Sierra Capital condemns Safeguard Scientifics' 'tax benefits preservation plan'.
Sierra Capital Investments, one of the largest shareholders of Safeguard Scientifics, with ownership of approximately 5.1% of the company's outstanding shares, issued a statement today condemning Safeguard's adoption of a new so-called "tax benefits preservation plan," which effectively handcuffs its largest shareholders from acquiring additional shares and negatively impacts trading liquidity ahead of an upcoming election contest. This comes at a time when, according to Sierra's calculations, Safeguard's tax assets appear to be at very little risk. "Less than one week after adopting a series of onerous nomination Bylaw requirements, and despite our request not to engage in any further activities that could be viewed as entrenching the Board and management, the Safeguard Board has now brazenly adopted a 4.99% poison pill, under the guise of protecting the Company's valuable tax assets. It is nothing new that the Company has valuable tax assets. We therefore cannot understand the Board's justification for adopting such a restrictive and chilling poison pill at this time just days ahead of the nomination deadline for the 2018 Annual Meeting. The Board should immediately disclose its computation for how vulnerable the Company is to an 'ownership change', as defined under Section 382 of the Internal Revenue Code, so shareholders can determine for themselves whether the Company is justified in taking this extreme step, or whether the poison pill is simply a pretext to further entrench the Board and management. While we applaud any genuine action by the Company to protect the diminution of shareholder value, our estimates indicate Safeguard is nowhere near reaching the 50 percentage point threshold, with movement of less than 20 percentage points by 5% holders in aggregate over the past three years. Without more, this begs the question about the Board's true motivation and timing of this initiative. We are now even more convinced of the need for change at Safeguard and are preparing to nominate a slate of director candidates to the Board by this Friday's deadline. While we are still in the process of evaluating the degree of change that we believe is necessary at Safeguard, the Board's recent actions signify that substantial change may be in order. We look forward to giving shareholders a voice at the 2018 Annual Meeting. However, as always, we remain open to any constructive dialogue with the Board that could lead to an amicable resolution."