Tix Corp., owner of Las Vegas discount ticket outlets and other assets, is in the midst of a nasty fight with its largest shareholder over the makeup of its board of directors and the overall direction of the company.
Baker Street Capital, L.P., a Los Angeles-based investment fund that owns 22 percent of Tix Corp. stock, this week sent a letter to fellow shareholders in which it said it was nominating five people for seats on the Tix Corp. board because it believes the current board has essentially done a lousy job generating “corporate profits or stockholder returns.” In nominating its slate of candidates, Baker Street hopes to wrest control of Tix Corp. away from CEO Mitch Francis and the current board.
Among the slate of director candidates Baker Street has nominated is former Live Nation vice president Greg Bettinelli, who is currently senior vice president of marketing for online private retailer HauteLook. Bettinelli also logged time at eBay and StubHub.
Tix Corp. has struggled in recent years, but the company believes it is turning things around, helped in part by its ticket distribution system patent and its recent acquisition of the assets of Vegas.com. The company recently reported its strongest-ever second quarter, and a 16 percent increase in revenues for the first six months of this year to $16.5 million. Consolidated net income for the first six months reached $1.6 million, compared to a loss of $1.3 million for the same period in 2010.
The company refers to Baker Street as “an activist hedge fund that has been a holder of Tix stock for approximately eight months” whose founding partner and chief investment officer Vadim Perelman has exhibited “reckless, juvenile” behavior by flipping from months of praise for the company to “publicly criticizing [the] Board and management.”
“We believe that if Baker Street were to move forward with a slate of hand-picked nominees as part of an ongoing effort to seize control of Tix, as Perelman has threatened, they would be incapable of continuing Tix’s recent success and, if elected, could impair the value of your investment in Tix by deviating from your Board’s proven strategy to build value for all Tix stockholders that has Tix poised for continued future success,” Tix Corp. wrote in a recent letter to shareholders. “Rather, Baker Street’s slate, if elected, will work solely to advance Baker Street’s interests and not the interests of all Tix stockholders.”
Baker Street believes Tix has acquired other businesses at the wrong times, incurring tens of millions of dollars’ worth of hits to its net income since 2007; suffered combined losses of more than $54 million since 2007, which has sapped revenue and shareholder growth; and presided over a huge drop in stock price from highs in the $7 range during 2007 to less than $1 by 2010.
Tix Corp. stock currently trades on the OTCQX Capital Market under the stock symbol TIXC, following its delisting on NASDAQ last fall due to its stock price dropping below $1.
“We believe it is necessary to replace the Tix Board to prevent it from taking further actions that serve its own interests at the expense of Tix stockholders,” Baker Street said.
Last year, Tix Corp. retained investment bank B. Riley & Co., LLC to explore strategic options and the sale of certain assets, and the company helped Tix sell off its Tix Productions, Inc. (TPI) division, which produces theatrical shows, to the management team of TPI.
This past spring, Baker Street believed Tix Corp. might try something similar with its management taking the company private, led by Francis, by buying it out at an amount that Baker Street thought could be too low. Baker Street said it believed $2.10 per share would be a fair price, which was more than 50 percent above the stock’s price of $1.34 at the time.
The buyout did not take place, but the board enacted a “stockholder rights plan” to protect the company from a takeover. Such plans, also known as “poison pills” allow shareholders to buy stock at reduced prices in the event of a takeover attempt.
Among others, Perelman also nominated himself as a candidate to the Tix board. According to Tix Corp.’s bylaws, the board of directors must have at least two members but no more than five, and they are elected at the annual shareholders meeting. Tix Corp. has not yet scheduled this year’s meeting.
