The fact that this is the first public letter we have ever been compelled to write should be cause for serious reflection and concern on the part of the entire Board. We have helped companies improve their capital allocation, operating efficiency, ESG profiles, and ultimately shareholder returns, while working behind the scenes across various industries. We are not short term actors we have owned many of our portfolio companies since our inception and our current portfolio’s weighted average holding period is over two years. We note that over the course of our history, Impactive has worked with over a dozen companies collaboratively to enhance shareholder value and deliver exceptional long-term returns. Absent the appointment of an Impactive representative to the Board, we see no choice but to consider nominating a slate of directors at the next annual meeting of shareholders to replace long-standing directors who must be held accountable for the Company’s subpar performance. We write today because we are exceedingly troubled by the Company’s long-term underperformance, lack of shareholder alignment, poor Board governance, and disingenuous shareholder engagement. Rather than accepting the help the Company so desperately needs, management and the Board proceeded to hire a series of “defense” advisors, seemingly to entrench their own interests at the expense of shareholders, concoct an unconvincing performative review process of our candidate, and ultimately reject our request. In May of 2022, in the spirit of collaboration, we suggested that an Impactive representative be added to the Board of Directors (the “Board”) to represent shareholder interests. During our engagement over the past 18 months, we have been clear that we believe Envestnet is a high-quality business that is not achieving adequate margins, returns, and its full potential value. (“Envestnet” or the “Company”) and is currently one of its largest shareholders with approximately 4.0 million shares of the Company’s common stock, representing approximately 7.2% of the shares outstanding. Impactive Capital, LP (together with its affiliates, “Impactive” or “we”) has been a long-term investor in Envestnet, Inc. The full text of the letter is set forth below: As such, Impactive seeks to add a shareholder representative to the Board to better align pay for performance, refocus on capital allocation and protect and drive long term shareholder value. Impactive highlights that despite the Board delivering significantly sub-market returns and collectively owning less than 1% of the Company, the Board has nonetheless increased management’s compensation over the past five years. In its letter, Impactive details Envestnet’s well-below market returns over multiple time periods relative to the S&P 500, S&P 400 and its closest peers, significant margin gap versus its closest peers, and egregious spending with seemingly no accountability for returns. (NYSE: ENV) (“Envestnet” or the “Company”), with an ownership interest of approximately 7.2% today issued an open letter to the Company’s Board of Directors (the “Board”). 15, 2022 (GLOBE NEWSWIRE) - Impactive Capital, LP, together with its affiliates, one of the largest shareholders of Envestnet, Inc. May Seek Further Board Change at 2023 Annual Meeting Troubled by Excessive Spending Without ROI Justification and Declining Profitability as Management and Board Payouts Increase Perplexed by Board’s Refusal to Add a Single Shareholder Representative to the Board, Despite Impactive’s Large Ownership Stake and Considerable Effort to Collaborate Over the Past 18 Months It also said Envestnet's management and board directors were overpaid and that the company should improve its corporate governance by putting all of its directors up for election every year.Details Serious Concerns with Envestnet’s Prolonged, Significant Stock Price and Operating Underperformance, Lack of Shareholder Alignment and Poor Board Governance In its statement, Impactive Capital cited poor profit margins and bad capital allocation among the reasons for Envestnet's underperformance. Shares of Envestnet, which is currently valued at about $3.4 billion, have shed about 23% of their value in the past year compared to an 18% decline in the S&P 500 Index. The fund remains open to discussions with Envestnet so that a proxy contest can be avoided, according to people familiar with the matter. Impactive Capital said it unveiled the challenge to Envestnet after its attempt to negotiate just one spot on the company's board for Wolfe was unsuccessful. "Given the disappointing returns, margin underperformance, and questionable governance over which the current board has presided, we have concluded that change is required for all directors up for election at this year’s annual meeting," Taylor Wolfe said in a statement.Įnvestnet did not immediately respond to a request for comment.
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