Comforce Corporation
(AMEX:CFS) may face some pressure in the near future after an activist
hedge fund expressed frustration with the company’s board and
management and urged its directors to explore strategic alternatives,
including a possible sale of the company. Bruce Galloway’s Strategic
Turnaround Equity Partners, which owns a 5 percent stake in the company, also threatened
to take their suggestions to shareholders if the company didn’t respond.
“While we have been supportive of your efforts and progress in
growing the sales of the company, reducing debt and improving earnings,
this has not resulted in an improved stock price.
Based on our internal research, and as I am sure you are aware,
Comforce is trading at a significant discount to its larger market cap
peers,” said Galloway. “More importantly, we don’t believe management
has clearly defined to the shareholders how to achieve its targets to
increase shareholder value.”
The news comes after Comforce recently reported strong third quarter
results. The latest quarter represented its 17th consecutive quarter of
improved year-over-year revenues on net income that rose 91% compared
to the same quarter last year. The company also reported that its
interest expenses continued to decline. However, no insiders have
purchased any shares while the stock has remained stagnant.
“We are most pleased with our increase in revenues and net income
for both the third quarter and nine months. The third quarter
represented our 17th consecutive quarter of year-over-year increased
revenue growth,” said CEO John Fanning. “We were also happy to have
posted increases in revenues of $1.9 million in Staff Augmentation
primarily as a result of increased sales to our Technical and
Information Technology customers.”
In the end, it will be interesting to see if the company sees
eye-to-eye with the activist hedge fund. Since management does not have
a significant stake in the company, the hedge fund may find it
difficult to push for a change of control transaction. However, this
stock is definitely one worth watching in the meantime!
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