Lighthaven Capital’s Short Thesis At Energous Corp

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Shareholders in Leaf Group have criticized the digital media company for issuing an $800,000, off-cycle stock bonus to chief executive Sean Moriarty. They also said they were “shocked” that Moriarty had been granted a $200,000 cash bonus in June, weeks after the company received a $7.1 million Paycheck Protection Program loan.

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The investor group includes Osmium Partners, PEAK6 Investments, Boyle Capital, Oak Management, Generation Partners, and Spectrum Equity. Claiming the company’s stock is deeply undervalued due to what they describe as a "Moriarty Discount," the activists have called for the CEO's dismissal.

The campaign has helped spark a rebound in the stock price, which is up nearly 40% year to date. In its defense, Leaf's board said several of the investors were "intimately involved" with the business over the past years and approved many of the aspects they now criticize.

You can hear PEAK6 principal Rachel Saunders discuss the investor group’s approach on The Activist Insight Podcast.

What We'll Be Watching For This Week

  • What will happen at Optiva’s annual meeting today after it called on its shareholders to approve its poison pill?
  • Will last Friday’s 13F deadline have birthed any new campaigns?
  • How will Ring Energy react to Simon Kukes nominating 12 candidates to the board in an effort to “improve the quality” of the c-suite?

Lighthaven Capital Management's Energous Corp Short Thesis

At the Contrarian Investor Conference last week, Lighthaven Capital Management presented a short thesis at Energous Corp (NASDAQ:WATT), claiming that the company’s wireless technology is too complex to work. Lighthaven’s Eric Chung said Energous Corp's wireless charging technology was "off-trajectory,"and is struggling to deal with waves being blocked or devices being moved. The short seller noted the issues surrounding wireless charging have been looked into by major phone manufacturers, including Sony, Apple, and Samsung, but interest waned after it proved difficult to make the technology work correctly.

Chung admitted that the stock had already come down significantly since Apple apparently passed on acquiring the company in 2017 but said that while Energous Corp had staged a mini-rebound after taking steps to cut costs, the survival of the company rested on the success or failure of its wireless charging technology.

Chart Of The Week

The number of Japan-based companies publicly subjected to M&A-related activist demands between January 01 and August 14, in respective years.

Chart Of The Week Energous Corp