An group of investors in Collectors Universe says the company is worth twice its current share value.
Shamrock Capital Advisors, which owns nearly 9% of Collectors Universe, parent company of Santa Ana, CA-based PSA and PSA/DNA, is urging the publicly traded grading and authentication company to sell.
Shamrock is headed by Roy Disney, the nephew of Walt Disney and based in nearby Burbank, CA.
In a letter filed with the Securities and Exchange Commission, Shamrock said it believed the company would be "an attractive acquisition candidate" but that recent decisions by its Board of Directors have hurt CU. Shares of Collectors Universe have been selling for around than $3.40, less than half of what Shamrock believes the company could fetch if sold to a private investor group. The initial public offering price for the company ten years ago was $21.82 per share.
Shamrock’s letter, written by Managing Director Dennis Johnson is below:
Mr. A. Clinton Allen
Chairman of the Board
Collectors Universe, Inc.
1921 East Alton Avenue
Santa Ana, California 92705
Dear Mr. Allen:
The Shamrock Activist Value Fund (“SAVF”) currently owns 806,005 shares or 8.8% of Collectors Universe, Inc.’s outstanding common stock and strongly recommends that the Board of Directors immediately begin the process to sell the company.
We believe the company’s core business of providing value added authentication services is an attractive business and far more valuable than implied by its current stock price of $3.37 per share. Our analysis concludes that the intrinsic value of Collectors Universe, Inc. is at least $7 per share. The Board has a fiduciary responsibility to maximize the value of the company and should attempt to realize that value through a transaction rather than attempting to provide oversight of the current flawed strategic direction of the business.
We believe the company is an attractive acquisition candidate and has a profile that would facilitate a transaction given the significant amount of cash and cash equivalents on the balance sheet as well as the company’s ability to generate positive cash flow. Further, there are significant costs the company is incurring as a public entity which could be eliminated as a result of a sale.
We certainly applaud and approve the company’s decision announced a few days ago to exit the business of authenticating and grading diamonds and colored gemstones. We believe this decision will help restore a certain amount of shareholder capital that was lost as a result of the Board’s decision to acquire the business in the first place.
As reflected in the current $3.37 share price, we do not believe investors have confidence or expect a return to the company’s initial public offering price of $21.82 ten years ago. During this period, the stock has underperformed its peer group and the Russell 2000 by a daunting amount. In our view, the current stock price is nothing more than a reflection of the Board’s inability to provide adequate oversight of the strategic planning process required to create long-term shareholder value.
The company history over the last few years is a litany of lost opportunities, frequent changes in strategy, near delisting from NASDAQ, incurrence of a series of operating losses, and the Board’s pathetic recent adoption of a poison pill we believe only serves to entrench management and this Board.
The company’s earnings per share report card is simply dismal – from a reported $0.27 per share in fiscal 2004 to a loss of $1.85 per share by fiscal 2008. These earnings results have been well below consensus analyst forecasts and return on invested capital has repeatedly been below the company’s cost of capital. We believe that these long-term performance results reflect inadequate Board oversight, a fundamentally flawed strategy and a failure to hold management accountable.
It should be no surprise to Directors that the company’s shareholders have lost confidence in this Board. Shareholders strongly voiced their disapproval of Directors at the 2008 annual meeting where the percentage of withheld votes per director ranged from 32% down to 12%. It is very unusual for an individual director of a public company to receive a withhold vote of 5-10%. The recent withhold vote by the company’s shareholders is clear evidence to us that shareholders have lost confidence in the Board’s ability to effectively represent the owners of Collectors Universe.
So what has been this Board’s response to current and past failures? To adopt a poison pill in 2009 without shareholder approval at a time when Corporate America is judiciously moving away from this sad practice.
We urge this Board to take the necessary steps now to create value for shareholders by selling the business. This initiative needs to be well underway before the 2009 annual meeting. Creating value for shareholders is your fiduciary responsibility and we believe a sale of the company is the best path to achieve that result for shareholders.
PSA & PSA DNA items currently for sale on eBay