180 Degree Capital Corp. (TURN) Earnings Call Transcript & Summary

Good morning, and welcome to 180 Degree Capital Corp.'s 2020 Annual Meeting of Shareholders. I'd like to turn the call over to Kevin, who will be chairing this meeting.

Good morning, everyone. Obviously, it would have been nice to have visited with some of you live. We'll do our best to try and get this meeting done virtually. And I hope everyone is staying safe and getting through this incredible time that we're living through. Good morning, ladies and gentlemen. My name is Kevin Rendino. I'm Chairman of the Board and Chief Executive Officer of 180 Degree Capital, and I will be chairing this meeting. I now call this meeting to order and welcome our shareholders and guests to the 180 Degree Capital 2020 Annual Meeting of Shareholders. Before making introductions, I would like to review the program for the meeting. We will begin by covering the business of the meeting as outlined in the proxy. We will end the meeting with an informal section, during which we will entertain questions from shareholders and attendees of this meeting. We would like to thank our shareholders for observing the precautions we have established for COVID-19 and attending this meeting by webcast or phone. Hopefully, this will be the last time we have to do this. In light of these circumstances, we will not be distributing or collecting paper ballots at this meeting. If you previously have voted by proxy, you do not need to vote again unless you wish to change your vote. If you would like to vote at this meeting or to change your vote, please e-mail our Inspector of Elections, Alicia Gift, at [email protected] to inform her of your desire to vote or change your vote at this meeting and the votes you would like to cast. We ask that you send any e-mails now so that we can be sure to address any request ahead of the time the polls are closed. We would like to ask that attendees hold all questions and comments to the designated question and comments period. During the formal portion of this meeting, please restrict questions and comments at that time to the 3 proposals submitted for vote of our shareholders in our proxy materials. Please hold all other questions to the informal portion of this meeting. We ask that all questions and comments be directed to me for response or referral to the appropriate officer or director and that you be as brief as possible to allow everyone who wishes the opportunity to participate. Also, please identify yourself before speaking and tell us if you're a shareholder or a proxy for a shareholder. If you are a proxy for a shareholder, please identify the shareholder. I would like to introduce our officers who are present with me today by phone: Daniel B. Wolfe, President and Chief Financial Officer and Chief Compliance Officer; and Alicia M. Gift, our Secretary and Senior Controller. Alicia Gift has been designated the Inspector of Election as present today. The inspector has signed her oath, and the Secretary has been instructed to file the oath with the records of this meeting. I am informed that a quorum is present for the transaction of business. Proper notice of this meeting was duly mailed on or about March 25, 2020, to all holders of record on March 16, 2020, and the affidavit of the mailing agent confirms such mailing. The Secretary will please file the affidavit with the records of the company and a copy with the minutes of this meeting. March 16, 2020, is the record date for the voting of shares at this meeting. As of the record date, the company had 31,121,562 shares of common stock outstanding. We will now proceed with the formal business of the meeting. At this meeting, shareholders are voting to elect 5 directors to the Board of Directors to serve until the next annual meeting or until their respective successors are elected. The 5 persons nominated for the Board of Directors are Stacy R. Brandom, Kevin M. Rendino, Richard P. Shanley, Parker A. Weil and Daniel B. Wolfe. The Board of Director recommends that the shareholders vote for the election of the Board's 5 nominees as directors of the company. The second item of business is the approval of an amendment to the company's restated certificate of incorporation to effect the reverse stock split of the company's stock by a ratio of not less than 1 for 2 and not more than 1 for 4 and a proportionate reduction in the number of authorized shares of common stock, with such ratio and the implementation and timing of such reverse stock split to be determined in the -- at the discretion of the Board of Directors of the company. The Board of Directors recommends that the shareholders vote for this proposal. The third item of business is the approval of the Audit Committee's selection of PricewaterhouseCoopers LLP as the independent registered public accountant for the fiscal year ending 2031 -- December 31, 2020. The Board of Directors recommends that the shareholders vote for this proposal. We will now take any questions or comments relating to the specific agenda items, either proposal one, the election of directors; proposal two, the authorization of the reverse stock split; and proposal three, the authorization of the Audit Committee's selection of PricewaterhouseCoopers as the independent registered public accountant for the fiscal year ending December 31, 2020. Although representatives of PricewaterhouseCoopers are not present in person or by phone, they are available for questions via phone. I ask that you please hold any general questions or comments until the designated question-and-comment period later in the proceedings. When you're recognized, again, please address your question or comment to me, and either I or another officer of the company will respond. Also, when you are recognized, please state your name and whether you are a 180 Degree Capital shareholder or a proxy for a shareholder. The floor is now open for your questions on proposals one, proposal two or proposal three. Daniel?

[Operator Instructions] We have one question in the queue. [ Tom ], please go ahead.

Yes, gentlemen. I think you're doing a great job with -- under the circumstances. So regarding the reverse split, I know there was some discussion on the quarterly call. Just kind of just interested in if the ratio -- given what's happened in the stock price, if you're thinking of changing what ratio you're actually thinking of doing at this point in time and what your -- I know you've got permanent capital. And Kevin, you pointed out the advantage of that over time. But just wondering a little bit more color on if there's an actual recommendation on how -- what the actual split -- reverse split would be.

So Tom, thank you for the question. Obviously, the proposal in the proxy is to allow for the authorization of a reverse stock split. And the ratio that we've asked for is anywhere between, as I said, 1.2 -- 1 for 2 and 1 for 4. We -- just because this may be approved by shareholders doesn't mean it's going to be implemented. It will only be implemented when we feel we're at a period of time where any sort of reverse stock split would make sense. I can tell you it's not a conversation that we actually had at our last Board meeting, and it's probably not a conversation that we will probably have at our next Board meeting. There's too many other things that we have to deal with right now which is this unbelievable environment of volatility and dislocation, the economic collapse that has been caused by this health crisis. And while we are certainly looking for the authorization to do this, I would not, by any stretch of the imagination, want any shareholder to believe, today at least, that it's a front burner discussion for us. Daniel, I believe we have a full year to implement this strategy post the authorization. Is that correct?

It's actually the end of this -- at the end of 2020. We would have to get back to shareholders if we don't implement it before the end of the year.

Okay. So we'll see where we go. I mean the idea was to get our share price to above $5 to make it more available to be bought by institutions that do not buy stock for less than $5. The second reason is companies of our size simply do not have 31.1 million shares outstanding. We have -- we simply have too many shares. I know there's a -- and I don't argue this. I know there's a general consensus that reverse stock splits are done by unhealthy companies or companies that are sick. That's not us. It's not -- it wasn't us yesterday. It's not us today, and it's not going to be us tomorrow. There's no reason that we need to do this other than for the reasons that I outlined. And we'll only do it if it makes sense. So I'm not worried all that much by the "general notion" that only sick companies do this. I know we're not sick. And I know that our book value is significantly higher than where our share price is, and our share price represents what I think is terrific value, especially as you look out towards our -- hopefully, what our Q2 book value is going to look like. So I'm not all that bothered by the "generalization" that only companies that do reverse stock splits are sick companies. We're certainly not that. But -- so that's sort of a long-winded answer, [ Tom ]. And on the permanent capital, I'm not sure there's a question in there other than the statement that we agree that permanent capital is super important and incredibly useful in this environment. I don't -- even today, I don't have to sit around and worry about at 4:00 whether or not we're going to have a redemption or a liquidation and then tomorrow, I'll have to come in and sell something. We just don't have to do that. We just have to spend all of our time analyzing the companies we own and new opportunities. So thank you for your question.

Thank you. There are no more questions in the queue.

Okay. So the question-and-comment period is concluded, and the polls are now open. Remember, if you previously have voted by proxy, you do not need to vote again unless you wish to change your vote. Submission of a proxy at this meeting revokes any prior proxies you may have submitted. Can the Inspector of Elections confirm if there were any request to vote at this meeting received via e-mail?

There were no votes via e-mail.

Thank you, Alicia. If there are no further proxies, I declare the polls closed for the matters voted on. With the agenda items now having been voted on, I will adjourn for the formal portion of this meeting. I have now received the preliminary voting report, the results of which will be confirmed later by the inspector. The preliminary report indicates that all of the Board's 5 nominees have been elected as directors. The reverse stock split proposal has been approved. And the company has authorization to retain PricewaterhouseCoopers LLP as the independent registered public accountant for the fiscal year ending December 31, 2020. With that said, the floor is now open for general questions or comments you have. After I recognize you, please state your name and identify yourself as a shareholder or a proxy for a shareholder. Daniel?

[Operator Instructions] We'll pause for a minute to see if there are any questions. I am not seeing any questions in the queue.

Given we had our shareholder call a week ago and we got a bunch of questions, I'm sure that's the reason. So with that, the proceedings are now concluded. As always, we continue and thank you and appreciate your interest and support of 180 Degree Capital. You know where to find us. Our phones work, our e-mails work, our text numbers work. And we would be delighted to visit with you either on the phone or via e-mail and, if you so desire, do some sort of Zoom and/or Google hangout video conference. So thank you very much for your time today, and good luck, everybody, and please stay safe.

Thank you, everyone. You can now disconnect.