company in a stronger position for future growth.

Remember, Cannell’s goal is to drive the value of EVINE Live shares. And if it is successful, EVINE Live could provide its shareholders with a profitable investment for years to come.

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