David Kanen , president of KWM LLC issues letter to PRTS CEO and board highlighting poor stock performance and value creation strategy
March 15 2023 - 7:30AM
Dear Mr. Meniane and the Members of the Board
I am writing on behalf of Kanen Wealth
Management, LLC which, together with its affiliates (“Kanen” or
“we”), is one of CarParts.com, Inc.’s (“PRTS” or the “Company”)
largest stockholders, owning approximately 3 million shares of the
Company’s common stock. As you know, we have attempted, on multiple
occasions, to privately address our concerns with management's
failure to meaningfully generate stockholder value at PRTS. These
engagements have been to no avail. Unfortunately, we are now forced
to publicly communicate our frustrations in a way that may be
unflattering to Mr. Meniane and the Company’s Board of Directors
(the “Board”).
As you may be aware, in early 2019, when Mr.
Mehran Nia and I had recently joined the Board, the Company’s
market cap was approximately $40 million. By April of 2021, just
two years later, PRTS’s stock was approximately $17 per share and
the Company’s market cap had risen to over $815 million. At that
time, Mr. Nia and I had both resigned from the Board to pursue
other ventures, thinking that the Company was well-positioned for
continued growth. Sadly, we were mistaken, as since then,
the Company’s market cap has
declined by half a
billion dollars and PRTS’s stock price now sits at less
than $6 per share.
Against this precipitous decline in the
Company’s stock price, it was puzzling to hear Mr. Meniane state on
the Company’s recent Q4 earnings call:
“The key to our
success lies in our culture and our commitment to shareholders.
We’ve built an incredible business centered around positive unit
economics, repeat customers and a laser focus on financial
discipline, all with the intention of maximizing long-term
shareholder value.”
Mr. Meniane, clearly you are seeing something
the stockholders are not seeing. We certainly don’t see your
commitment to stockholders. Nor do we see how you are “maximizing
long-term shareholder value” given the Company’s declining market
cap and stock price. Do you think that stockholders don’t
understand the situation? Mr. Meniane, we feel the need to remind
you that the Company’s stock price and market cap are the
ultimate scorecards of success. Under your watch as COO,
CFO, and now CEO, the Company has suffered $500 million destruction
of stockholder value! This is the unpleasant truth – and we need
the Company to address it.
In our private conversations, you have
demonstrated a clear disregard for meaningful input from one of
your largest stockholders. To date, we have requested, among other
things, that: (1) Mr. Nia rejoin the Board; (2) the Company
actively repurchase shares pursuant to the stock repurchase program
announced last year; and (3) the Company review and rationalize
expenses. Each time, you have rebuffed our input and failed to
implement any of our suggestions. Your desperate attempts to shun
friendly advice from significant and concerned stockholders reflect
poorly on the state of the Company’s corporate governance and
highlight your indifference to the interests of some of your most
important stakeholders.
Therefore, we strongly recommend that the
Company immediately take the following actions to restore
stockholder value at PRTS:
|
1) |
Repurchase
shares under the previously announced $30 million share repurchase
program announced in 2022; |
|
2) |
Conduct a detailed and thoughtful expense rationalization
program; |
|
3) |
Halt any further equity dilution until stockholder value is
restored to peak levels; |
|
4) |
Form a strategic review committee to explore alternatives that
maximize stockholder value including a sale of the Company; |
|
5) |
Re-instate me as a shareholder representative in the boardroom;
and |
|
6) |
Consult with Mr. Nia to determine his desire and willingness to
be re-instated as a director to the Board, and appoint him to the
Board if he’s so willing to serve. |
We hope that this serves as a wake-up call to
management and the Board and begins a productive and collaborative
dialogue. Otherwise, we intend to take all steps necessary to
restore stockholder value at PRTS.
Very truly yours,
KANEN WEALTH MANAGEMENT LLC
David KanenPresidentdkanen@kanenadvisory.com
CarParts com (NASDAQ:PRTS)
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