Alta Fox Capital Management LLC., the majority shareholder of Daktronics, a video display manufacturer, has called on the company's board of directors to replace President, CEO and Chairman Reece Kurtenbach over alleged poor performance, according to a report posted on businesswire.com. Daktronics, in response, claims it is working with independent advisors to address the issues.

Alta Fox Capital Management released a letter stating its concern and dissatisfaction with company executive leadership and the company's trajectory, which it has sent to the strategy and financing review committee of the board of directors for Daktronics, according to the report.

"As we have told you previously, Alta Fox — now the company's largest shareholder — has no confidence in Mr. Kurtenbach and Chief Financial Officer Sheila Anderson," the investment group said in the letter. "The company's shares have declined in value by more than 60% under Mr. Kurtenbach's executive leadership, in stark contrast to the Russell 2000's more than 100% long-term appreciation. That fact alone should be grounds for announcing a plan for replacing him. Meanwhile, Ms. Anderson oversaw increased discretionary capital spending and a massive build of net working capital, which greatly contributed to a liquidity crisis."

The letter further alleges patterns of excessive work from home by leading executives and implies that executives are not in touch with daily operations in the company.

"...We are extremely disappointed that it (the board of directors) is not taking decisive action to address deep-rooted issues related to the company's corporate governance, management team and value creation efforts," Alta Fox said in the letter. "We believe these long-standing issues culminated in the company's auditor issuing 'substantial doubt about the company's ability to continue as a going concern,' as disclosed in the recent 8-K filed with the SEC. Alta Fox has been adamant about the urgent need for governance improvements, leadership changes and an immediate and certain liquidity solution during our private interactions with the board, but no substantive changes have been made.

"Therefore, it is with deep regret that we have to file a Schedule 13D this week without being able to disclose a cooperation agreement with Daktronics or any indication of a productive relationship with you — the very individuals whom the company's stakeholders are depending on to protect them from further Kurtenbach-driven missteps, nepotism and value destruction. Daktronics has seen its equity market capitalization decline by hundreds of millions of dollars during the tenure of Chairman and Chief Executive Officer Reece Kurtenbach, making your apparent loyalty to the Kurtenbach family and resistance to Alta Fox's good faith engagement truly confounding," Alta Fox added in the letter.

Digital Signage Today reached out to Daktronics for comment and received the following response.

"As the company noted in its Jan. 25, 2023, press release, the board's strategy and financing review committee is working with independent financial and legal advisors to ensure the company is on solid financial footing," Daktronics said in a statement sent via email by company representative Justin Ochsner. "We have already made tangible progress by working with our current lender to extend a $10 million maturity on the company's credit facility. The committee is now focused on longer-term liquidity and is actively reviewing alternatives, including several proposals that the company has received. We expect to engage with Alta Fox on its proposal in connection with this review, as we have told Alta Fox on numerous occasions."

The full text of the Alta Fox letter is available in the cited businesswire.com report.

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