Acacia Research Corporation · NASDAQ:ACTG
Acacia Research — Proxy Contest (May 2018)
54 slides from Acacia Research's proxy contest presentation, May 24, 2018
Slide 1: Sidus Group - Acacia Research Corporation
Sidus Group Acacia Research Corporation May 24, 2018
Slide 2: Disclaimer
Disclaimer This presentation is for discussion and general informational purposes only. It does not have regard to the specific investment objective, financial situation, suitability, or the particular need of any specific person who may receive this presentation, and should not be taken as advice o
Slide 3: Table of Contents
Table of Contents 1 Executive Summary 2 Why We Are Here 3 Acacia’s Abysmal Performance 4 A Board Enriching Itself at the Expense of Stockholders 5 Acacia’s Deeply Conflicted and Unelected Board 6 Acacia’s Abysmal Corporate Governance 7 Our Nominees 3
Slide 4: Executive Summary
Executive Summary Acacia Research Corp. (NASDAQ: ACTG) (“Acacia” or the “Company”) has woefully underperformed over the past 1-, 3-, 5-, and 10-year periods, resulting in major stockholder value destruction. In fact, the stock is down nearly 87% over the past five years. We believe Executive Cha
Slide 5: About Acacia Research Corporation
About Acacia Research Corporation Ticker: NASDAQ: ACTG HQ: Newport Beach, CA Founded:1993 Market Cap: ~ $200 million Paid-in Capital: $640 million Business: Was a patent licensing business until the previous CEO resigned in December of 2015. Since then it has made various announcements about inten
Slide 6: About BLR Partners LP and Sidus Investment Management, LLC
About BLR Partners LP and Sidus Investment Management, LLC Sidus Investment Management, LLC (“Sidus”) • New York-based employee-owned investment partnership. • Founded in 2000 by Managing Members Michael J. Barone and Alfred V. Tobia Jr. • Since 2000, Sidus has executed a hedged small and mid cap
Slide 7: Why We Are Here
Why We Are Here Oliver Press Partners, LLC
Slide 8: A Critical Decision for Stockholders
A Critical Decision for Stockholders The 2018 Annual Meeting presents a rare opportunity to effect constructive change at the Board level For the past two years, we believe that Mr. Graziadio has been the puppet master, dominating the Board and appointing his associates as directors (57% of the cu
Slide 9: Sidus' History of Engagement with Acacia
Sidus’ History of Engagement with Acacia We have repeatedly attempted to engage in constructive dialogue with representatives of Acacia – but the Company has repeatedly rebuffed our efforts, leaving us with choice other than to nominate independent candidates for election to the Board October 31, 20
Slide 10: Sidus's Involvement in Acacia
Sidus’s Involvement in Acacia Q4 2016 – Sidus Investor Letter Q2 2016 – Sidus Investor Letter Q3 2016 – Sidus Investor Letter “Acacia is now concentrating on attracting a “We have used recent weakness to add to our “Most importantly the company began to execute larger more diverse set of revenue opp
Slide 11: Acacia's Abysmal Performance
Acacia’s Abysmal Performance Oliver Press Partners, LLC
Slide 12: Sustained Stockholder Value Destruction
Sustained Stockholder Value Destruction 1-, 3-, 5- and 10-Year Total Shareholder Return1 1-Year 3-Year 5-Year 10-Year ACTG -34.4% -65.0% -86.6% -32.4% NASDAQ 22.2% 49.5% 130.2% 249.2% Composite Index NASDAQ-100 Technology 29.1% 85.9% 197.0% 319.4% Sector Index Nearly 87% Stock Price Depreciation Ove
Slide 13: Acacia's Desperate Attempts to Rationalize Its Failure
Acacia’s Desperate Attempts to Rationalize Its Failure are Transparent and Misleading We believe Acacia distorted an RPX report to construct a faulty set of peers in its latest peer group to mislead stockholders Contrary to 1the comparisons it shows in its public filings to date, Acacia now cites
Slide 14: Acacia Has Destroyed Value on an Unprecedented Scale
Acacia Has Destroyed Value on an Unprecedented Scale Acacia’s stock performance is the worst of its RPX selected peers. Public PAE Overview Stock Market Cap Market Cap SG&A Price (As of (As of Employees Employees Cost per (As of 9/30/14) 3/31/18) Percent (As of (latest S,G & A Employee Large Cap Com
Slide 15: Quarterly Earnings Timeline
Management’s Ongoing Ambiguity Around Acacia’s “Strategy” Date Quarter Earnings Call References to Acacia’s “Strategy” Matthew Vella, CEO & President “(O)ver the past several quarters Acacia has continued to pursue its marquee portfolio strategy, honing in on a smaller number, but ultimately more fi
Slide 16: Quarterly Earnings Timeline
Management’s Ongoing Ambiguity Around Acacia’s “Strategy” Date Quarter Earnings Call References to Acacia’s “Strategy”* Quarterly Earnings Timeline Robert B. Stewart, Principal Executive Officer & President “(W)e tend to partner with high-growth tech companies that need our help with their patent Ma
Slide 17: We Believe Acacia Squandered $649M of Paid in Capital
We Believe Acacia Squandered $649M of Paid in Capital Company Paid In Enterprise Patent R&D SG&A Expense Capital* Value Licensing Spend per Employee (31 March Royalties (LTM) ($ 000) 2018) (FY 2017) ACTG 649 38 65.4 1 1,938.5 IDCC 673 1,745.9 512.4 68 145.7 XPER 687 1,440 373.7 102 193.7 OLED 608 4,
Slide 18: A Board Enriching Itself at the Expense of Stockholders
A Board Enriching Itself at the Expense of Stockholders Oliver Press Partners, LLC
Slide 19: Profits Interest Plan is Dangerous and Flawed
Profits Interest Plan is Dangerous and Flawed Acacia’s 2018 proxy filing states: The PIP is extremely troubling and highly irregular. We have been unable to find any other examples of this practice in a U.S. public company. As stockholders, we find this dynamic to be utterly toxic. Adverse Tax C
Slide 20: Follow the Money
Follow the Money Public AIP Investments (e.g. Veritone) Illiquid Shares ACTG Board Fees to Acacia insiders Fees to Acacia The result? Stockholders’ money is insiders being wasted and Investors insiders are benefitting. Acacia’s investments benefit Graziadio and insiders at the expense of Acacia stoc
Slide 21: Acacia's Deeply Conflicted and Unelected Board
Acacia’s Deeply Conflicted and Unelected Board Oliver Press Partners, LLC
Slide 22: G. Louis Graziadio, III is a Penny Stock CEO
G. Louis Graziadio, III is a Penny Stock CEO Graziadio is a penny stock CEO CEO of Boss Holdings, Inc. (OTCBB:BSHI) and President of Western Metals Corp. (OTCBB: WTLC). He was appointed a director of Acacia in 2002 and became Executive Chairman on August 1, 2016. Since his appointment as Exe
Slide 23: Graziadio Serves on Four Public Boards and is an Executive at Four Companies
Graziadio Serves on Four Public Boards and is an Executive at Four Companies In both its May 14th and May 21st letters to stockholders, Acacia claims that Louis Graziadio has been “effectively” serving as CEO for two years: “Mr. Graziadio, who effectively has served as our acting chief executive for
Slide 24: Graziadio's Companies Come with Warnings to Investors
Unlike Most OTC Companies, Those that Graziadio is Involved with Come with Warnings to Potential Investors Sources: https://www.otcmarkets.com/stock/BSHI/quote 24 https://www.otcmarkets.com/stock/WTLC/quote
Slide 25: Graziadio Has Hand-Picked 57% of the ACTG Board
Graziadio Has Hand-Picked 57% of the ACTG Board In a little over two years, four directors have been hand-picked by the incumbent Board and never elected by Acacia stockholders. All four of these unelected directors – James Sanders, Frank Walsh, Joseph Davis and Paul Falzone – can be tied direct
Slide 26: Acacia's Unelected Directors
Acacia’s Unelected Directors All four of Acacia’s unelected directors were appointed by the incumbent Board and placed into staggered classes where they would not be subject to stockholder approval for extended periods of time. Incredibly, the Nominating and Governance Committee of the Board has o
Slide 27: Acacia's Unelected Directors: How We Got Here
Acacia’s Unelected Directors: How We Got Here Incredibly, the majority of Acacia’s Board has simply been appointed rather than ever being elected by stockholders Percentage of Board that has been Appointed 4/18/18 Board size 60% reduced from 8 to 7 2016 Annual Meeting 2015 Annual Meeting 2017 Annual
Slide 28: Acacia's Board is Riddled with Conflicts
Acacia’s Board is Riddled with Conflicts Indirect Beneficial Owner Graziadio Family Trust G. Louis Graziadio III Executive Chairman Trustee Frank E. Walsh III James F. Sanders Independent Director Independent Director We question the independence of Messrs. Walsh and Sanders given their clear ties t
Slide 29: In Our View, Mr. Walsh is Not Independent from Graziadio
In Our View, Mr. Walsh is Not Independent from Graziadio Frank E. Walsh, III was appointed to Acacia’s Board on April 1, 2016 to fill the vacancy following the resignation of CEO Matthew Vella. Mr. Walsh was appointed as a Class III Director with a term ending at this year’s annual meeting. Mr.
Slide 30: In Our View, Mr. Sanders is Not Independent from Graziadio
In Our View, Mr. Sanders is Not Independent from Graziadio Rather than stand for a stockholder vote, James F. Sanders was appointed to Acacia’s Board on July 18, 2017 – over a year after the resignation of Chairman Chip Harris on June 9, 2016 – as a Class I Director whose term expires at the 2019
Slide 31: Acacia's Abysmal Corporate Governance
Acacia’s Absymal Corporate Governance Oliver Press Partners, LLC
Slide 32: Acacia Goes Dark: Failure to Communicate with Stockholders
Acacia Goes Dark: Failure to Communicate with Stockholders A Growing Lack of Transparency Jan. 14, 2015 Dec. 21, 2015 April 21, 2016 Aug. 1, 2016 Oct. 27, 2016 April 19, 2017 Acacia attends CEO Matthew Interim CEO Mr. Graziadio Acacia ends Robert Stewart, its last investor Vella resigns, Marvin Key
Slide 33: Graziadio Has Done This Before
Graziadio Has Done This Before* Boss Holdings Since June 1996 Mr. Graziadio has been Chief Executive Officer and Chairman of the Board of Directors of Boss Holdings, Inc., which primarily imports and distributes work gloves and protective boots. Boss Holdings had annual revenues of $61.6 million
Slide 34: Louis Graziadio's Excessive Compensation
Louis Graziadio’s Excessive Compensation Why did Mr. Graziadio, a non-employee of the Company, receive nearly $1 million more in aggregate compensation in fiscal 2016 than the Company’s CEO earned in the previous year? When Mr. Graziadio was appointed as Executive Chairman, the Company disclosed t
Slide 35: Acacia is an Investment Company Masquerading as an Operating Entity
We Believe Acacia is an Investment Company Masquerading as an Operating Entity to Avoid Being a Regulated 40 Act Entity To be/remain an operating company, an entity must have either of the following: At least 60% of invested assets (not including cash or treasury securities) in “majority-owned”
Slide 36: The Veritone Investment
The Veritone Investment Despite no one with any relevant experience or background in technology venture investing, and with no formal strategic investment committee formed, Acacia made a $54M highly speculative illiquid investment in an Artificial Intelligence company called Veritone, Inc. (NASDAQ:
Slide 37: The Bitzumi Investment – A New Lesson to Learn
The Bitzumi Investment – A New Lesson to Learn On February 14, 2018, Acacia put out a press release stating it was investing in Bitzumi Inc., a pre-revenue company looking to develop opportunities in cryptocurrency and blockchain industries. The release indicated that ACTG had the right to inves
Slide 38: The Bitzumi Investment
The Bitzumi Investment The SEC's Uneven Cryptocurrency Crackdown “Two weeks ago, Bitzumi Inc., which describes itself as a "vertically integrated bitcoin exchange" of online media and crypto-related offerings, began soliciting investors on its website. Bitzumi has two executives, only one of whom wo
Slide 39: Acacia's Lavish Headquarters
Acacia’s Lavish Headquarters Acacia only has 13 employees, yet its headquarters occupies a 17,758 square foot office on the 12th floor of one of the most expensive office buildings in Orange Country, CA. That comes out to 1,366 square feet per employee. The Company has made occasional statements
Slide 40: Acacia's Organizational Documents Contain Stockholder-Unfriendly Provisions
Acacia’s Organizational Documents Contain a Number of Stockholder-Unfriendly Provisions • The Acacia Board is classified into three separate classes, meaning each director is subject to election by stockholders only once every three years. • Classified structure has been used as an “entrenchment shi
Slide 41: The Acacia Board is Long Tenured and Unelected
The Acacia Board is Long Tenured and Unelected Prior Public Acacia Directors Board Tenure Elected by Stockholders Board Experience G. Louis Graziadio, III (age 68) 16 Years Yes Yes Fred A. deBoom (age 82) 23 Years Yes No William S. Anderson (age 59) 11 Years Yes No Frank E. Walsh, III (age 51) 2 Yea
Slide 42: The Acacia Board Has No Processes in Place
The Acacia Board Has No Processes in Place Acacia has failed to complete its search for a permanent CEO for almost 2.5 years and has never provided stockholders with an update • On December 21, 2015, Acacia appointed an interim CEO and allegedly commenced a search process for a new CEO. We don’t bel
Slide 43: The Acacia Board Has No Processes in Place
The Acacia Board Has No Processes in Place Acacia has failed to complete its search for a permanent CEO for almost 2.5 years and has never provided stockholders with an update • On August 1, 2016, upon the recommendation from the Nominating and Governance Committee (which only met once in 2016), the
Slide 44: The Acacia Board Has No Processes in Place
The Acacia Board Has No Processes in Place Now the same Board that has continuously failed to find a CEO – or even search for one – claims in its proxy statement: “The Board, with assistance from management and a consultant, is currently conducting a search for CEO candidates.” Acacia Proxy Statemen
Slide 45: Why is Thomas Bruderman in the Acacia Boardroom?
Why is Thomas Bruderman in the Acacia Boardroom? According to the April 2, 2018 10-K for Blackridge Technology (OTCQB: BRTI), a $32M penny stock company, board member Thomas Bruderman is both a Board observer and advisor to Acacia. Thomas Bruderman is a disgraced ex-Fidelity trader who was fined and
Slide 46: Acacia's Priorities are Clear
Acacia’s Priorities are Clear Year # Meetings # Meetings # Meetings Advisory Firm Commentary Compensation Audit Committee Nom/Gov Committee Committee ISS notes concerns with highly discretionary incentive plans and gives Acacia a Quickscore of 10. Glass 2013 8 4 1 Lewis recommend against de Boom and
Slide 47: Our Nominees
Our Nominees Oliver Press Partners, LLC
Slide 48: Sidus' nominees, Alfred V. Tobia Jr. and Clifford Press
Sidus’ nominees, Alfred V. Tobia Jr. and Clifford Press, have proven technology investing experience and a demonstrated record of corporate governance achievements for stockholders. 48
Slide 49: Our Nominees – Alfred V. Tobia Jr.
Our Nominees – Alfred V. Tobia Jr. Al Tobia Jr. has a 30-year record as a technology analyst and investor with broad expertise (including corporate governance) and demonstrated ability to create value. TECHNOLOGY AND INVESTING EXPERIENCE PUBLIC COMPANY ENGAGEMENT EXPERIENCE: APAC, HHS • Co-founded S
Slide 50: Our Nominees – Clifford Press
Our Nominees – Clifford Press Clifford Press has extensive corporate governance experience and a demonstrated record of driving positive results at public companies where he has served on the board. In each of the cases described below, he was the single appointee of a stockholder when joining the b
Slide 51: The Choice is Clear
The Choice is Clear Change is needed at Acacia, and Mr. Tobia and Mr. Press possess the experience and independence required to rectify the severe corporate governance failings and drive future value creation at the Company Prior Public Advocate of Overseen Company Improved Truly Fresh Significant V
Slide 52: Don't Take Our Word For It
Don’t Take Our Word For It Those who have worked alongside both Mr. Tobia and Mr. Press can attest to the value they add to the boards they serve on Alfred V. Tobia Jr. Clifford Press “We were very impressed with Al Tobia’s ability “Clifford was engaged from the start, coming in with to bridge the g
Slide 53: Our Priorities
Our Priorities Improve Corporate Governance - Seek elimination of stockholder unfriendly governance and improve transparency with stockholders Appoint Qualified CEO Reconstitute the Board - Destagger Board and seek election of highly qualified candidates Comprehensive Review of Current Portf
Slide 54: Contacts / How to Vote
Contacts / How to Vote Media Contact: Sloane & Company Joe Germani / Kristen Duarte, 212-486-9500 jgermani@sloanepr.com / kduarte@sloanepr.com 54