STOCK TITAN

WYNNEFIELD CAPITAL IMPLORES TECHPRECISION TO GIVE ALL SHAREHOLDERS A VOICE IN VOTAW PRECISION TECHNOLOGIES TRANSACTION

Rhea-AI Impact
(Neutral)
Rhea-AI Sentiment
(Neutral)
Tags
Rhea-AI Summary
Wynnefield Capital, the largest institutional stockholder of TechPrecision Corporation, is demanding the company's board to allow stockholders to vote on the proposed Votaw acquisition, citing concerns about stockholder value destruction and significant dilution. The company's poor stock performance, declining by 14.7% to $4.46 per share on January 8, 2024, and by 37.8% since the proposed acquisition on November 29, 2023, has raised alarm. TechPrecision's board is accused of disregarding stockholder interests and failing to engage with shareholders. The company's stock performance has been consistently poor, declining by 22.0% on a year-to-date basis and by 37.4% in 2023. The acquisition of STADCO also resulted in a 31.3% decline in TPCS shares. Wynnefield Capital is calling for accountability and transparency from the board and management.
Positive
  • None.
Negative
  • The poor stock performance and declining stock prices indicate significant concerns about the company's management and strategic decisions. The board's refusal to engage with shareholders and provide detailed information on the Votaw acquisition raises doubts about transparency and accountability. The consistent decline in stock performance over multiple periods reflects a lack of confidence from investors and stockholders.

The concerns raised by Wynnefield Capital regarding TechPrecision's proposed acquisition of Votaw Precision Technologies and the subsequent stockholder response highlight a significant issue in corporate governance and shareholder rights. The sharp decline in TechPrecision's stock price following the announcement of the acquisition suggests a disconnect between the board's decision-making and shareholder expectations. The market's reaction, which includes a 37.8% decline in share price since the acquisition announcement, indicates a lack of confidence in the strategic direction of the company.

From a financial perspective, the potential dilutive effect of the acquisition on existing shareholders is a critical point of analysis. If the acquisition is financed through equity, it could lead to a decrease in earnings per share and a reduction in individual shareholders' ownership percentage, unless accompanied by a proportionate increase in the company's overall value. This is particularly concerning in light of the stock's underperformance relative to the Russell Micro Index. Monitoring the capital raise process for fairness and equal access will be crucial in maintaining shareholder trust and market integrity.

The allegations of insufficient disclosure and engagement with shareholders could raise legal concerns regarding the board's fiduciary duties. The board is obligated to act in the best interest of the company and its shareholders, which includes providing transparency about significant corporate actions such as acquisitions. The claim by Wynnefield that the board has not adequately disclosed the funding strategy for the Votaw acquisition raises questions about compliance with securities laws and regulations that mandate fair disclosure of material information.

Additionally, the board's decision to potentially bypass a shareholder vote on a transformative acquisition could be seen as an avoidance of the accountability mechanisms inherent in corporate governance structures. The legal implications of this action would depend on the company's bylaws, state law and the specifics of the acquisition agreement. Shareholder activism, such as that displayed by Wynnefield, can often lead to increased scrutiny of board decisions and potentially to legal challenges if shareholders believe their rights have been infringed upon.

The negative stockholder reaction to the Votaw acquisition proposal, as evidenced by the significant drop in TechPrecision's share price, suggests that the market may not perceive the acquisition as value-accretive. In contrast, the market generally rewards acquisitions that are expected to lead to synergies, cost savings, or revenue growth. The lack of detailed financials and transaction financing information about the Votaw acquisition is a red flag for investors, as it hampers the ability to conduct a thorough valuation analysis.

Historical stock performance data provided by Wynnefield Capital indicates that TechPrecision's stock has not only underperformed since the announcement of the Votaw acquisition but also since its previous acquisition of STADCO. This trend raises concerns about the company's acquisition strategy and integration capabilities, which are key factors in determining the success of M&A activities. The board's communication strategy, or lack thereof, can also significantly impact investor sentiment and stock performance, further emphasizing the importance of transparency and engagement with the investment community.

NEW YORK, Jan. 19, 2024 /PRNewswire/ -- Wynnefield Capital and its affiliates, collectively the largest institutional stockholder of TechPrecision Corporation (NASDAQ: TPCS), with a 4.5% beneficial ownership interest, today issued the following public letter to the Company's Board of Directors.

***

January 19, 2024

Wynnefield Capital Demands TechPrecision's Board to Commit That Stockholders Will Vote on the Votaw Transaction

Dear Board of Directors,

Wynnefield Capital and its affiliates (collectively, "Wynnefield") own 393,857 shares of common stock, or 4.5%, of TechPrecision Corporation (NASDAQ: TPCS) ("TechPrecision" or the "Company") as of December 31, 2023. Wynnefield is TechPrecision's largest institutional stockholder, according to Bloomberg.

In its first public letter on December 7, 2023, Wynnefield asked the company to hold a public conference call to explain the proposed acquisition of Votaw Precision Technologies. After receiving no response to this very reasonable request, on December 19, 2023, we publicly questioned why the board was unwilling to disclose the transaction's funding strategy. TechPrecision has given just a generalized response with no material details. Wynnefield remains alarmed by this Board of Directors' disregard for its duties to ALL stockholders, the uncertainty it has created and its contribution to stockholder value destruction.

TechPrecision's board has not earned stockholder trust to approve at its sole discretion, under any circumstance, the proposed Votaw transaction. The claim "the board is unanimous in support of the acquisition" should not be reason to circumvent stockholder interests to weigh in and vote on a proposed transformational acquisition. Just when unfavorable voting results were reported following the September 12, 2023, annual meeting of stockholders, the board was approving the execution of a letter of intent with Votaw knowing that the potential acquisition could cause significant dilution to existing TechPrecision stockholders.

Wynnefield is at a total loss why the company would not engage immediately with its shareholders. We intend to carefully monitor the inevitable dilutive capital raise to ensure equal access opportunity for all shareholders. Wynnefield has operated for over 30 years and never witnessed anything quite this bizarre.

Wynnefield Capital demands accountability given the destruction of stockholder capital. It is time this board and management ADMIT their shortcomings and publicly ENGAGE with stockholders. TPCS stockholder returns are clearly a disaster on an absolute and relative basis.

Source: Bloomberg

No matter how you look at it, TechPrecision's board has caused great harm. The track record is as follows:

  • Stockholder reaction to TechPrecision's press release on January 8, 2024. TPCS shares DECLINED by 14.7% to $4.46 per-share on Monday, January 8, 2024, from $5.23 per-share on Friday, January 5, 2024 – an immediate, one-day reaction to the company's press release.
  • Stockholder reaction since TechPrecision's proposed Votaw acquisition on November 29, 2023. TPCS shares DECLINED by 37.8% to $4.04 per-share on January 18, 2024, from $6.50 per-share on November 29, 2023.
  • 2024 YTD TPCS share performance. TPCS shares DECLINED by 22.0% on a 2024 YTD basis as of January 18, 2024, hitting a new 52-week low of $4.04 per-share and the lowest closing price since $4.00 per-share on April 9, 2019 – almost 5 years ago!
  • 2023 TPCS share performance. TPCS shares DECLINED by 37.4% in 2023. The Russell Micro Index increased by 7.7% in 20231.
  • TPCS share performance since STADCO acquisition. TPCS shares DECLINED by 31.3% for the period from TechPrecision's STADCO acquisition close on August 25, 2021, to January 18, 2024.

Source: Bloomberg data.




































In TechPrecision's press release on June 8, 2023, the board's claim that it is "…limited by the securities laws as to what topics…" can be discussed attempts to obfuscate the many topics that are legally allowed and insults stockholder acumen. TPCS shares plummeted by 14.7% that day. What more proof does the board need that their path remains ill-advised than the dismal stockholder returns presented above?

As Wynnefield attempted to understand this situation better through constructive advice in our first two public letters, we now request further explanations on behalf of ALL stockholders:

  • VOTAW FINANCIALS and TRANSACTION FINANCING. The board claims it is unable to provide "more information about Votaw's financial condition and results of operations," which leaves stockholders without key metrics to assess the opportunity against potential financing scenarios. This claim is rubbish.
    • Wynnefield demands to understand the margin of safety between Votaw's operating cash flow and the board's assumed long-term financing structure (or the board's philosophy on acceptable financing parameters) to pay for Votaw's potentially $110 million price tag.
    • Wynnefield demands to learn why the board allowed the 45-day termination period to expire without all or most of the financing structure in place beforehand. If any of the financing structure is in place, stockholders are entitled to that information and the board would be irresponsible to keep this a secret.
       
  • VOTAW EARNOUT. The Earnout Payment is realized based on an EBITDA target to be achieved for just the first 12-month period of financial performance.
    • Wynnefield's strong preference is to establish earnout performance metrics realized over multiple years that better match TechPrecision's anticipated significant financial obligation payments. If Votaw's performance flounders any time after the first year of TechPrecision's ownership, the Seller's Earnout Payments are locked-in over the following years while TechPrecision is left with a potential mismatch between its operating cash flow expectation and financial obligations. Multi-year EBITDA performance targets keep a Seller engaged with "skin in the game" over a longer period and offers more protection for stockholders.
       
  • OVERHEAD SAVNGS. The board claims," Our immediate plan is to start moving STADCO's operations into the Votaw facility towards the end of 2024, continuing into 2025…"
    • Wynnefield wonders why the board would allow critical savings to be delayed. This is another way the board's bad negotiations favored the Seller and their Earnout Payment (based on performance ending October 31, 2024) instead of prioritizing stockholders' best interests.
    • Wynnefield asks for explanation of how TechPrecision plans to serve critical STADCO customers during the potentially poorly timed relocation. Public statements by the Department of Defense and OEMs have made comments regarding the readying 2024 production ramps for Sikorsky's CH-53K heavy lift helicopters and Boeing's F15-EX fighter jets, two major military programs that STADCO contributes components. Moving STADCO's operations during late 2024 and in 2025 is a concern.
       
  • CAPEX SAVINGS. Stockholders know of but are not "well aware of the deferred maintenance problems at STADCO" because these have not been publicly discussed in detail.
    • STADCO's CAPEX has been low. In the company's FORM 10Q, STADCO's capital expenditures totaled just $4,530 during the six-month period ending September 30, 2023. Per the company 10K report, STADCO capital expenditures totaled $725k in 2023 and $113k in 2022.
    • If TechPrecision can find financing to purchase a $110 million acquisition, surely the company should be able to fund a considerably smaller amount to support a recently completed acquisition. Stockholders might even expect that TechPrecision's STADCO due diligence should have aptly informed of future capital expenditure investments before the purchase. Lastly, on FY2Q24 (ending September) earnings call, TechPrecision's CEO stated, "…our delivery meets the expectations of the customers for both subsidiaries…that across the board for our key customers, we are not losing any confidence in any one of them…" suggesting STADCO was on firm footing.
       
  • STADCO and M&A. The board's claim "even prior to completing the acquisition of STADCO in August 2021, it was our intent to relocate STADCO, whether by finding a new location or acquiring a compatible company."
    • Wynnefield would like the board to cite when management publicly informed the stockholders of STADCO's relocation and M&A strategy intentions.
    • STADCO's S-1 dated January 7, 2022 (nearly 4 ½ months after the acquisition), states, "In addition, Ranor's and STADCO's businesses will continue to maintain a presence in Westminster, Massachusetts and Los Angeles, California, respectively."
    • Further, the board's statement of "…or acquiring a compatible company" suggests that the board intended to execute on an M&A strategy, a significant undertaking for TechPrecision's new significantly leveraged balance sheet.

TechPrecision stockholders have been patient investors, but recent board actions have been devastating. While Votaw's valuation incorporates just recently improved financial performance, existing TechPrecision stockholders would give up full ownership of RANOR and STADCO just months before their production ramps up and after waiting patiently for years.

IT'S NOT TOO LATE TO EXPLAIN THE PROPOSED VOTAW ACQUISITION ON A PUBLIC CONFERENCE CALL AND TO COMMIT THAT STOCKHOLDERS WILL BE ABLE TO EXERCISE THEIR OWNER VOTE.

Respectfully yours,

Nelson J. Obus, Founder                   Robert D. Straus, Portfolio Manager

***

Media:

Daniel Yunger
Kekst CNC
daniel.yunger@kekstcnc.com

 


Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/wynnefield-capital-implores-techprecision-to-give-all-shareholders-a-voice-in-votaw-precision-technologies-transaction-302039638.html

SOURCE Wynnefield Capital

FAQ

What is Wynnefield Capital demanding from TechPrecision's board?

Wynnefield Capital is demanding that the company's board allows stockholders to vote on the proposed Votaw acquisition.

What are the concerns raised by Wynnefield Capital regarding the Votaw acquisition?

Wynnefield Capital is concerned about stockholder value destruction and significant dilution as a result of the proposed Votaw acquisition.

What is the current stock performance of TechPrecision Corporation?

TechPrecision's stock performance has declined by 22.0% on a year-to-date basis and by 37.4% in 2023. The acquisition of STADCO also resulted in a 31.3% decline in TPCS shares.

What is the reaction of stockholders to TechPrecision's press release on January 8, 2024?

TPCS shares declined by 14.7% to $4.46 per share on January 8, 2024, from $5.23 per share on January 5, 2024, in response to the company's press release.

What is the reaction of stockholders since TechPrecision's proposed Votaw acquisition on November 29, 2023?

TPCS shares declined by 37.8% to $4.04 per share on January 18, 2024, from $6.50 per share on November 29, 2023, following the proposed acquisition.

What is the stock performance of TPCS shares since the STADCO acquisition?

TPCS shares declined by 31.3% for the period from TechPrecision's STADCO acquisition close on August 25, 2021, to January 18, 2024.

What is the demand from Wynnefield Capital regarding the board and management?

Wynnefield Capital is demanding accountability and transparency from the board and management given the destruction of stockholder capital and poor stock performance of TPCS shares.

Techprecision Corporation

NASDAQ:TPCS

TPCS Rankings

TPCS Latest News

TPCS Stock Data

42.22M
8.07M
11.43%
15.56%
0.01%
Iron and Steel Forging
Manufacturing
Link
United States of America
WESTMINSTER

About TPCS

ranor, inc. is a leader in the fabrication and machining of precision components and equipment. we serve the alternative energy, nuclear, medical, defense, aerospace, and industrial markets. we are proud to offer our customers customized services and integrated “turn key” solutions for complete products requiring fabrication and machining as well as assembly, inspection and testing. ranor is committed to working with its customers to manufacture their products using the most efficient and precise methods possible. we have earned our reputation through outstanding technical expertise, attention to detail, and a total commitment to quality and excellence.