Transmeta Corporation
(NDAQ:TMTA) received a letter from its largest shareholder today
expressing concern over yesterday’s staggering option grants and other
recent developments that have bought serious questions to light
regarding the company’s strategic direction. Riley Investment Management (RIM), which owns 6.4% of Transmeta, demanded several changes to protect shareholders.
The board of directors is tasked with prudently placing the
interests of shareholders above their own and those of insiders.
However, last night’s option grant totaling 725,000 shares to the
company’s top four executives diluted shareholders by over 5% and
almost doubled the company’s historical grants on a split-adjusted
basis. The timing of the grant is also very disconcerting and ironic in
that it was made at historically depressed levels – essentially giving
executives $5 million of value at a great cost to shareholders.
Obviously, RIM viewed this as a major issue and questioned the
integrity of the board.
RIM also reiterated its belief that shareholders will be best
rewarded through a distribution of cash and a monetization of the
company’s intellectual property as opposed to management’s plan to fund business development and
evaluating potential acquisitions. RIM believes that this strategy
would result in proceeds in excess of $20 per share while management’s
strategy would likely result in operating expenses that eat through the
guaranteed $20 million per year revenue stream from Intel by lining the
pockets of management and executives.
“In light of the failures of the management team and the Board, the
company’s proposed strategy is especially disturbing,” said RIM in
their letter. “Transmeta shareholders should ask a simple question –-
would the current management team and board be able to raise $250
million from the public market to pursue a risky strategy with
operating expenses of $25 million per year and no clear path to
profitability? We believe the answer is unequivocally no.”
In the end, it will be interesting to see how the board responds to
this letter as it makes several points that even average investors can
identify with – most notably yesterday’s option grant. Combined, these
factors make TMTA a stock worth watching!
Related Companies
Intel Corporation (INTC)
Advanced Micro Devices (AMD)
Texas Instruments Inc. (TXN)