Roumell disappointed in LEAF Group's continued intransigence

CHEVY CHASE, Md., July 21, 2020 /PRNewswire/ -- Roumell Asset Management, LLC closely read LEAF Group's July 20^th letter to shareholders.  We are disappointed by the company's continued intransigence to what is clearly the desire of the majority of the company's shareholders to unlock value by monetizing the company's marketplace and media assets.

The company's hostility to the clear expression of shareholders is remarkable, and dishonest.  To wit, in its July 20^th letter, the company states, "We believe most of our shareholders are seeking sustainable, long-term value generation."

The word "most" implies a majority; such a suggestion is patently inaccurate.  The filers of two recent Schedule 13Ds (the "Group" and Penderfund Capital) represent roughly 47% of the company's outstanding shares.  Roumell Asset Management issued a press release on June 30^th indicating its general support for unlocking shareholder value, which can reasonably be interpreted as 1) a lack of confidence in the current management team and 2) a desire to monetize the company's assets. Inclusive of RAM's ownership, the percentage of shareholders dissatisfied with management is clearly over 50%.  Thus, most shareholders reject the company's pleas for another chance to turn the company around. 

If one assumes that the remaining shareholders, after subtracting out shares held by insiders, who have not publicly weighted in are split 50/50 between management and the combined sum of shareholders who have expressed a view, the sum of shareholders lacking confidence in this management team would exceed 70%.  Still, the company seems to argue that it possesses a "right" to operate the company irrespective of clear shareholder wishes because of recent positive trends.  

To be clear, the company's recent operating strength does not alter our view that the company should be monetized.  In fact, it strengthens our view, as we believe recent operating performance, and the favorable tailwinds, will of course be reflected in the new bidding process.  The company's indication that it received an offer of $30.5 million for Society6 suggests a 0.4x price-to-sales multiple based on 2019's revenue of $76 million.  Society6's 100% YOY growth rate suggests this asset would warrant a much higher valuation today based on its 2x revenue run rate, which would likely afford a higher multiple to boot.  

The possible motivation(s) of shareholders (owners), mused about by the company in its letter, are completely irrelevant.  We expect the company to stop acting as if it's entitled to ignore the clear view of the majority of its shareholders that the best way to unlock shareholder value is to monetize the company's assets to the highest bidders.  It is clear that Mr. Moriarty is unwilling to graciously accept the wishes of the company's shareholders.  The board should act to correct this situation.   

SOURCE Roumell Asset Management, LLC

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