Safeguard Scientifics investors call for leadership shakeup - Technical.ly Philly

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Feb. 14, 2018 12:59 pm

Safeguard Scientifics investors call for leadership shakeup

Yakira Capital Management is asking for leadership overhaul amid what they call “persistent shareholder value destruction.” It's the second investor group to speak up in recent months.

Safeguard Scientifics' Radnor offices, pictured here in 2016.

(Photo by Roberto Torres)

Investors in Radnor-based venture capital firm Safeguard Scientifics say the publicly traded company should overhaul its structure and replace its current leadership.

In a letter published Wednesday and addressed at the company’s Chairman Robert Rosenthal, Connecticut-based hedge fund Yakira Capital Management — which says it owns 2.41 percent of outstanding Safeguard shares and is among the company’s top 10 shareholders — bashed Safeguard for what it calls an “unwillingness to engage in further constructive dialogue” and questioned whether current leadership had “performed appropriately as fiduciaries tasked with representing the best interests of shareholders.”

“The sad truth is that the only people making money from this Company are management and the Board — while shareholders have been left losing money during one of the greatest bull markets in history,” the document reads.

The investors complain about the lack of successful exits and a 31.5 percent drop in the company’s share price from when Steve Zarrilli took over as CEO in November 2012.

The letter follows a similar document published by New York-based Sierra Capital. Inquirer reporter Joe DiStefano said the document, penned by Philly-area investors Darren Wallis and Joseph Manko, called for a change in management and the selling of the company’s stake in about two dozen different companies in spaces like health IT, ecommerce and SaaS.

Yakira Capital Management is listed on Safeguard’s latest fiscal report, published in January, as the tenth largest institutional holders of outstanding shares with 2.28 percent. Investor Bruce Kallins said the number has risen to 2.41 percent since the publication of that report.

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“What you should be checking out is the stock price and the fact that the board has breached its fiduciary duty,” Kallins told Technical.ly over the phone.

Other institutional investors in Safeguard include First Manhattan CompanyBlackRock, T. Rowe Price and the Vanguard Group.

In mid-January, Safeguard announced it had entered a “change of strategy and operations” that resulted in laying off half its staff, in a bid to establish a “more streamlined organizational structure that will better position us to focus our resources on the highest-return opportunities while generating immediate cost savings.”

Safeguard, a company founded in the 1950 by famed investor Pete Musser, peaked in value and then crashed in the year 2000 as the dotcom bubble burst. Now, openly in sell-off mode, it has halted making investments in new companies and instead seeks to monetize its shares in portfolio companies. Old City software firm WebLinc and Center City health IT company CloudMine are among the Safeguard-backed companies in the Philly area.

An email to CEO Zarrilli this morning was not immediately responded to. New York-based PR agency Joele Frank, which specializes in crisis communications and represented Safeguard Scientifics at the time of the layoffs, did not immediately respond to requests for comment via phone and email.

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