Fermi co-founder calls for sale after Rick Perry board vote
Fermi co-founder and largest shareholder Toby Neugebauer is urging the company to put itself up for sale while it pursues a tenant agreement. His statement followed the results of Fermi's October 30 annual meeting and the company's November 4 Form 8-K filing.
- Toby Neugebauer called for Fermi to be put up for sale.
- He said 38.9% of outstanding shares voted to re-elect Rick Perry.
- Neugebauer attributed more than 80% of stock value loss to the period since July 3.
- He disputed Fermi's claim that he breached a director nomination agreement.
- He urged Fermi to close a tenant deal while pursuing a sale.
Neugebauer points to shareholder and market results
Neugebauer said Fermi's shareholders, the public markets and Texas voters had rejected Rick Perry and the board led by Marius Haas. According to his statement, 38.9% of Fermi's outstanding shares voted to re-elect Perry, while more than 61% did not.
Neugebauer also excluded the 68,842,821 shares the Perry family last reported owning. On that basis, he said 31.5% of the remaining shares voted for Perry. He added that Perry received less support than the other director on the ballot on every measure.
He linked the vote to Fermi's August 11 bylaw change, which was made without a shareholder vote. Under the revised rule, a director must win a majority of all outstanding shares, with shares not voted for the candidate treated as votes against. Neugebauer said the change was intended to prevent shareholders from replacing directors, but instead contributed to Perry's defeat.
Stock decline and dispute over board nomination rights
Neugebauer said he proposed a dual-track process on May 22 to sell or partner Fermi while continuing to evaluate its standalone plan. He said indicative enterprise valuations at the time ranged from $10 billion to $20 billion, but that investment banks were rebuffed by Fermi. He suspended his proxy campaign on July 3 to give the board room to run that process.
According to Neugebauer, Fermi's stock has since lost more than 80% of its value and the company's cost of capital has increased sharply. He said every share issued today raises about one-fifth of what it would have raised when he stepped back.
Neugebauer also disputed Fermi's claim that he breached an agreement by not voting for Perry. He cited an agreement under which Caddis, Griffin Perry's company, retains the right to a board nominee only while it beneficially owns more than 50% of the shares it held at the IPO. Fermi's IPO filings reported 128,196,450 shares, while Caddis now reports 52,256,833 shares, according to Neugebauer.
Call for a sale alongside tenant negotiations
Neugebauer said Fermi should seek a buyer while closing a tenant deal, arguing that the company needs a partner with a lower cost of capital, construction expertise and a customer. He said the former senior management team had been working with TensorWave and another company while negotiations with the original Tenant 1 continued.
He said the former management team believed Fermi was on track to close a larger lease with TensorWave by June 30, but that the board has not announced whether critical closing conditions, including secured financing, have been met.
Neugebauer said shareholders would not accept a recapitalization that wipes them out. He also said his family would continue fighting for shareholder rights in Texas, while discovery in his lawsuit is underway. The dispute leaves Fermi facing pressure over its board, financing and tenant strategy, while Neugebauer advocates combining a potential sale with progress on a customer agreement.
