Echo Lake Capital Issues Top Ten List of Reasons Why Shai Gozani, CEO of Neurometrix Inc., Should Be Fired
- None.
- NURO stock price has declined by 99% since its IPO, indicating significant investor losses.
- Shai Gozani has received over $10 million in compensation despite shareholders suffering massive losses.
- Gozani was charged by the FTC for various wrongdoings at NURO, reflecting governance issues.
- Gozani personally paid $4 million to the FTC as part of a settlement, raising ethical concerns.
- NURO continues to sell stock significantly below its net cash value, potentially harming shareholder value.
The significant 99% decline in NURO's stock price since its IPO indicates a severe underperformance that raises concerns about the company's strategic direction, financial management and overall viability. Such a decline is an extreme outlier compared to typical market behavior and suggests that investors have lost confidence in the company's ability to generate future profits. The compensation of over $10 million received by CEO Shai Gozani, despite shareholder losses, may be perceived as misaligned with the interests of shareholders, potentially leading to further erosion of investor trust.
The issuance of shares at prices below net cash value is a strategy that can provide immediate liquidity but often comes at the cost of shareholder dilution. This action suggests that the company may be facing significant cash flow challenges, necessitating the raising of capital in a manner that is disadvantageous to current shareholders. While this approach can be necessary in certain situations, it is generally considered a negative signal about a company's financial health and future prospects.
The charges by the Federal Trade Commission (FTC) against Gozani for various wrongdoings at NURO and the subsequent $4 million personal settlement payment raise serious legal and ethical concerns. Such developments can have a profound impact on investor sentiment and the company's reputation. The legal implications of these charges may include increased scrutiny from regulators, potential fines and legal costs, all of which can affect the company's financial position and its ability to operate effectively.
Moreover, the presence of these issues suggests a possible lack of adequate corporate governance and internal controls, which are critical components in protecting shareholder interests and maintaining corporate integrity. Investors and analysts often scrutinize such factors when assessing a company's risk profile and long-term sustainability.
The composition of NURO's Board of Directors, including individuals with diverse backgrounds such as a stand-up comedian and a practicing doctor, may be questioned for its effectiveness and suitability in overseeing a public company. While diversity in expertise can bring valuable perspectives, it is essential for board members to possess the requisite knowledge and experience to make informed decisions that align with the company's strategic goals and the best interests of shareholders.
The market's reaction to the board's continued support of CEO Gozani, despite the outlined concerns, will likely influence investor confidence. If the market perceives the board as ineffective or not acting in shareholders' best interests, this could lead to further negative sentiment and downward pressure on the stock price. The ability of a board to respond to shareholder concerns and take decisive action when necessary is a critical factor in maintaining corporate governance standards and ensuring the company's competitiveness in the market.
- NURO stock price has declined
99% since its IPO - Gozani has received compensation of over
$10 million since the IPO - Gozani was charged by the FTC for various wrongdoings at NURO
- Gozani apparently personally paid the FTC
$4 million as part of a settlement - Gozani barely owns any NURO shares
- NURO continues to sell stock significantly below its net cash value
NEW YORK, NY / ACCESSWIRE / March 12, 2024 / Earlier today Echo Lake Capital sent a letter to the Board of Directors of Neurometrix, Inc. (NASDAQ:NURO). The letter listed the top ten reasons why the Board should immediately fire Shai Gozani, the company's longstanding Chairman and CEO. The reasons include (i) NURO's stock price has declined
The letter also questions why the Board (whose members include a stand up comedian, a practicing doctor, and a board director of two other public companies (Performant Financial Corp. and American Oncology Network Inc.)), continue to support Gozani considering his performance over the past twenty years.
A full copy of the letter can be found below:
CONTACT:
Ephraim Fields
ef@echolakecapital.com
To:
Shai Gozani - Chairman and CEO
Bradley Fluegel - Board Director at Performant Financial Corp. and American Oncology Network Inc.
David E. Goodman - Practicing Doctor in Novato, CA
Nancy E. Katz - "Consultant"
David Van Avermaete - Stand Up Comedian
Shai Gozani is the worst Chairman/CEO we have ever seen…and we've a lot of them.
You collectively are among the worst Board of Directors we have ever seen. Even though NURO's long-suffering shareholders continue to lose money, you continue to enrich yourselves at shareholders' expense while also inexcusably continuing to support Mr. Gozani (despite his well-established track record of destroying shareholder value). We are deeply concerned about your repeated failures to act in shareholders' best interests. Furthermore, having closely analyzed your backgrounds and professional experiences we question why any public company would select you to serve as a board member....but these topics can be addressed in subsequent letters.
Since you apparently believe Mr. Gozani has been doing a good job, we've prepared a list of the TOP 10 reasons why we believe he should be fired immediately:
| 1) | Stock price declined | |
| Gozani has been NURO's Chairman and CEO since its IPO and since that time NURO's stock price has declined | ||
| 2) | Received over | |
| Since the IPO Gozani has received (aka the Board has given him) compensation exceeding | ||
| 3) | Personally charged by the Federal Trade Commission for actions at NURO. | |
| In 2020 the FTC claimed Gozani (among other things) engaged in "unlawful acts and practices repeatedly over a period of more than four years, continued their unlawful acts or practices despite knowledge of complaints that advertising claims for Quell were not substantiated and went beyond claims the FDA allowed for similar devices, and continued such deceptive advertising unabated until FTC staff notified them it would recommend law enforcement action." We encourage you to read the entire FTC complaint which includes additional damaging allegations. | ||
| 4) | Apparently personally paid the FTC | |
| We can only imagine the level of incriminating evidence the FTC had against Gozani that motivated him to apparently personally pay the FTC | ||
| 5) | Approves of NURO issuing stock at massive discount to net cash. | |
| We find it inexcusable that NURO has been selling stock at prices dramatically below its net cash per share. We see no justification for these equity issuances especially since NURO already has a significant amount of net cash. Year to date Nuro has sold over 460,000 shares at an average price of | ||
| 6) | Barely owns any NURO shares. | |
| Despite being NURO's founder, Gozani owns only approximately 10,000 NURO shares. These shares have a market value of only | ||
| 7) | Refuses to speak with a large NURO shareholder. | |
| We are NURO's 2nd largest shareholder (and own multiples more stock than does the entire Board combined). We have been trying to speak to Gozani since late February (before we filed our Schedule 13D) but he has not responded to us. We believe part of a CEO's job is to engage with shareholders, not avoid them. | ||
| 8) | Has taken compensation worth almost 2x NURO's equity market cap. | |
| The | ||
| 9) | Believes a | |
| At the end of 2023, NURO had an equity market of only | ||
| 10) | Ask some former NURO shareholders. | |
| We believe that almost every institutional investor that NURO has had over the past 20 years has lost confidence in Gozani. If the nine reasons we listed above haven't convinced you to fire Gozani, we suggest you speak with some of NURO's former investors to learn why they dumped their shares and what they think of Gozani. |
None of what we have written in this letter should be new to you, nor should the public criticism you've received from the company's largest shareholder, RS Fund LP. We think it is shameful that the company's two largest shareholders have to publicly write to you in order to protect the value of their investment. If you really want anyone to believe you are fulfilling your fiduciary responsibilities and acting in the best interests of shareholders, we believe you should immediately (i) fire Gozani, (ii) cancel the ATM offering and (iii) liquidate the company.
Sincerely,
Ephraim Fields
Echo Lake Capital
SOURCE: Echo Lake Capital
View the original press release on accesswire.com
