Marcato Capital Management Inc. is stepping up its campaign for seats on the board at Buffalo Wild Wings Inc., targeting the company and its executives with criticism over stock sales and what it calls un-kept promises.
The San Francisco-based hedge fund, owner of 5.6 percent of Buffalo Wild Wings stock, released a presentation on Wednesday, criticizing executives for most of the shares they’ve been granted since the company’s 2003 initial-public offering.
“In our view, this lack of long-term ownership has contributed to failures of governance and oversight, poor capital allocation discipline and the severe lack of urgency in navigating the difficult operating environment,” Mick McGuire, managing partner at Marcato, said in a statement.
“Shareholders deserve a board and management team that is willing to commit its own capital alongside them.”
Yet the company disputed Marcato’s assertion that the board and management are not aligned with the company’s shareholders.
“The board and management team collectively own significant equity interests in the company,” a company spokesperson said in an emailed statement. “Virtually all trading of the company’s common stock owned by management — who receive approximately half of their compensation in performance-based stock awards — is executed under preexisting plans that are commonly adopted for personal financial planning purposes.”
The statement also noted that in the past five years, Buffalo Wild Wings stock is up more than 80 percent, and it’s up more than 470 percent over the past 10 years. “We believe the stock performance is compelling evidence of the effectiveness of the board and management, and their focus on the creation of long-term shareholder value.”
Marcato’s complaints come two weeks after the shareholder took aim at various financial and operational targets the company has set recently, and its failure to meet those expectations.
Marcato has nominated four people to the company’s board, including McGuire. Other nominees include former Buffalo Wild Wings executive Lee Sanders and former Pizza Hut brand CEO Scott Bergren, along with Sam Rovit, CEO of food manufacturer CTI Foods.
Such proxy fights often take on the feeling of political campaigns, and Marcato has been public with its complaints about Buffalo Wild Wings management. The shareholder has a website, WinningAtWildWings.com, and makes routine presentations about the company.
In its presentation on Wednesday, Marcato complained that no company executive has ever bought stock in the company on the open market, and for years have quickly sold shares they’ve purchased through the company’s employee equity plan.
Buffalo Wild Wings’ Employee Stock Purchase Plan allows employees to buy company stock at a 15-percent discount. Marcato says that executives have a history of “flipping” those shares at market prices within an average of 75 days after their purchase. “Management has used equity incentive plans as a cash machine,” Marcato said in its presentation.
Yet such purchases represent just 2 percent of all stock the executives have sold over that time.
“Management promotes their optimism for and commitment to creating shareholder value and yet betrays that sentiment with aggressive selling of stock,” Marcato said in its presentation.
Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze
