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I am happy to report the portfolio recovered strongly in July and August, as most of my investment theses continued to play out nicely and most holdings reported strong results. Even a commodity-related Australian holding that was delisted after a sharp selloff on December 31, 2015 reported very healthy cash generation. The portfolio’s rebound confirms that it pays off to have patience and focus on intrinsic value rather than pursue short-term outcomes.
As I had stated in my H1 2016 letter, the portfolio’s weak performance during the period was mostly driven by one investment: Perion Network (NASDAQ:PERI). To quote: “The financially most painful investment decision in my life to date has been an investment in Perion Network. This is an investment in what was once Israel’s largest IT start-up, after it had fallen on hard times and looked cheap in the aftermath. Unfortunately, there are serious issues with current management: a lack of credibility, a track record of horrendous capital allocation, and an overhead structure that no longer fits the size of the business. Many of these issues only revealed themselves over time and only became obvious earlier this year. It took me too long to spot them and to act accordingly.”
As it turns out, I am not alone in my assessment. Significant shareholder and serial entrepreneur Ronen Shilo (the founder of PERI’s largest legacy business) just called an extraordinary shareholders meeting with an open letter to the Board, stating:
- This deterioration results from lack of proper management and leadership.Perion’s executive management lacks vision and strategy. The Shareholder has requested several times that the Board replace the management, primarily the CEO, Mr. Joseph Mandelbaum. However, despite promising otherwise, the Board has not implemented these changes.
- Faulty “staggered” Board structure under Articles is a primary reason for the Board’s complacency in not effecting management changes.Under the “staggered” Board structure, Perion’s directors are entrenched for three-year terms and do not face annual elections. Consequently, certain directors feel too comfortable with the status quo to lead these changes.
- “Staggered” Board structure prevents shareholders from replacing complacent directors annuallywith new nominees who will better protect shareholders’ interests. Instead, certain directors, together with management, continue to direct Perion without proper reflection of shareholders’ interests.
I couldn’t agree more.
I believe the company is vastly undervalued based on how profitable it could be. However, to realize the company’s potential, one has to replace the CEO – and this apparently requires the replacement of certain Board members as well. The upcoming meeting is the opportunity for shareholders to speak up, re-gain control, and initiate a much-needed change in management.
If you know fellow shareholders of PERI, please spread the word. I hope to see many of them in Israel on September 26. Let me know if you have any questions.
Currently, we are not aware of any other matters that will come before the Meeting. Any shareholder of the Company who intends to present a proposal at the Extraordinary General Meeting of Shareholders must satisfy the requirements of the Israeli Companies Law 5759-1999 ( the ” Companies Law “) . Under the Companies Law, only shareholders who hold at least 1% of the Company’s outstanding voting rights are entitled to request that the Board of Directors include a proposal in a shareholders meeting, provided that such proposal is appropriate for consideration by shareholders at such meeting. Such shareholders may present proposals for consideration at the Meeting by submitting their proposals in writing to our Corporate Secretary and General Counsel at the following address: 1 Azrieli Center, Building A, 4th Floor, 26 HaRokmim Street, Holon, Israel 5885849, Attention: Corporate Secretary and General Counsel, or by facsimile to +972-3-644-5502. For a shareholder proposal to be considered for inclusion in the Meeting, our Corporate Secretary and General Counsel must receive the written proposal no later than August 29, 2016.
Throughout this Notice of Extraordinary General Meeting of Shareholders and the enclosed Proxy Statement, we use terms such as the ” Company “, ” Perion”, ” we “, ” us “, ” our ” and ” our company ” to refer to Perion Network Ltd. and terms such as ” shareholders “, ” you ” and ” your ” to refer to our shareholders.
Shareholders Entitled to Vote
Only shareholders of record at the close of business on August 29, 2016 (the ” Record Date “), will be entitled to notice of, to participate in, and to vote at, the Meeting.
Shareholders may vote their shares by personally attending the Meeting or by appointing “proxies” to vote on their behalf at the Meeting. Whether or not you intend to attend the Meeting in person, please take the time to vote your shares by completing, signing and promptly mailing the enclosed proxy card to the Company’s transfer agent, in the enclosed, postage-paid envelope. A duly executed proxy card must be received by the Company not later than the close of business on September 25, 2016 in order to be counted in the vote to be held in the Meeting. You may also present the proxy card to the chairperson at the Meeting. Shareholders may revoke their proxy at any time before the effective exercise thereof by filing with the Company’s transfer agent a written notice of revocation or a duly executed proxy card bearing a later date, delivered to the Company’s transfer agent no later than the close of business on September 25, 2016, or by presenting a later dated proxy card to the chairperson at the Meeting or by voting in person at the Meeting if you are the record holder of the shares. If you attend the Meeting and you are the record holder of the shares, you may vote in person, whether or not you have already executed and returned your proxy card. If your shares are held in “street name”, meaning in the name of a bank, broker or other record holder, you must either direct the record holder of your shares on how to vote your shares or obtain a legal proxy from the record holder to vote the shares at the Meeting on behalf of the record holder as well as a statement from such record holder that it did not vote such shares.
If your shares are held through a member of the Tel Aviv Stock Exchange (” TASE member “), and you intend to vote your shares at the Meeting in
person or by proxy, you must deliver to us, via messenger or registered mail, a confirmation of ownership ( ishur baalut ) issued by the applicable TASE member, confirming your ownership of our Ordinary Shares as of the Record Date, as required by the Israeli Companies Regulations (Proof of Ownership of Shares for Voting at General Meeting), 5760-2000. Alternatively, you may vote electronically via the electronic voting system of the Israel Securities Authority (“ISA”), up to six hours before the time fixed for the Meeting. You should receive instructions about electronic voting from the TASE member through which you hold your shares.
Joint holders of shares should note that, pursuant to our Articles of Association, the vote of the senior of joint holders of any share who votes such share, whether in person or by proxy, will be accepted to the exclusion of the vote(s) of the other registered holder(s) of such share, with seniority determined by the order in which the names of the joint holders appear in our Register of Shareholders. For the appointment of a proxy to vote shares held by joint holders to be valid, the signature of the senior of the joint holders must appear on the proxy card.
Position statements will be accepted no later than ten days prior to the Meeting date. Any position statement received will be furnished with the SEC on Form 6-K and the MAGNA on-line system of the ISA and will be available to the public on the websites of the SEC and the ISA.
Your vote is very important to us. The board of directors recommends that you vote “for” proposal one and “against” proposal two.
By Order of the Board of Directors,
Chairman of the Board of Directors
Date: August 22, 2016
Perion Network Ltd.
1 Azrieli Center, Building A, 4th Floor
26 HaRokmim Street
Extraordinary General Meeting Of Shareholders To Be Held On September 26, 2016
This Proxy Statement is being furnished to the holders of ordinary shares, par value NIS 0.01 per share (the ” Ordinary Shares “), of Perion Network Ltd. in connection with the solicitation by our Board of Directors (the ” Board of Directors “) for use at our Extraordinary General Meeting of Shareholders (the ” Meeting “), or at any adjournment thereof, pursuant to the accompanying Notice of Extraordinary General Meeting of Shareholders. The Meeting will be held at the offices of the Company located at 1 Azrieli Center, Building A, 4th Floor, 26 HaRokmim Street, Holon, Israel 5885849 on Monday, September 26, 2016 , at 4:00 p.m. (Israel time), or at any adjournment thereof. The record date for determining our shareholders that are entitled to notice of, to participate in, and to vote at, the Meeting is August 29, 2016 (the ” Record Date “) .
The agenda of the Meeting will be as follows:
1. To consider a proposal of our Board of Directors to approve amendments to our Articles of Association; and
2. To consider a shareholder proposal to approve amendments to our Articles of Association.
Currently, we are not aware of any other matters that will come before the Meeting. If any other matters properly come before the Meeting, the persons designated as proxies intend to vote in accordance with their judgment on such matters.
Shareholders may vote their shares at the Meeting by personally attending the Meeting or by appointing “proxies” to vote on their behalf. Upon the receipt of a properly executed proxy, as set forth in the accompanying Notice of Extraordinary General Meeting of Shareholders, the persons named as proxies therein will vote the Ordinary Shares covered thereby in accordance with the instructions of the shareholder executing the proxy. With respect to the proposals set forth in the accompanying Notice of Extraordinary General Meeting of Shareholders, a shareholder may vote in favor of any of the proposals or against any of the proposals or may abstain from voting on any of the proposals. Shareholders should specify their votes on the accompanying proxy card. We are not aware of any other matters to be presented at the Meeting. If any other matters are presented at the Meeting, the persons named in the attached form of proxy shall vote all shares represented by all executed proxies in their best judgment.
Any shareholder returning the accompanying proxy may revoke such proxy at any time prior to its exercise by (i) giving written notice to the Company’s transfer agent of such revocation or a later dated proxy no later than the close of business on September 25, 2016, or (ii) requesting the return of the proxy at the Meeting or delivering a later dated proxy to the chairperson at the Meeting or voting in person at the Meeting if such shareholder is the record holder of the shares.
As of August 15, 2016, we had 76,326,588 Ordinary Shares outstanding. Each Ordinary Share is entitled to one vote on each matter to be voted on at the Meeting. Two or more shareholders present, personally or by proxy, who hold or represent together at least 33-1/3% of the voting rights of our issued share capital will constitute a quorum for the Meeting. If within one half of an hour from the time appointed for the Meeting a quorum is not present, the Meeting shall stand adjourned for one week at the same hour and place, or to such day and such time and place as the chairperson may determine with the consent of a majority of the voting power represented at the Meeting in person or by proxy and voting on the question of adjournment. If a quorum is not present at the adjourned date of the Meeting within one half of an hour of the time fixed for the commencement thereof, then the Meeting shall take place regardless of the number of shareholders present and in such event the required quorum shall consist of any number of shareholders present in person or by proxy.
We will bear the cost of soliciting proxies from our shareholders. Only shareholders of record at the close of business on the Record Date will be entitled to vote at the Meeting. Proxies will be solicited by mail and may also be solicited in person, by telephone or electronic communication, by our directors, officers and employees. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their expenses in connection with the sending of proxies and proxy material to the beneficial owners of our shares.
On all matters considered at the Meeting, abstentions and broker non-votes will be treated as neither a vote “for” nor “against” the matter, although they will be counted in determining whether a quorum is present. “Broker non-votes” are shares held by brokers or other nominees which are present in person or represented by proxy, but which are not voted on a particular matter because instructions have not been received from the beneficial owner. Brokers and other nominees have discretionary voting authority under the applicable rules to vote on “routine” matters only. Thus, it is critical for a shareholder that holds Ordinary Shares through a bank or broker to instruct its bank or broker how to vote those shares, if the shareholder wants those shares voted on every proposal at the Meeting.
If you attend the Meeting and are the record holder of the shares, you may vote in person, whether or not you have already executed and returned your proxy card. If your shares are held in “street name”, meaning in the name of a bank, broker or other record holder, you must either direct the record holder of your shares on how to vote your shares or obtain a legal proxy from the record holder to vote the shares at the Meeting on behalf of the record holder as well as a statement from such record holder that it did not vote such shares.
If your shares are held by a member of the Tel Aviv Stock Exchange (” TASE member “), and you intend to vote your shares at the Meeting in person or by proxy you must deliver to us, via messenger or registered mail, a confirmation of ownership ( ishur baalut ) issued by the applicable TASE member, confirming your ownership of our Ordinary Share as of the Record Date, as required by the Israeli Companies Regulations (Proof of Ownership of Shares for Voting at General Meeting), 5760-2000. Alternatively, you may vote electronically via the electronic voting system of the Israel Securities Authority (” ISA “), up to six hours before the time fixed for the Meeting. You should receive instructions about electronic voting from the TASE member through which you hold your shares.
This Proxy Statement provides you with detailed information about the matters on which you are requested to vote your shares. In addition, you may obtain information about the Company from documents filed with the United States Securities and Exchange Commission (the ” SEC “), which are also available to the public at the website of the ISA, at: www.magna.isa.gov.il . We encourage you to read the entire Proxy Statement carefully.
Should changes be made to any proposal after the publication of this Proxy Statement, we will communicate the changes to our shareholders through the publication of a press release, a copy of which will be filed with the SEC on Form 6-K and with the ISA.
Beneficial Ownership Of Securities By Certain Beneficial Owners
The following table sets forth certain information as of August 15, 2016, concerning the only persons or entities known to the Company to beneficially own 5% or more of the Company’s outstanding Ordinary Shares. Other than with respect to our directors or officers, we have relied on public filings with the SEC. Beneficial ownership of shares is determined in accordance with the Securities Exchange Act of 1934, as amended and the rules promulgated there under, and generally includes any shares over which a person exercises sole or shared voting or investment power. Ordinary Shares that are issuable pursuant to an outstanding right within 60 days of a specified date are deemed to be outstanding and beneficially owned by the person holding the right for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Except as indicated in the footnotes to this table, to our knowledge, each shareholder in the table has sole voting and investment power for the shares shown as beneficially owned by such shareholder. Our major shareholders do not have different voting rights than our other shareholders.
See the full PDF below.